<p>Robin Brazier is a former Communications and Operations Associate for the Smart Campaign.</p>


Robin Brazier

When clients aren't protected, it's bad for business.

Blog Post

<em>This is the second in <a href="https://cfi-blog.org/tag/smart-100-blog-series/">a series of blog posts</a> exploring the impact of Smart Certification on the financial inclusion industry.</em>

Smart Certification recently reached the milestone of 100 certified financial institutions, which collectively serve 42 million clients around the world. Among our lessons learned along the way: consumer protection starts with listening.

When the demonetization crisis struck India in 2016, many clients were left with currency that was no longer valid and had no means to repay their loans. They worried that their financial institutions would treat them harshly. Sulthana, who owns a small shop in India, had a different experience with <a href="http://smartcampaign.org/certification/certified-organizations/certified-profiles-ujjivan">Ujjivan</a>, a Smart-Certified small finance bank: “When demonetization happened…we told Ujjivan that we needed a few more days to repay it. They were very considerate and understanding, spoke politely and gave us a few more days [to repay the loan].”

While demonetization was a unique shock for clients and lenders in India, the empathy described by Sulthana reflects the importance that Ujjivan places on respectful communication and customer service. As it has done for many of the certified providers, the certification process helped Ujjivan formalize its client-centric approach. Ujjivan has established a separate service quality department with dedicated customer care representatives at all branches, with the responsibility of proactively seeking customer feedback and resolving complaints.

By promoting <a href="http://smartcampaign.org/about/smart-microfinance-and-the-client-protection-principles">principles</a> such as fair and respectful treatment of clients, transparency, and mechanisms for complaint resolution at financial institutions around the world, the Smart Certification program works to ensure that clients are heard and kept at the center of the financial inclusion industry. The Smart Campaign conducts research to determine what people really care about and identify risks that disproportionately affect low-income clients. Through projects like the <a href="http://smartcampaign.org/tools-a-resources/1089">Client Voice</a> and <a href="http://www.smartcampaign.org/tools-a-resources/1030">What Happens to Clients Who Default</a>, the Campaign studies what risks and challenges clients face as they gain access to fast-changing financial services. This knowledge informs the design of the Smart Certification standards and industry best practices for responsible financial inclusion.

In its Client Voice research to-date, the Smart Campaign asked clients in four countries (<a href="http://smartcampaign.org/tools-a-resources/1087">Peru</a>, <a href="http://smartcampaign.org/tools-a-resources/1076">Benin</a>, <a href="http://smartcampaign.org/tools-a-resources/1088">Georgia</a> and <a href="http://smartcampaign.org/tools-a-resources/1077">Pakistan</a>) to describe their experiences with financial providers. The results showed that clients shared similar complaints across geographies:
<ul>
 	<li>Clients had an inadequate understanding of the basic attributes of their products, such as loan terms and conditions.</li>
 	<li>Clients said they had unpleasant experiences with financial institution staff members, who often treated them poorly and with disrespect. One client from Pakistan said, “They don’t think that we can genuinely have problems… They don’t try to understand.”</li>
 	<li>Mechanisms for filing a complaint at the studied institutions were lacking.</li>
 	<li>Clients were making unreasonably large sacrifices to repay their loans. For instance, borrowers in Ghana reportedly skipped meals, sold their possessions, or took their children out of school when they were about to default. Clients who actually default are often pushed into taking more desperate measures, like some in Uganda who fled town or changed their names.</li>
</ul>
These findings demonstrate that when financial service providers do not prioritize client protection their customers can suffer, which jeopardizes the sustainability of their business. Smart Certification aims to mitigate client harms by listening to clients and supporting institutions to create good communication channels with their clients.

Hearing directly from clients provides information that enables policy makers and product designers to improve their offerings. The findings of the Client Voice research in Peru had a major impact on the Superintendency of Banking, Insurance and Private Pension Funds of Peru (SBS), the country’s primary financial regulator SBS, leading them to <a href="https://cfi-blog.org/2017/11/13/how-smart-campaign-research-is-influencing-client-protection-policy-in-peru/">adapt the market’s regulatory framework</a> to better meet the needs of clients:
<ul>
 	<li>Clients told us that they didn’t understand how credit bureaus or credit reporting worked; SBS worked with the credit bureau system to develop a simplified credit report that motivated users to look up their credit information.</li>
 	<li>We found that 40 percent of respondents in Peru didn’t understand their loan terms; SBS started testing ways to clarify the information on loan terms and conditions, and required insurance companies to explain the scope and characteristics of product coverage to potential clients.</li>
 	<li>A quarter of clients in Peru reported that microfinance providers discriminated against those of lower socioeconomic status. SBS implemented new regulations on market conduct, incorporating detailed responsibilities and obligations for financial institutions to improve their business practices and advance equal treatment of clients.</li>
</ul>
Smart Certification raises the client voice within financial institutions by promoting timely and responsive mechanisms for client complaints and problem resolution. In this way, clients’ concerns are better heard and institutions get the feedback they need to improve their products and services. Smart Certified institutions affirmed the benefits of this feedback loop <a href="http://smartcampaign.org/tools-a-resources/1149">in a recent survey</a> with 86 percent attesting that achieving certification helped them better understand client risks and allowed them to better serve their clients. This is sorely needed when access to financial services worldwide is growing, but <a href="https://qz.com/1260139/india-has-the-highest-number-of-inactive-bank-accounts-in-the-world/">usage is stagnant</a>.

Empathy matters. In the Smart Campaign’s direct conversations with clients, they tell us that they value transparent and respectful service above all else. Empathy and compassion for a borrower who is struggling to make a payment, like Ujjivan client Sulthana, go a long way in increasing client retention and loyalty. So as we celebrate what 100 Smart Certifications means for the industry, let’s not forget what it means to the clients the industry serves.

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2018/05/16/100-smart-certifications-a-milestone-for-responsible-financial-inclusion/">100 Smart Certifications - A Milestone for Responsible Financial Inclusion</a>

<a href="https://cfi-blog.org/2016/09/28/fintechprotects-prioritizing-responsible-agent-management-at-oxigen/">#FintechProtects: Prioritizing Responsible Agent Management at Oxigen</a>

<a href="https://cfi-blog.org/2015/03/26/smart-certification-kashf-foundation-takes-the-lead-in-pakistan/">Smart Certification: Kashf Foundation Takes the Lead in Pakistan</a>

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Where Does Consumer Protection Begin? Start with Listening

If clients are confused or feel misled by the provider, trust is eroded.

"If clients are confused or feel misled by the provider, trust is eroded."

March 15 is <a href="http://consumersinternational.org/what-we-do/world-consumer-rights-day/">World Consumer Rights Day</a> (WCRD), a day marked by the consumer movement each year to raise global awareness about consumer rights and needs. It’s an opportunity to demand that the rights of all consumers are respected and protected, and to protest against market abuses and social injustices which undermine those rights. The Smart Campaign marks this occasion by talking about the importance of transparency and grievance redressal as key tenets of client protection and building consumer trust.

WCRD’s theme this year is “Making Digital Marketplaces Fairer.” With the volume of online transactions increasing, consumers are exposed to new – sometimes not fully understood – risks. For this reason, WCRD 2018 is calling for access to fair and secure internet for all, action against scams and fraud, and better consumer protection online.

According to Consumers International, <a href="http://consumersinternational.org/media/154916/e-commerce-overview-report.pdf">nearly half</a> of consumers that have access to internet but do not shop online cite lack of trust as the reason. Similarly, <a href="http://consumersinternational.org/what-we-do/world-consumer-rights-day/2018-making-digital-marketplaces-fairer/">almost 70 percent</a> of online consumers worry their digital payments are unsafe. What contributes to this lack of trust? The causes vary, but they often hinge on two things: lack of transparency and insufficient grievance redressal mechanisms.
<h3>Transparency</h3>
For the Smart Campaign, transparency means much more than disclosure agreements. Even when these are in place, <a href="http://smartcampaign.org/storage/documents/Synthesis_Report_ENG_FINAL.pdf">research shows</a> that low-income clients rarely fully understand the terms and conditions (T&amp;Cs) of the product they purchased. Many times, when the T&amp;Cs are explained simply and thoroughly, they are <a href="https://www.itu.int/en/ITU-T/focusgroups/dfs/Documents/01_2017/ITU_FGDFS_Report-on-Review-of-DFS-User-Agreements-in-Africa.pdf">often in English</a> instead of in the language of the customer. Sometimes <a href="http://www.cgap.org/sites/default/files/Working-Paper-Competition-in-MFS-Kenya-Tanzania-Jan-2016.pdf">third-party charges or hidden fees</a> aren’t fully disclosed up front, but only after the purchase is finalized. In other cases, the entire price is hidden until <a href="http://www.cgap.org/sites/default/files/Focus-Note-Consumer-Protection-in-digital-Credit-Aug-2017.pdf">after the completion of the purchase</a>.

On World Consumer Rights Day, we remind digital financial service providers and online marketplaces to transparently and effectively convey important product information so their customers fully understand. As pointed out in our recent Smart Brief, <a href="http://smartcampaign.org/storage/documents/Smart_Brief_Tiny_Loans_Big_Questions_Final_092617.pdf">“<em>Tiny Loans, Big Questions</em>,”</a> clients should also be able to store and save T&amp;Cs related to their digital purchase or transaction, just as they should for a face-to-face one. If clients are confused or feel misled by the provider, trust is eroded. Alternatively, when providers meet consumers where they are by using their language and being completely transparent about business practices and pricing, they are taking an important step in building customer trust and loyalty.
<h3>Recourse Mechanisms</h3>
<img class="alignright wp-image-25279" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2018/03/pull-quote-2.png" alt="" width="315" height="207" />Consumers of practically every product or service are bound to have complaints or questions regarding their purchase or transaction. This issue is especially relevant in digital marketplaces, since there tends to be limited human interaction. On top of that, customers who are new to the technology or not familiar with digital interfaces may be confused and are therefore likely to require customer service. <a href="http://smartcampaign.org/storage/documents/Smart_Brief_Tiny_Loans_Big_Questions_Final_092617.pdf">“<em>Tiny Loans, Big Questions</em>”</a> points out that problem resolution can be particularly difficult when clients are using a lending service that involves multiple companies, as in the case of mobile lenders using a mobile network operator’s agent network for cash-in and cash-out payments. Borrowers in this situation are interacting with agents who are not full-time employees and likely do not work for the lender. Although agents offer a human touch, as cash transactions are their primary duty, they may have little ability to field questions or resolve problems related to the loan product.

On World Consumer Rights Day, the Smart Campaign stresses the right of consumers to access simple, fair redress. We know that if customers do not have an easily accessible grievance redressal mechanism when things go wrong, they will be less likely to trust the product or service they’re buying. However, if the customer feels heard and sees that their needs are adequately addressed, trust is strengthened. Fair redress can be achieved by setting up well-staffed call enters or establishing online chats between staffers and customers, for example. <a href="http://www.centerforfinancialinclusion.org/storage/Uniting_TechandTouch_Kenya_FINAL.pdf">CFI Fellow Alexis Beggs Olsen</a> advocates for “centaur solutions” combining digital and human interfaces to best support low-income customers using digital financial services, while improving customer acquisition and retention.
<h3>Moving Forward</h3>
At the Smart Campaign, it’s our job to stay on top of risks to clients around the world and to work with financial service providers and other parties to help mitigate those risks.  While the risks themselves change over time, one thing remains constant: if consumers do not trust the service, product, provider or platform, these entities will struggle to reach their full potential and it will be harder to achieve meaningful financial inclusion.  At the end of the day, customers being heard and respected through grievance redressal channels and transparent business practices are two of the most critical components to building consumer trust. Only when this trust is in place can digital marketplaces and financial services providers do their part in making a <a href="https://twitter.com/search?q=%23BetterDigitalWorld&amp;src=tyah">#BetterDigitalWorld</a>.

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2017/06/05/the-smart-campaign-promotes-stronger-client-protection-and-sector-collaboration-in-uganda/">The Smart Campaign Promotes Stronger Client Protection and Sector Collaboration in Uganda</a>

<a href="https://cfi-blog.org/2017/08/03/the-microfinance-ceo-working-group-reports-out-consumer-protection-by-the-millions-and-other-updates/">The Microfinance CEO Working Group Reports Out: Consumer Protection By the Millions and Other Updates</a>

<a href="https://cfi-blog.org/2017/12/19/nigeria-needs-to-include-consumer-protection-in-its-ambitious-financial-inclusion-plans/">Nigeria Needs to Include Consumer Protection in Its Ambitious Financial Inclusion Plans</a>

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This World Consumer Rights Day, Let’s Build Trust

<em> </em>

<a href="https://www.flickr.com/photos/7156765@N05/29313860701/"><img class="alignright wp-image-23954" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/08/29313860701_3da626f47b_o.jpg" alt="U.S. Capitol Building" width="350" height="233" /></a>Lately, so much has been happening in Washington, D.C. that it feels impossible to keep up. Every day is a whirlwind of new developments. The Smart Campaign has been keeping its eye on one bill in particular: <a href="https://consumermediallc.files.wordpress.com/2017/05/bills-115hr10ih.pdf">H.R. 10, the Financial CHOICE (Creating Home and Opportunity for Investors, Consumers and Entrepreneurs) Act of 2017</a>. Among its other provisions, the Financial CHOICE Act threatens to disarm the Consumer Financial Protection Bureau (CFPB) and compromise the well-being of financial service consumers in the United States.

Introduced by House Representative Jeb Hensarling (TX-5) in April, the CHOICE Act, according to its sponsors, would loosen the allegedly burdensome and complicated regulations put in place by the <a href="http://www.cftc.gov/LawRegulation/DoddFrankAct/index.htm">Dodd-Frank Act of 2010</a> with the stated goal of increasing <a href="https://www.forbes.com/sites/alexverkhivker/2017/05/10/the-financial-choice-act-will-roll-back-wall-street-regulations-and-thats-a-good-thing/#489419d47b89">financial services access</a> for small businesses and spurring economic growth. These small businesses are said to be having a difficult time getting loans from small banks due to Dodd-Frank, and the CHOICE Act would purportedly lessen these difficulties and allow more small banks to lend to small businesses.

However, from where the Smart Campaign is sitting, the CHOICE Act looks quite different.

If passed, the CHOICE Act would, among other things:
<ul>
 	<li>Repeal the rule that prohibits banks from using depositors’ funds to trade on their own accounts. This would allow banks to own hedge funds, bringing back the speculation that fueled the collapse of 2009.</li>
 	<li>Rollback oversight of and penalties on credit rating agencies and insurance companies – again, reintroducing some of the market features that led to the collapse.</li>
 	<li>Exempt banks that agree to increase their capital from “stress tests” every two years.</li>
 	<li>Revoke the qualitative tests that evaluate banks’ plans for managing capital and risk.</li>
</ul>
While these provisions address major structural issues in the financial system – adding significant risk – we at the Smart Campaign are especially focused on the provisions that directly affect consumers. For example, the Act would remove requirements that guided how much credit card networks can charge retailers for debit card transactions.

More broadly, the most damaging effect the CHOICE Act would have on consumers is crippling the <a href="https://www.consumerfinance.gov/">Consumer Financial Protection Bureau</a> (CFPB) by limiting – and in some cases eliminating – its enforcement and rulemaking authority through the following:
<ul>
 	<li>Requiring the CFPB to get congressional approval before taking enforcement action against financial institutions.</li>
 	<li>Restricting the Bureau’s ability to write rules regulating financial companies.</li>
 	<li>Revoking the CFPB’s authority to conduct education campaigns.</li>
 	<li>Preventing the CFPB from publishing complaints it collects from consumers about financial services.</li>
 	<li>Allowing the President of the United States to fire the CFPB’s director at will.</li>
</ul>
In its six short years of existence, the CFPB has helped <a href="https://prosperitynow.org/events/expense-consumer-financial-safety-how-financial-choice-act-would-leave-consumers-harms-way">provide $12 billion to 29 million American consumers</a>. Dismantling the CFPB would leave the nation’s consumers vulnerable and enable some of the irresponsible behavior toward consumers that triggered the previous financial crisis.

The CHOICE Act is not a friend of small business or consumers. Several groups have come out against the bill, including <a href="http://consumersunion.org/">Consumers Union</a>, which says it puts individuals at risks while protecting big banks and “shady lenders.” The Retail Industry Leaders Association, which includes major retailers like Apple, has come out against the bill’s provisions related to debit card swipe fees. <a href="http://uspirg.org/news/usp/financial-%E2%80%9Cchoice%E2%80%9D-act-%E2%80%9Ccruel-choice%E2%80%9D-cfpb-consumers-students">The U.S. Public Interest Research Group opposes the CHOICE Act</a>, citing its rollback on protections for all consumers, most notably students, service members, and veterans. Perhaps most impressive, <a href="https://consumerist.com/2017/06/07/ags-blast-financial-choice-act-urge-congress-to-reject-proposed-bill/">Attorneys General of 20 states have sent a letter to Congress defending the CFPB</a>, writing that they “oppose any effort to curtail its authority.”

Although the bill passed in the House of Representatives in June and has <a href="https://www.congress.gov/bill/115th-congress/house-bill/10/all-actions">moved to Committee in the Senate</a>, there are still many steps before the bill survives to pass in Congress as a whole. In the meantime, opponents will be calling and writing Senators to tell them they <a href="https://www.indivisibleguide.com/resource/financial-choice-act-hr-10/">oppose financial deregulation that puts consumers’ money at risk</a>.

At the Smart Campaign, we support watchdog agencies like the CFPB because they embody the <a href="http://smartcampaign.org/about/smart-microfinance-and-the-client-protection-principles">values</a> we work to integrate into the global financial inclusion industry. Values like transparency, responsible pricing, and the right to mechanisms for complaint resolution are important because they work together to empower clients, as well as safeguard fair markets. We believe American consumers deserve better than the Financial CHOICE Act.

<em>Image credit: <a href="https://www.flickr.com/photos/7156765@N05/29313860701/">Onasill ~ Bill Badzo via Flickr</a></em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2017/03/08/womens-strikes-and-the-business-case-for-gender-equity/">Women's Strikes and the Business Case for Gender Equity</a>

<a href="https://cfi-blog.org/2014/03/21/cfpb-gives-voice-to-clients/">CFPB Gives Voice to Clients</a>

<a href="https://cfi-blog.org/2017/02/09/the-u-s-consumer-financial-protection-bureau-and-the-smart-campaign/">The U.S. Consumer Financial Protection Bureau and the Smart Campaign</a>

Why the Financial CHOICE Act Is the Wrong Choice

Every year on March 8<sup>th</sup> we honor women around the world by celebrating International Women’s Day. This international holiday not only recognizes women’s valuable achievements and contributions to society, it recognizes the work that still needs to be done to create a more inclusive, gender equal world.

This day resonates especially strongly this year, with the <a href="http://parodemujeres.com/">International Women’s Strike</a> also taking place today. For the worldwide strike, women are encouraged to not participate in paid or unpaid work and to avoid spending money – with the aim of demonstrating women’s integral professional and economic role in society. Over 50 countries around the world are participating in the strike, from Canada to Cambodia.

Women’s strikes are nothing new – for decades, women have been using strikes as a form of protest to demonstrate their value to society and create change. The most famous example took place in <a href="http://www.bbc.com/news/magazine-34602822">Iceland in 1975</a>, when 90 percent of the country’s women skipped going to the office and abstained from childcare duties to march together to demonstrate their importance. More recently in 2015, <a href="https://www.opendemocracy.net/beyondslavery/jayaseelan-raj/women-strike-back-protest-of-pembillai-orumai-tea-workers">women tea workers at the Pembillai Orumai plantation in India</a> went on strike for almost a month, winning a significant pay raise. In South Korea last summer, <a href="https://medium.com/@mikekimsf/women-of-samsung-walk-out-national-strike-for-equal-pay-hits-korea-22a185bdd3f7#.whlvkz9e7">30,000 female Samsung employees performed a walk-out</a> in the early hours of the work day, demanding a close to the 40 percent gender pay gap. Samsung felt the blow of this strike, as it resulted in a 20 percent nose-dive in Samsung stock and the temporary closing of global offices.

Clearly, strikes such as these have both a social and financial impact. They demonstrate the huge extent to which women contribute to the economy – and what it would be like if women were not participants in it.

Strikes also make clear that full financial inclusion for women not only makes sense for equality and society, but it is simply smart business. <a href="http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2013/02/GSMA-mWomen-Visa_Unlocking-the-Potential_Feb-2013.pdf">Women have proven to be very loyal and proselytizing customers</a> to the businesses they frequent – including financial institutions – when their needs are met. <a href="http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2016/12/Using-your-data-to-drive-growth-in-mobile-money-services.pdf">Women are also most often the household’s active financial managers</a>. Yet according to the most recent <a href="http://documents.worldbank.org/curated/en/187761468179367706/pdf/WPS7255.pdf">Global Findex data</a>, there remains a persistent financial inclusion gender gap: women make up 55 percent of the world’s unbanked adults. In developing countries, the average gap in bank account ownership between men and women widens to nine percent.

Globally, financial service providers are missing nearly half of the entire market. The increased financial inclusion of women presents significant growth potential for economies worldwide. In fact, the <a href="http://www3.weforum.org/docs/GGGR16/WEF_Global_Gender_Gap_Report_2016.pdf">World Economic Forum’s 2016 Global Gender Gap report</a> finds a positive correlation between a country’s gender equality levels and both per capital GDP and level of economic competitiveness. Financial inclusion and labor force participation for women need to be prioritized as a part of every country’s financial inclusion strategy.

Time and time again, women have demonstrated their critical contributions to societies and economies around the world. This International Women’s Day, let us recognize these contributions and continue to work toward a world that is inclusive to every woman.

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2016/04/20/g2p-and-gender-when-will-pakistani-women-be-able-to-withdraw-their-own-money/">G2P and Gender: When Will Pakistani Women Be Able to Withdraw Their Own Money?</a>

<a href="https://cfi-blog.org/2016/01/11/celebrating-women-leaders-profiles-of-financial-inclusion-pioneers/">Celebrating Women Leaders: Profiles of Financial Inclusion Pioneers</a>

<a href="https://cfi-blog.org/2017/02/24/why-women-in-smes-lean-out/">Why Women in SMEs Lean Out</a>

Robin Brazier

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