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Personal Communication in a Fintech World: Evidence from Loan Payments

Author

Listed:
  • Christine Laudenbach
  • Jenny Pirschel
  • Stephan Siegel

Abstract

We examine the effect of personal, two-way communication on the behavior of borrowers, who have fallen behind on their consumer loan payments. While the lender has informed all borrowers about the delinquency through an automatically generated letter, some borrowers also receive a phone call from a randomly assigned bank agent. We find that borrowers, who speak with a bank agent typically for only a few minutes, are significantly more likely to make timely payments and significantly less likely to default. This finding holds in a subset of hard-to-reach borrowers as well as when we instrument for the call with exogenous variation in borrowers’ reachability. The effect of the call is also persistent. Borrowers, who receive a call, are significantly less likely to become delinquent again. Personal aspects of the call, such as the likeability of the agent’s voice, significantly affect payment behavior, while the surprise element of the call does not. Our results suggest that the form of communication significantly affects borrowers’ payment behavior.

Suggested Citation

  • Christine Laudenbach & Jenny Pirschel & Stephan Siegel, 2018. "Personal Communication in a Fintech World: Evidence from Loan Payments," CESifo Working Paper Series 7295, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_7295
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    File URL: https://www.cesifo-group.de/DocDL/cesifo1_wp7295.pdf
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    More about this item

    Keywords

    Fintech; communication; guilt aversion; prosocial behavior;

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D10 - Microeconomics - - Household Behavior - - - General
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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