Debtor Psychology

Behavioral Economics

In our use of Behavioral Economics, called ‘Debtor Psychology’, we apply insightful psycho/economic concepts to enhance communication and payment agreements with debtors concerning how they will reduce their debt, in what time frame, and by what amount.

Behavioral economics considers the effects of social, cognitive, and emotional factors on the economic decisions of individuals and businesses and we translate that into what it can mean to you. These psycho/economic models integrate insights about how self-interest, rules-of-thumb, and other non-rational features of business life affect your business and how you can use them to promote effective communication with your clients and customers.

What will it do?

Debtor Psychology supplements and enhances your knowledge of, and approach to, customers through insights obtained from portfolios, demographics, and individuals. By applying certain frameworks to your existing client portfolios, you can engineer the timing, communication, and payment structures for your customers. For ‘Back End’ credit management, i.e. those customers who have tipped into a non-payment scenario, Debtor Psychology is your best opportunity to find ways to bring your portfolios from under- or non-performing to an ‘outperform’ situation. Debtor Psychology represents true Innovation; it is not plug-and-play, but it does have straightforward concepts that can be discussed with your portfolio campaign teams and implemented for your particular clients or portfolio profiles.

What concepts are used?

The starting point of Debtor Psychology is that customers are irrational, but ‘rationally’ irrational. In other words, they respond to their environment and changing circumstances in ways we can predict and use to help them get out of debt. Using some basic concepts, we can design a premium product offering for your clients:

  1. Identity: ensuring we are speaking to the right person? in campaign design
  2. Framing: using language & concepts to trigger effective behavior
  3. Choice Architecture: balancing simplicity and complexity to encourage the best choices
  4. Commitment Mechanisms: helping customers stick to debt-reduction plans

Debtor Psychology focuses on the preferences of your debtor groups or campaigns and provides you and your portfolio managers an additional lens through which to see and understand:


Important choices


Productive approaches


Effective structures

Is anyone else doing this?

There are two answers to this question:

1. The Debtor Psychology approach, using Behavioral Economics to inform and direct collections efforts, is probably unique. A ‘Google’ of the subject turns up many applications of the principles in marketing & advertising, loans, and credit cards, but no experience with, or comprehensive use of, it in ‘Back End’ collections. In this way, GMD brings a unique offering. Indeed, at this moment, live trials are being run in Europe and the results should be available by Q1 2013. Using Debtor Psychology can give you a practical edge in how you collect, but can also enhance your positioning in the market and allow you to brand a premium collections product.

2. Is anyone else doing this?: Yes, you are! Many of the Debtor Psychology principles are ‘common sense’ and you have been incorporating them implicitly into your campaigns for quite a while. By applying these concepts explicitly, you will not only be able to learn how to make current approaches better, but understand which practices may have been holding back your campaign effectiveness.

I’ll try it, how do we start?

Please contact GMD at your convenience and we will set up a meeting to do an initial mapping of your current practices and you will receive our comprehensive white paper outlining concepts and approaches in greater detail.