A Better System for Internal Complaint Handling

Just like any product, there are times when financial services do not work as customers expected they would. In "Doing Digital Finance Right," CGAP explored the most common complaints among digital financial services users, which include payment system downtime, keystroke errors, and agent surcharges for transacting.

When any of these issues arise, customers will almost always turn to the financial service provider for help, whether it is a hotline, an agent or a local service center. CGAP research has shown that in their journey toward effective complaint resolution, customers face different barriers – such as distance to reach the nearest branch, lengthy queues and negligent staff – and that new technologies, such as SMS and messaging apps, can be a great solution to overcome them (see Recourse in Digital Financial Services: Opportunities for Innovation).

However, customers may become frustrated when they do not notice consistent improvement in product design or financial service providers’ procedures in handling complaints. How can providers improve their internal complaint handling systems? The system should be seen as a cycle with three phases, beginning with product design.

Complaint handling cycle

Complaint Handling Cycle diagram
Complaint Handling Cycle diagram

During product design, the financial service provider should calculate certain risks and implement controls for them. Since such controls are not flawless, providers should plan for some failures and detail how to remedy them (redress and compensation) in customer service manuals. These remedies can and should be a win-win, reducing the number of disputes for providers and providing quick resolution and fair compensation for customers. For example, a provider may charge customers for withdrawal transactions through automated fees, but an agent charges “extra” from a customer by demanding the fee in cash. The provider should plan for this risk, putting in place procedures to compensate the client and solve his or her individual problem. This is the first stage of the cycle.

Internal complaints handling systems should be integrated into a broader corporate governance context, contributing to the compliance and internal controls framework. Through complaint analysis, providers can identify emerging risks that were not evaluated during the product design phase. This classification and monitoring constitutes the second stage of the cycle. In the extra charge example, it is important for the provider to observe the problem recurrence and compare it with the expected recurrence planned at the product design phase. These nonevaluated risks – symptoms of deficient design or changes in the environment, such as regulatory framework or IT architecture – should be investigated.

In the third stage, providers can achieve a change in customer experience. Improvement proposals for product design or customer service procedures should be escalated to high-level management and tested for effectiveness before full implementation. In the extra charge example, if the provider discovers that the problem is with one specific agent, a solution – as simple as termination of the contract with this agent and search for another partner in the region – should be escalated to improve customer experience. It is also important to establish additional or improved internal controls to prevent the same problem from happening again.

Role of supervisors

Supervisors should implement this integrated approach with a compliance and internal controls framework, as noted in "Making Recourse Work for Base-of-the-Pyramid Financial Consumers," to ensure that financial service providers have these mechanisms for complaints handling in place and present summary complaints data reports regularly to the financial regulator.

When designing regulatory reports, supervisors should consider each different stage of the internal complaints handling cycle and its main objective.

  • Individual complaints handling (first stage): The regulator should consider customer service accessibility and promptness of resolution procedure. Key indicators to be reported may include average hotline waiting time and calls dropped for a hotline, turnaround time, the downtime for an SMS-based or web-based complaint system and the number of complaints resolved (or not resolved) in the defined timeframe.
  • Complaint analysis (second stage): The regulator should consider receiving reports for market monitoring, including information like the number of complaints by product and issue or the volume of reversed transactions. The regulator may consider implementing standardized classifications to allow comparability between providers.
  • Solution process (third stage): The regulator should assess if the root causes of complaints are identified and addressed. This report may include the description of root causes, but also the proposed solutions and the stage of their implementation, which can indicate the level of commitment of high-level management in improving consumer experience. In Brazil, the Central Bank (Resolution 3,849) requires the financial services providers’ internal ombudsmen to report the improvement and corrective actions proposed to the financial service providers’ board of directors. Though the information is not publicized, it allows the supervisor to check if the inputs from complaints are generating solutions.

Other regulators are moving toward a more detailed and specific reporting according to their supervisory objectives. In Indonesia, for example, OJK (Circular 2/SEOJK.07/2014) determined that complaint reports should be forwarded every three months in three parts:

  • The number of complaints by product and issue (market monitoring)
  • The time elapsed for the final resolution of complaints received (individual complaints handling)
  • Causes identified for the complaint submitted by customers (solution process)

Effective complaint reporting, designed with elements from each stage, not only enables supervisors to monitor consumer risks, but also to ensure a successful internal complaint mechanism, from the customer’s individual problem solution to service improvement. Implementing this three-phase complaint handling mechanism, providers are able to self-correct their procedures, ensuring customers better service in response to their complaints. 



Recourse systems can help consumers overcome the challenges related to product adoption and continued use by helping resolve initial problems or challenges quickly, which can build trust in providers and their products, and increase uptake and customer retention.

This Focus Note explores consumer risk in digital finance—-particularly through the lens of lower-income and less-experienced consumers.

This Focus Note explores innovative ways for policy makers and providers to raise awareness and improve accessibility of recourse mechanisms, tailor recourse to suit new products and delivery channels, and proactively use recourse data to address systematic problems in BoP markets.


14 July 2016 Submitted by Farzana (not verified)

This is a very useful and pragmatic approach to gaining meaningful value from complaints information. This type of data could also be very useful to help enhance the level of insight available in management information reporting that is filtered to senior management and Board structures. An aspect of testing corporate consumer culture could be linked to the level of interrogation of this information demonstrated by Board members and senior executives. This in turn must inform strategic decision making relating to business improvement initiatives impacting customer value creation through improved product design and better customer experiences.

15 July 2016 Submitted by Stan (not verified)

Thank you for your contribution, Farzana. Testing and enforcing corporate consumer culture among providers is a big challenge for policymakers.

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