People prefer to request debt repayment in person from close friends. (Credit: Eyecrave Productions)
Editor’s note: This article was written by Katrina Nickell.
INDIANAPOLIS – Asking to be repaid can be an awkward conversation — especially depending on who owes you. New research from the Indiana University Kelley School of Business in Indianapolis reveals that the way people request money back is influenced by the closeness of their relationship with the borrower.
According to research conducted by Alexander Park, assistant professor at the Kelley School, people prefer to request debt repayment in person from close friends, as face-to-face communication allows for a more personal resolution. However, when dealing with acquaintances or distant social connections, individuals tend to prefer low-contact methods, such as digital payment apps like Venmo or Zelle, to avoid the discomfort of in-person requests.
Alexander Park
“This research documents that when navigating uncomfortable interactions, people selectively maneuver based on the needs of the social relationship at hand,” Park wrote. “This work is also one of the rare examples that studies finances and social relationships outside of the realm of romantic relationships.”
Park’s paper, “Fighting Fiscal Awkwardness: How Relationship Strength ChangesConsumers’ Approach to Resolving Peer Debt,” is published in the Journal of Experimental Psychology.
Park collaborated with Cynthia Cryder, from the Olin Business School at Washington University in St. Louis, and Rachel Gershon, from the Haas School of Business at the University of California Berkeley. The group conducted nine studies, which included scenario-based experiments and a nationally representative survey. In doing so, it provided insight on how and why people tailor their repayment requests based on the strength of their relationship with the borrower.
In addition to exploring emotional responses to conversations over money, the study surveyed subjects’ perceived discomfort when discussing various sensitive topics with peers. Some topics include relationship problems, politics, and death. Discussion around money issues was the second most uncomfortable topic.
Across all subjects, respondents expressed a higher level of discomfort when discussing sensitive topics with distant acquaintances compared to close friends. This reinforces the idea that relationship closeness may shape how we handle uncomfortable conversations.
“We believe studying financial indebtedness within social relationships is important because both money and social connections play a fundamental role in our daily lives,” Park said.
People anticipate discomfort when requesting money from distant connections, which drives them away from morepersonal requests, according to the research. Instead, distant connections are more likely to opt into digital apps like Venmo or Zelle.
On the contrary, people worry that close friends may view a digital request as cold or impersonal — leading them to favor more direct and personal interactions.
“As technology advances, so does the way people communicate. So, the development of financial payment apps like Venmo and Zelle may help individuals address financial indebtedness without the discomfort of in-person interactions.” Park said.
Overall, this research contributes to a better understanding of how people navigate the complexities of discussing money within social relationships.
“People make many decisions with an eye toward how others will perceive them, and we find that the domain of indebtedness is no exception,” Park wrote in his paper. “Our work contributes to this understudied domain of interpersonal debt and the psychology underlying individuals’ approaches to maintaining financial and social harmony in this context.”