Research & Analysis

Recourse in Digital Financial Services

Ramkumar, a migrant from Bihar, works at a construction site in Delhi, India. He regularly sends money to his family, who lives several hours away in Deoghar, Jharkhand, at the nearby State Bank of India (SBI) branch. He loses a day’s wage each time, as the bank branches are crowded and it takes hours to go through the long queues. His friend Raj told him he can now deposit money at the nearby mobile money agent in just five minutes. Ramkumar tries this and deposits INR 3000 (US$50) at the agent to be transferred to his SBI account. The agent accepts the cash, dials the transaction on his mobile, and tells Ramkumar he will receive the SMS immediately. Ramkumar waits for 10 minutes, but the SMS does not arrive and he begins to get worried. Then he spots the toll-free customer care number on a poster and calls. The customer care executive (CCE) confirms that the transaction happened, the amount has been credited, and Ramkumar should receive the message shortly. Five minutes later the SMS arrives and the CCE calls to confirm. Ramkumar is delighted with this personal attention and decides that from now on he will send money only through an agent.

This actual case highlights the importance of an efficient customer recourse system. 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. Effective recourse—and the key principles of awareness, access, timeliness, and fairness associated with effective recourse systems—becomes all the more relevant in the case of digital financial services (DFS), which still face trust deficits among some consumers.

Mobile phones and agents are driving expansion of formal financial services by allowing for new delivery models and product designs that target base of the pyramid (BoP) consumers. These new access points and transaction types also create new challenges and opportunities for delivering timely, accessible, and effective complaints resolution. This Brief highlights lessons from CGAP research on recourse systems developed and being implemented for DFS from six markets using a range of different DFS business models and product lines. The following are three key considerations that can significantly influence the effectiveness of recourse systems in DFS:

  1. New touchpoints and distribution channels. These expand recourse options, but can also lead to complaints getting lost in the resolution process as there are multiple levels for customer interaction.
  2. User-led versus agent-led transactions. The primary transaction point, whether it is at an agent or the consumer on his or her own mobile wallet, will influence the proper design of the recourse system and likely channel for complaint resolution.
  3. More advanced services beyond payments. Offering more complex products such as credit, savings, and insurance via these channels will raise new issues, so recourse systems of DFS providers will need to evolve in response to these product innovations