How Can We Learn from Borrowers’ Online Behaviors? The Signal Effect of Borrowers’ Platform Involvement on Their Credit Risk

Abstract

A growing number of borrowers are applying for digital credit through Internet platforms due to the integration of digital credit services the Internet. However, further empirical evidence is needed to explore how a borrower’s platform behaviors affect its credit risk. As such, our study uses signaling theory as the theoretical foundation to explore the overall effects of a borrower's platform involvement intensity on its credit risk based on a large consumer credit application dataset. The main finding shows the increase in a borrower’s involvement intensity reduces its likelihood of defaulting. We attribute it to the platform's belief that borrowers with high involvement intensity have the higher value to the platform. In addition, we examine how a borrower's involvement intensity is moderated by several factors, such as the stability of its platform involvement intensity and its credit history. Due to the importance of digital credit services in microfinance, we have provided useful implications for achieving win-win outcomes in the credit market for the stakeholders.

Being Emotionally Supportive: Exploring the Value of Emotional Appeals Retargeting in Recovering Consumers of Financial Services

“…As discussed before, privacy is a main concern in the context of financial services. FSPs usually require consumers to provide more confidential information for credit risk evaluation (Tang, 2019), and thus privacy-sensitive consumers may sense the loss of control over information and an invasion of privacy. Goldfarb and Tucker (2011) suggest that the most significant challenge in financial services marketing and operations is usually around anxiety related to privacy perceptions.…”

“…Therefore, this study aims to empirically investigate the effectiveness of emotional appeals retargeting in winning consumers back within the financial service market. As previously mentioned and reinforced by the extensive survey conducted by Signicat, 5 two prominent factors contribute significantly to the high abandonment rate observed within the financial service markets: (1) consumers' indecisive motivation in adopting financial services, stemming from their psychological distance to FSPs due to a lack of financial literacy (Liberman et al, 2007) and/or a reluctance to seek assistance from third-party financial institutions (Turvey and Kong, 2010), and (2) their substantial concerns regarding potential operational issues within FSPs, such as system vulnerabilities, misuse of personal information, and privacy breaches (Tang, 2019). Accordingly, we have devised two distinct emotional appeals to tackle these issues, aiming to reduce the perceived psychological distance and enhance the sense of psychological security within financial services.…”

Optimal Nonlinear Pricing with Data-Sensitive Consumers

“…While already Becker (1980) makes the point that consumers may value privacy intrinsically, the economics literature that studies consumers with such intrinsic preferences is small but growing. There is an empirical literature that points to the existence of an intrinsic value of privacy and seeks to quantify it (see Tsai (2011), and more recently, Lin (2020) and Tang (2020)). On the theoretical side, Choi et al (2019) and Acemoglu et al (2020) model consumers with intrinsic privacy concerns in order to study the role of data externalities.…”

Choice Architecture, Privacy Valuations, and Selection Bias in Consumer Data

“…Although existing literature has documented the presence of privacy preferences, empirical studies quantifying the value of data to consumers are nascent (Acquisti et al 2013, Lin 2022, Tang 2019, Collis et al 2020. One potential reason is that privacy preferences are context-specific (Martin & Nissenbaum 2016) and hard to measure.…”