March 15 is World Consumer Rights Day (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, nearly half of consumers that have access to internet but do not shop online cite lack of trust as the reason. Similarly, almost 70 percent 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.
Transparency
For the Smart Campaign, transparency means much more than disclosure agreements. Even when these are in place, research shows that low-income clients rarely fully understand the terms and conditions (T&Cs) of the product they purchased. Many times, when the T&Cs are explained simply and thoroughly, they are often in English instead of in the language of the customer. Sometimes third-party charges or hidden fees aren’t fully disclosed up front, but only after the purchase is finalized. In other cases, the entire price is hidden until after the completion of the purchase.
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, “Tiny Loans, Big Questions,” clients should also be able to store and save T&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.
Recourse Mechanisms
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. “Tiny Loans, Big Questions” 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. CFI Fellow Alexis Beggs Olsen 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.
Moving Forward
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 #BetterDigitalWorld.
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