A chocolate nudge can serve a public purpose
SummarySBI’s use of behavioural insights to identify likely retail defaulters and pre-empt defaults is novel and welcome. India’s economy needs corporate credit to outpace retail loans, though
In business as in daily life, how someone behaves can reveal much about what the person is thinking or planning to do. Tell-tale signs exist; what’s needed is a way to identify them. If this can be done, it could serve as a timely input for pre-emptive action that may alter an outcome favourably. The use of behavioural readings, however, isn’t all that common. So it’s interesting to see the country’s largest lender, State Bank of India (SBI), experiment with a novel idea that plumbs the human psyche. The state-run bank has started catching involuntary signals sent by retail borrowers of a weak will to make their repayments. How? In the bank’s observation, clients who did not answer reminder calls for their dues tended not to pay. The correlation was strong enough for SBI to devise remedial measures. If such an alert is triggered, an executive is sent to the debtor’s home on a surprise visit with a box of chocolates to make a polite memory knock. This soft nudge is reported to have shown positive results. It has helped reduce retail defaults.