Reducing loan repayment postponement

The challenge:

At the beginning of the pandemic, the government decreed that both businesses and individuals could postpone their loan repayments for up to 9 months. 

However, what if this crisis solution for vulnerable people was misused? What if tens of thousands postponed even though they didn’t have to? That would mean a major cashflow hit for banks. Moreover, it could harm the clients as well. 

That’s why a major bank wanted to prevent postponements for those who were not facing serious financial issues.

The approach: 

Even if postponing might seem like a good choice, it meant the clients needed to repay the loan for a longer time and pay additional interest as well. This could have harmed them in the long run. The bank needed to be very clear about that.

Clients could request a postponement through internet banking or a mobile app. We analyzed the current funnel and identified steps where we could slow them down and make them realize these long-term effects. 

The solution

The goal was to be a partner who provided relevant information and at the same time, made the clients consider the negative aspects of this option. 

We proposed splitting the online funnel into 5 steps, each with its own role in changing the client’s mind:

Step 1: Clear information fairness

People are, in general, very sensitive to fairness and can be judgmental when they see something unfair happen to someone else. 

To minimize unfair requests, we placed a checklist with clear criteria on the first step. Once the clients went over the questions, they could quickly see that this option was not meant for them.

What it actually looked like:

Step 2: Adding friction and paying attention to the negatives

In the second step, the client got all the necessary information about the postponement and a chance to learn more on a separate landing page. 

The redirection itself also served as additional friction, which would slow the client down without making it too hard to postpone.

Once they got to the landing page, they were able to learn all the required information, including the long-term negative effects of the postponement. The negatives were also illustrated in a specific example, in the same way as in the following Step 3 of the funnel. 

Step 3: Using concrete examples instead of general information

Personal stories grab attention, provide a clear picture and evoke emotions. That’s why instead of just listing all of the negative aspects, we went with a specific example in the third step of the funnel.

By using a specific example, it was much more apparent what the postponement would mean for them personally and how much they could actually end up overpaying.

Step 4: Commitment and removing uncertainties

In general, people don’t like commitments very much. So, in the fourth step, we asked them if it was clear to them that once they filled out the application, it was legally binding. 

Then they needed to either click an “I want to proceed” button or an “I’ll think it over” button, giving them a chance to quit the process. 

To nudge the clients towards the second button, we also removed the biggest uncertainty they might feel about the process – that it was now or never, and they would not be able to postpone their loan later during the pandemic. 

Before they moved to the form, we reassured them that they could ask to postpone at any time during the crisis, so they could still take time to think about it. 

Step 5: Prompting honesty

This was the last step of the process before submitting the application – the form. 

To nudge the clients towards honest answers, they needed to check a little box at the top of the form asking them to confirm that all the information they were about to provide was true. 

Finally, clients needed to answer an open question:

“What is the reason you are about to apply for a postponement?”

Finding out that the clients objectively did not have a good reason to apply would be likely to lower the chances that they would actually do so.