Bank loan officers are more likely to approve loan applications earlier and later in the day, while ‘decision fatigue’ around noon is associated with failure to choose the safest option of saying no .
These are the results of a study by researchers from the Cambridge Department of Psychology, published today in the journal Royal Society Open Science.
Decision fatigue is the fatigue caused by having to make difficult decisions over a long period of time. Previous studies have shown that people with decision fatigue tend to fall back on the “ default decision ”: choosing any option is easier or seems safer.
Researchers looked at decisions made on 26,501 loan applications by 30 loan officers at a major bank over a month. The agents made decisions on “restructuring requests”: when the customer already has a loan but has difficulty repaying it, he therefore asks the bank to adjust the repayments.
By studying decisions made in a bank, researchers were able to calculate the economic cost of decision fatigue in a specific context – the first time this was done. They found that the bank could have collected an additional $ 500,000 in loan repayments if all the decisions had been made early in the morning.
“Loan officers were more willing to make the difficult decision to give a client easier loan repayment terms in the morning, but by noon they were tired of the decision and were less likely to take a loan. loan restructuring request. After lunch, they probably felt more rested. and were able to make better decisions again, ”said Professor Simone Schnall of the University of Cambridge’s Department of Psychology, lead author of the report.
Decisions on loan restructuring applications are cognitively demanding: loan officers must weigh the client’s financial strength against risk factors that reduce the likelihood of repayment. Mistakes can be costly for the bank. Approval of the application results in a loss against the original payment plan, but if the restructuring is successful, the loss is significantly less than if the loan is not paid off at all.
The study found that clients with approved restructuring requests were more likely to repay their loan than if they were asked to stick to the original repayment terms. The tendency of loan officers to turn down more requests around lunchtime was associated with financial loss for the bank.
“Even the decisions that we might assume are very objective and motivated by specific financial considerations are influenced by psychological factors. This clearly shows that regular breaks during working hours are important to maintain high performance levels, ”said Tobias Baer, researcher at the University. from the Cambridge Department of Psychology and first author of the report.
Modern working models are characterized by extended hours and a higher volume of work. The results suggest that reducing prolonged periods of intensive mental effort can make workers more productive.
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