Apply for a loan? Avoid midday! Requests processed around 12 noon are likely to be rejected because bankers struggle with “ decision fatigue. ”
- Researchers examined the decisions made by 30 bank credit officers over the course of a month
- Specifically, they looked at 26,501 loan repayment restructuring requests
- Decision fatigue results from making many difficult choices in a row
- While refusing to restructure a loan implies a loss to the bank, default is worse
- Declined requests around lunchtime cost the bank about $ 500,000 overall
A study found that bank credit officers are more likely to approve loan applications early and late in the business day – and reject applications that were processed at noon.
Psychologists in the UK studied decisions made on 26,501 loan restructuring requests by a major bank team of 30 credit officers over a period of one month.
They found that the officers appeared to have “decision fatigue” in the middle of the day, making them more likely to fall behind the safer option of saying no.
Processing loan applications involves assessing a client’s financial strengths against his or her risk factors – and is thus cognitively demanding.
Making the wrong decision can be costly, and although restructuring often results in a loss compared to the original payment plan, default may be worse for the bank.
According to the team, the results highlight how getting regular breaks amid long periods of intense work can make employees more productive overall.
Bank credit officers are more likely to approve loan applications early and late in the business day – and turn down requests that were processed around 12 noon, according to a study (Stock Photo)
Decision fatigue is the mental fatigue that results from having to make difficult decisions repeatedly over an extended period of time.
Previous research has shown that this burnout leads people to undo any “default” option – the one that appears to be either easier or safer.
“Credit officials were more willing to make the tough decision to give a customer more lenient loan repayment terms in the morning,” said research author and psychologist Simon Shnall of the University of Cambridge.
“By midday, however, they showed decision stress and were unlikely to agree to the loan restructuring request.”
“After lunch, they might have felt more refreshed and were able to make better decisions again,” she added.
In the study, the loan requests that credit officials were processing were so-called restructuring requests.
These are situations where a distressed customer who already has a loan asks the bank to adjust the repayment schedule to help him.
By studying decisions in a bank, the team was able to provide the first account of the economic impacts of decision fatigue in a given context.
Clients were more likely to pay off their loan in full if their schedule was restructured than if the original repayment terms had been kept.
This means that the trend of rejecting more requests around lunch has resulted in an avoidable financial loss for the bank.
The researchers concluded that the bank could have collected an additional $ 500,000 in loan repayments if all decisions were made early in the morning, before the burnout had begun.
Psychologists in the UK studied decisions made on 26,501 loan restructuring requests by a major bank team of 30 credit officers over a period of one month. And they found that the officers seemed to suffer from “decision fatigue” in the middle of the day (left), making them more likely to fall behind on the safer option of saying no (right).
“Even decisions that we might assume are highly objective and directed to specific financial considerations are influenced by psychological factors,” said research author and psychologist Tobias Bayer, from the University of Cambridge.
“This is clear evidence that regular breaks during working hours are important to maintaining high levels of performance.”
The full results of the study have been published in the Royal Society Open Science.
Study finds that being generous “makes you really happy”
Being genuinely generous makes people happier, according to research by an international team of experts in 2017.
The study found that neurons in an area of the brain associated with generosity activate neurons in the ventral striatum, which are associated with happiness.
A group of 50 volunteers in Switzerland participated in a spending experiment, each receiving 25 Swiss francs (GBP 20 / USD 25) per week for four weeks.
As part of the experiment, participants performed an independent decision-making task, as they could behave more or less generously while measuring brain activity with functional magnetic resonance imaging (fMRI).
They were asked to choose to present between three and 25 francs of their money as a gift to a different recipient from those previously chosen.
The researchers found that Participants who committed themselves to spending their endowments on others behaved more generously in the decision-making task.
They also detected an increase in self-reported happiness compared to the control group.
The full results are published in Nature Communications.