We turn now from financial products to their delivery and the experience that comes with using them. As we learned in our Client Voice research, the experience is often as important to customers as the product itself.
Customers new to formal financial services often approach providers hesitantly, especially if they also struggle with literacy. Interviewees often say that they feel intimidated or unwelcome when entering a bank. Such new customers may be easily turned off if their first experience leaves them feeling disrespected or confused.
With digital services, the client experience shifts in ways that can be both better and worse for the financially excluded and underserved. There is less chance of disrespect from staff, but instead, the customer faces the impenetrability of an electronic device.
In the next few paragraphs we sketch some of the most-desired attributes of the customer experience at the present moment in which the financial inclusion sector offers a mix of traditional and electronic delivery methods.
5. Simple products and interactions.
Simple and transparent product design enables consumers to use products appropriately and builds trust. As customer touch points shift to digital, interface designers must strive to use very simple language or images – and it helps if the products themselves are actually very simple. They should not come with hidden terms and conditions, exclusions or confusing prices. The inclusive insurance sector is finding that radical simplification of products – like doing away with costly claim verification processes – is a key to serving lower income segments, as Garance Wattez-Richard writes in her essay in this series.
We observe that many providers attempt to move towards simplicity but only get halfway there. It is easy to forget that customers may not understand ordinary banking terms, as we learned ourselves when asking people to take a financial health quiz. MicroSave, among others, has pointed out that, for people with limited literacy – or, as they call it, orality – the long number strings needed for mobile money transactions can be barriers to confidence and create errors. In Latin America, Fundación Capital found that poor women unused to ATMs were grateful to be able to practice in private on the tablet-based simulator Fundación Capital developed. We could cite many more such examples.
6. The ability to talk to a person when necessary.
Routine financial service use in high income countries has become almost entirely digital; digital will soon become the norm everywhere. However, the target customers of financial inclusion are not yet prepared to live in this future.
Research by CFI Fellow Alexis Beggs-Olsen showed that after almost a decade with M-Pesa, consumers in Kenya are very comfortable conducting transactions digitally. But when they are considering whether to take up a new service, learning how a service works, and especially when something goes wrong, they would strongly prefer to talk to a person face-to-face. According to Beggs-Olsen, call centers, while they do feature human conversations, are considered – by Kenyans at least – as a poor substitute to face-to-face. Chatbots attempt to simulate human interactions, but customers still want a lifeline to a real person.
In the transition away from branch-based banking, many banks have outsourced face-to-face interactions to banking agents. However, CFI Fellows Shreya Chatterjee and Misha Sharma, who studied banking agents in India, showed that agents are not often well-trained or incentivized to fill these supportive roles.
Getting the balance of tech and touch right is a significant future challenge for providers.
7. Trust that providers protect them from harm and have their interests at heart.
Like many useful tools, financial services can be dangerous. They need to be provided and used responsibly. As consumers begin to use new financial services, they need confidence that providers are aligned with their interests.
Until recently, consumer protections lagged under a buyer-beware philosophy that designated financial system regulation’s purview as stability. But when the 2008 financial crisis demonstrated how consumer protection failures in the U.S. mortgage market could trigger a global cascade of additional failures, regulators acknowledged that consumer protection gaps could upset stability and began to include it in their mandates. Despite a decade of effort, much remains to be done, and in many situations the incentives for providers to act responsibly need to be internally motivated – based on the business case for consumer trust.
The Smart Campaign is a global effort led by CFI to embed Client Protection Principles into the fabric of the financial inclusion sector. We have examined provider practices and heard from customers about the harms they have experienced. While much of what we have seen is not pretty – like public shaming of debt defaulters in several countries – we also know that many providers are eager to apply good practices. We have certified over 100 financial institutions for meeting such standards.
Despite a decade of effort, much remains to be done, and in many situations the incentives for providers to act responsibly need to be internally motivated – based on the business case for consumer trust.
The digital revolution is creating new consumer protection challenges, which must be adequately dealt with if customers are going to fully engage with the new offerings. Concerns about legitimacy, security and the ability to fix mistakes are frequently topmost in customers’ minds. Transparency is a special challenge for mobile money and credit providers who must convey sufficient information to customers through the limited USSD. Aggressive marketing has also risen as a concern. Mobile money customers from Kenya to Peru receive loan offers, and some feel pressure to borrow, but they don’t know which companies to trust. (I also get robo-call loan offers every week. I don’t trust any of them.)
While much research has identified consumer protection issues arising in digital financial services, there has been relatively less effort to translate that learning into standards of practice and promulgate those practices throughout the sector.
8. Trust that institutions use customer assets (money and data) appropriately and safely.
A special set of consumer protection concerns involves how financial institutions handle the money and data clients entrust to them. The need for assurance of the safety of deposits has been a central regulatory concern for so long that it should hardly need remarking. And yet customers are increasingly entrusting their money to new entrants, witness the P2P collapses in China, that may not have the same regulatory oversight as full-fledged banks, for example, when they store money temporarily on payment apps. So the deposit-protection concern is still with us, though in new guises.
The appropriate use of data has become a hot-button issue not only in financial services, but throughout the realms of commerce, politics and national security. In financial services, strong feelings surface on both sides. One side is enthusiastic about the opportunities opened by the mushrooming of consumer data footprints that can be analyzed with new data science techniques. The other side hoists the banner of privacy rights and asserts the need for consumer ownership and control of their own data. While many agree that consumer consent for data use is part of a solution, making consent meaningful has proved difficult. No consent often means no service. The recent promulgation in Europe of the General Data Protection Regulation (GDPR) has implications reaching all over the globe.
Perhaps more than any other issue raised here, how to get to positive practices on data rights is an open question. Katharine Kemp’s essay in this series will explore the challenges in greater depth.
9. Protection from frauds and scams.
Low income people are continually exposed to frauds and scams. Many of these come from rogue players posing as legitimate ones. A client in Benin showed us a photograph he had taken of a storefront that opened an office in his city, collected deposits from hundreds of people, and then closed up shop. The photographer confessed that he had not known how to recognize that the business was fraudulent. Assurance of legitimacy was a major preoccupation of the Kenyans interviewed by Beggs-Olsen about the blend of tech and touch. They relied for this assurance on the word of friends and family.
With digital services, the opportunity increases for frauds to occur inside institutions, through security breaches. CFI Fellow Patrick Traynor documented significant vulnerabilities among digital financial service apps. Given the frequency of major hacks into high-profile companies, vulnerabilities throughout the financial system are no surprise. Hackers seem always to be a few steps ahead of cybersecurity. And as Kemp argues in her forthcoming essay on data, the risk rises when more and more data is stored and moved throughout the financial sector.
Providers and clients are on the same side in the effort to stop fraudsters. As the success of credit card companies over the years shows, the rewards of sustained investment in fraud control include customer loyalty, trust and usage.