Social media meets FinTech platforms: How do online emotions support credit risk decision-making?

As emerging FinTech platforms face pressure in efficiently managing credit risk, the human emotional spectrum of FinTech platform borrowers within social media becomes a potential source for gaining insight into and evaluating their financial behaviors. Collaborating with an Asian FinTech platform, we investigate the impact of social media emotions on a platform’s loan-approval decisions and repayment-reminder interventions before due dates. We demonstrate that anger at the pre-approval stage has a U-shaped relationship with platform borrowers’ default probability. We reveal what we call “a bright side of anger” with respect to curbing financial credit risk: moderate intensity of anger at the pre-approval stage suggests a lower loan default probability. We also find that the average happiness tendency of platform delinquent borrowers’ at the pre-maturity stage becomes informative and valuable, as it shows a U-shaped relationship with loan default; as for anger, it does not work therein. Furthermore, our field experiment indicates that a positive-expectation reminder is useful for prompting repayment when delinquent borrowers are in strong emotional intensities, regardless of anger or happiness. However, a negative-consequence reminder results in a higher default probability for delinquent borrowers who maintain high immediate happiness before the loan maturity dates. We draw on the classical appraisal theory of emotions and the feelings-as-information theory to interpret our findings. We offer non-trivial theoretical and practical implications to support FinTech platform credit risk decision-making by investigating the value of social media emotions and advocating for cross-functional coordination between debt approval and debt collection departments.