Online banking and automated credit scoring technologies are making credit faster. Borrowers can obtain uncollateralized cash loans within minutes of encountering consumption or investment stimuli. These loans feature high interest rates and/or stiff penalties for delinquency. Through a randomized experiment in Mexico, this study tests the impact of waiting periods on outcomes related to digital credit. Specifically, it measures: 1) the causal impact of experiencing a delay on default rates, repayment rates and indebtedness, 2) the selection effect of delays in credit disbursement, and 3) the total effect of a policy enforcing delays. The hypothesis is that waiting periods will reduce spurious demand for loans and will be used for more productive purposes following waiting periods. This study advances the understanding of digital credit, contributes to the literature on behavioral biases in consumer finance, and tests the value of waiting periods as consumer protection and borrower screening measures. Results forthcoming.
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