Visual Nudges and Borrower Loan Choices: Evidence from a Field Experiment

Last registered on October 18, 2024
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Pre-Trial

Trial Information

General Information

Title
Visual Nudges and Borrower Loan Choices: Evidence from a Field Experiment
RCT ID
AEARCTR-0014536
Initial registration date
October 08, 2024

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
October 18, 2024, 4:40 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

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Primary Investigator

Name
Joon Sang Yoon
Affiliation
Chinese University of Hong Kong, Shenzhen
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Other Primary Investigator(s)

PI Name
Regina Wittenberg-Moerman
PI Affiliation
Kellogg School of Management, Northwestern University
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PI Name
Tianyu Zhang
PI Affiliation
The Chinese University of Hong Kong, Shenzhen
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PI Name
Kanyuan Huang
PI Affiliation
The Chinese University of Hong Kong, Shenzhen
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PI Name
Mengwei Tang
PI Affiliation
The Chinese University of Hong Kong, Shenzhen
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Additional Trial Information

Status
In development
Start date
2024-10-09
End date
2024-12-09
Keywords
Finance & Microfinance
Additional Keywords
JEL code(s)
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
We work with a government-backed online lending platform in China to examine borrowers’ loan choices. The platform allows borrowers to directly borrow money from banks. Banks will list their loan products on the platform. Any individual or a small business with a valid Chinese ID can register with the platform and apply for loans. From the platform’s historical data and the pilot study, we find that borrowers often make sub-optimal decisions by choosing loans with worse characteristics (e.g., high interest rate, slow processing time, low approval rate). In this study, we examine whether a simple visual nudge by labeling the loan product can change borrowers’ loan choices, potentially helping them make better decisions.
External Link(s)

Registration Citation

Citation
Huang, Kanyuan et al. 2024. "Visual Nudges and Borrower Loan Choices: Evidence from a Field Experiment ." AEA RCT Registry. October 18. https://doi.org/10.1257/rct.14536-1.0
Sponsors & Partners
Experimental Details

Interventions

Intervention(s)
We place labels on loan products on a government-backed online lending platform in China. The platform allows borrowers to directly borrow money from banks.
a. Control group: no label.
b. Treat 1: Lowest rate label – we place a label on the loan with the lowest spread
c. Treat 2: Fastest processing time label - we place a label on the loan with the fastest processing time
d. Treat 3: Highest success rate label - we place a label on the loan with highest historical approval rate
Intervention Start Date
2024-10-09
Intervention End Date
2024-12-09

Primary Outcomes

Primary Outcomes (end points)
1. Whether the borrower applies for a loan
2. The loan product that the borrower selects
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
Subject recruitment: we work with a government-sponsored lending platform in China to recruit potential borrowers. As borrowers log into the platform, the platform will prompt a survey asking the borrower to fill in basic background information, such as gender, age, income range, as well as their loan demand, i.e., how much money they want to borrow and duration.
Based on the borrower’s loan application, the platform will recommend 5 loan products to the borrower. The borrower can apply for one or more of those recommended. Once the borrower applies, the bank is notified and will start to process the loan application.
Treatment: Once the borrower completes the survey, she will be randomly assigned to one of the following groups:
a. Control group: no label.
b. Treat 1: Lowest rate label – we place a label on the loan with the lowest spread
c. Treat 2: Fastest processing time label - we place a label on the loan with the fastest processing time
d. Treat 3: Highest success rate label - we place a label on the loan with highest historical approval rate
We observe which loan product the borrower picks and how much time the borrower spends on selecting the loan product.
Experimental Design Details
Not available
Randomization Method
We work with the lending platform to design a program that randomly assigns the borrower to the control group or one of the three treatment groups. The randomization is done via a random number generator that generates a number between 1 to 4. The probability of entering each group is 25%.
Randomization Unit
Randomization is at the individual level
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
We plan to recruit about 1,500 individuals for the experiment. Based on the pilot study, approximately 30% of the individuals will apply for at least one loan. Therefore, our expected sample size is about 450 individual borrowers. Given that each borrower will receive 5 recommended loan products, we expect to have 450*5=2,250 borrower-loan pairs in our sample.
Sample size: planned number of observations
At least 450 borrowers. At the loan level, we will have at least 2,250 borrower-loan pairs (each borrower applies to maximum of 5 loans).
Sample size (or number of clusters) by treatment arms
Approximately 450 borrowers divided into four groups (three treatment and one control). Approximately 112 borrowers per group.
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Based on our pilot study, the minimum detectable effect size is 50 individual borrowers, or equivalently, 249 borrower-loan pairs, for a 5% significance level.
Supporting Documents and Materials

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IRB

Institutional Review Boards (IRBs)

IRB Name
Chinese University of Hong Kong (Shenzhen)
IRB Approval Date
2024-04-01
IRB Approval Number
CUHKSZ-D-2024051
Analysis Plan