Study Overview
The project addresses the global issue of rising household debt, focusing on Argentina, where inflation and interest rates are exceptionally high. In collaboration with Banco Galicia, the project aims to alleviate debt distress among low-income households through various financial interventions. The research objectives can be summarized as follows: (i) determining the most effective way for the bank to communicate new loan terms to clients; (2) exploring the factors that influence whether clients prefer fixed or variable rate contracts; (3) developing strategies for the bank to set contract terms in the face of uncertain demand.
Study Results
Within the context of this study, the team ran an experiment with the largest private bank in Argentina to enhance the marketing of their debt-refinancing program. This initiative took place while Argentina was experiencing a surge in household debt, exacerbated by high inflation and interest rates. The bank aimed to engage over 300,000 delinquent clients, primarily from lower-income households, through targeted email campaigns. The study tested if displaying monthly payments instead of the high-interest rates in emails would increase engagement. Contrary to expectations, clients were more likely to click on the link when the interest rate was displayed, with response rates varying significantly across different regions of Argentina. As interest rates started to decline, the bank launched a second, adaptive experiment. The results showed that a multi-prior approach proved effective as fewer emails were needed to achieve significant results compared to traditional randomized controlled trials. In the capital city of Buenos Aires, for instance, the experiment was stopped after 294 emails, far fewer than would be needed in traditional methods.
Intervention: Financial services
Intervention Partner: Banco Galicia
Populations: Loan recipients
IBSI Funding Acknowledgement: Lab for Inclusive FinTech (LIFT)