The Six Principles of Persuasion in Debt Collections

Reciprocity – Give to Get
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"We are more likely to comply with a request from someone who has provided us with a favor or benefit."
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Lenders often focus on reminding borrowers of their obligations. But what if collections teams first offered something of value?
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Application in Debt Collections:

• Provide borrowers with helpful financial insights, such as cash flow management tips or business growth strategies.
• Offer a small grace period for loyal borrowers, reinforcing goodwill.
• Introduce milestone-based incentives (e.g., borrowers who pay on time for six months get a lower interest rate on their next loan).
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When borrowers feel they have received a benefit, they are more likely to reciprocate by honoring their financial commitments.
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Commitment and Consistency – Small Steps Lead to Big Results
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"Once people commit to an idea or course of action, they are more likely to follow through with it."
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Small commitments make it easier to fulfill larger commitments. This is especially crucial in microfinance, where borrowers may struggle with lump-sum payments.
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Application in Debt Collections:
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• Instead of pushing for a full missed EMI in one go, get a micro-commitment—such as a partial payment—with a promise to pay the rest later.
• Have borrowers verbally confirm their repayment plan with an agent. Studies show people are more likely to follow through on written or spoken commitments.
• Implement a "pre-commitment message"—before a payment is due, remind the borrower of their prior commitment rather than just the due date.
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This technique creates a psychological drive to stay consistent with prior actions.
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Social Proof – Show That Others Are Paying
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"People look to others to determine the correct course of action."

If borrowers believe that many of their peers are paying on time, they are more likely to do the same.
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Application in Debt Collections:

• Share success stories of borrowers who consistently repay on time and how it has helped them access higher credit limits.
• Send anonymized statistics: “95% of borrowers in your category have paid this month. Don’t miss out!”
• Use community influence—if a group of small business owners in a locality repays, others in the area are more likely to follow suit.
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Social proof reassures borrowers that repaying on time is the norm, not the exception.
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Authority – Trust Comes from Expertise
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"People are more likely to be persuaded by those who are perceived as credible experts."
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Borrowers trust those who appear knowledgeable and professional.
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Application in Debt Collections:

• Train collection agents to act as financial advisors, not just payment collectors. When they provide sound financial guidance, borrowers are more likely to comply.
• Lenders can collaborate with industry bodies to host financial literacy sessions, increasing perceived authority.
• Use digital communication channels that reflect professionalism (e.g- SMS reminders from the official lender’s ID, emails with an expert’s name rather than generic templates).

By positioning collections teams as credible advisors, lenders can shift the conversation from confrontation to cooperation.
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Liking – People Repay Those They Like
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"We are more likely to be influenced by those we like and who show they care about us."
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Debt collection often fails because borrowers feel the lender is just another entity chasing money. A personalized, human approach changes the game.
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Application in Debt Collections:

• Train agents to build rapport with borrowers. A simple "How is your business doing?" before discussing payments can make a huge difference.
• Use the borrower’s name in communication. “Hi Rajesh, we noticed your next EMI is due. Let us know if you need any assistance.”
• Assign a single agent to a borrower, ensuring consistency in interactions rather than random calls from different numbers.
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A borrower who likes and trusts their lender is more likely to prioritize repayments.
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Scarcity – The Fear of Losing Benefits
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"People are more motivated by the thought of losing something than by the thought of gaining something."
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The fear of missing out can drive timely payments.
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Application in Debt Collections:

• Offer time-bound benefits: “Make your payment before the 10th to qualify for a processing fee waiver on your next loan.”
• Communicate the consequences of non-payment subtly but firmly: “Late payments could impact your ability to get future loans.”
• Introduce priority services for on-time payers—faster loan approvals, better terms, or exclusive offers.
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Creating a sense of urgency ensures borrowers don’t deprioritize their payments.
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Embedding Persuasion Across the NBFC’s Collection Strategy
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To create a lasting impact, lenders must embed these principles at every stage of the collections process:

• Proactive Communication: Don’t wait for a missed payment; engage borrowers beforehand.
• Omnichannel Outreach: Use SMS, WhatsApp, email, and personal calls to maintain visibility.
• AI and Automation: Leverage data to personalize nudges and time interventions optimally.
• Empathy-Driven Training: Equip collections teams with skills that foster trust, not fear.
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By applying the art of persuasion, NBFCs can transform collections from a forceful pursuit into a seamless engagement process—one that strengthens borrower relationships while ensuring steady repayments.
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Final Thought: A Shift from Enforcement to Influence
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Debt collections in India, especially in the micro and small business segment, can no longer rely on pressure tactics alone. The key lies in influencing behavior rather than enforcing compliance.
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Cialdini’s words remind us: “Persuasion is not about coercion; it is about helping people make decisions that are in their best interest.”
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When collections teams master persuasion, they don’t just recover payments—they build stronger borrower relationships, increase retention, and ultimately, create a more sustainable lending ecosystem.