an effect of the relationship offer on immediate demand for the personal loan itself is that demand for loans is mostly driven by idiosyncratic and relatively rare shocks to customer’s liquidity, but that customers value the _option_ of future loans from the lender, contributing to demand for the non-credit product as a way of maintaining the financial relationship.<sup>27</sup> The design of the product adoption experiment allows us to rule out several potential explanations that could explain the pattern of our results. First, it could be that customers who are granted repayment flexibility at a time when they are facing financial distress are more interested in deepening their relationship with the lender because the offer causes them to infer that the lender will be more willing to renegotiate financial contracts in the future. This mechanism—which could give rise to future moral hazard and adverse selection into banking relationships—is ruled out by the result that borrowers who were offered repayment flexibility by the lender do not have higher demand for personal loans, whose terms can at least in principle be renegotiated ex post, from the lender than borrowers who were not offered repayment flexibility. Second, it could be that forbearance offers generate demand for the non-credit product (an enhanced credit report) because they prime customers to think about the importance of maintaining a good credit score. We can also rule out this channel, given that all participants of the product adoption experiment had received a debt forbearance offer in the main experiment, yet only customers in the relationship offer treatment exhibit higher demand for the lender’s products in the product adoption experiment. Moreover, this would not differentially affect the adoption of branded and unbranded credit reports.

To understand which causal mechanism is most consistent with increased demand for future interactions with the lender in response to the relationship offer, we present results from two sets of follow-up exercises. We first report heterogeneous treatment effects for the product adoption exercise in Table B.10 in the Supplementary Appendix to better understand which borrower characteristics correlate with demand for future interactions with the lender. While we cannot conclusively show which borrower characteristics are most predictive of demand for the non-credit product due to sample size limitations, the pattern of results from this exercise is broadly consistent with the analysis of heterogeneity in the loan repayment response to repayment flexibility.

To further examine what motivates borrowers to deepen their relationship with the lender, we conducted a small follow-up survey with customers in the product adoption experiment. While we cannot statistically distinguish the responses of participants in the regulator offer treatment from the responses of participants in the relationship offer treatment, the results provide some stylized evidence consistent with the results from the loan repayment analysis. The overwhelming majority (70 percent) of customers who express interest in the non-credit product state that the main reason for doing so is that they may want to apply for a loan from the lender in the future. About 50 percent of borrowers interviewed for follow-up believe that their lender is overall better than its competitors and 30 percent believe that the lender is a better match for their specific needs than its competitors. The latter number is slightly higher (33 percent) for borrowers who received a personalized forbearance offer from their lender. Although these results must be interpreted with caution given sample size limitations, the 27 Customers overwhelmingly report that the possibility of taking out future loans from the lender is the major reason to accept the non-loan product offer (B.12).

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