- Case Study
Message framing to improve digital credit repayment rates
- July 30, 2014
- 9:48 am
SECTOR
PROJECT TYPE
DOI
Location
BEHAVIORAL THEME
OVERVIEW
Digital credit offers a compelling opportunity to lower the costs and barriers to accessing Credit. Recent research has suggested that this increased access has led to improved household resilience to shocks (Bharadwalj, 2019). Yet, timely borrower repayment is a challenge for credit institutions. Stringent policies such as blacklisting, have been adopted to drive timely repayments and finalize collections, however, they have proven quite expensive and can have negative long-term impacts on borrowers. Recently, cost effective approaches have been sought out such as the use of behavioral nudges. Particularly in the peer-to-peer market, the use of social levers have the potential to encourage borrowers to prioritize repayment based on social responsibility.
THEMATIC AREAS
The decision to repay a loan is often subject to both a consumer’s ability, but more importantly, willingness to pay. That willingness is naturally subject to a number of competing priorities and behavioral barriers. Uncertainty about the consequences, lack of salience of the repayment terms, or unclear links to their perception of self can all inhibit timely repayment. Fortunately, evidence has shown that small changes such as conveying a sense of obligation, visualizing clear plans and goals, and automating deductions can create any easy avenue to help customers avoid costly fees associated with late or nonpayment. In this project, Busara was commissioned to design a set of behavioral interventions that would improve the likelihood that borrowers repay their digital loans on time.