> Posted by Rafe Mazer, Financial Sector Specialist, CGAP

CGAP recently launched a Mystery Shopping Technical Guide, based on our experiences sending lower-income consumers to seek financial products in markets as diverse as Ghana, Kenya, Malaysia, Mexico, Peru, and the Philippines.

The method of training actual consumers to conduct mystery shopping has proven helpful to understand the challenges they face in achieving financial access and receiving quality product advice. In several markets we found that sales staff often restrict information on fees and charges and do not provide consumers with the lowest cost product option that matches their needs. For example, in Mexico and Peru we saw sales staff who neglected to offer low-fee savings products available at their institution, while in Ghana sales staff never mentioned the APR of a loan, as they are required by law to do. In Malaysia, insurance sales staff did not use the mandatory Customer Fact Find Form which helps assess customers’ needs and product suitability.

These findings are not surprising to those who study client protection and financial advice, and studies in markets such as the U.S. and India have found similar issues with sales staff. All of this raises a fairly important question of “Can we fix financial advice from frontline bank staff?” Or is the incentive to mis-sell too great and monitoring a sufficient number of individual sales practices too burdensome? This is a discussion I have had with regulators. How do you use policy to drive behavior change in a market? The short answer is that it’s not easy; the long answer is that behaviorally-informed policies, product regulation, and market monitoring tools can help.

But what about the committed leadership of organizations that have signed on to the Smart Campaign (which include providers we have visited during these mystery shopping exercises)? If mystery shopping shows that sales staff do not always keep the customer’s best interests in mind, can we fix this with provider or industry-level changes in sales practices or perhaps through sales staff training? I would like to take advantage of this forum to hear from providers who have implemented policies to fix sales staff misconduct so we can start to document good practices for monitoring sales staff behavior. To help kick things off, here are a few ideas from my side, based on our mystery shopping work:

Help consumers learn to ask the right questions. In several markets we separated consumers into “experienced” and “inexperienced” profiles, with experienced consumers instructed to ask some specific questions about key product features. These shoppers generally received more product information from sales staff, so it may be worth developing a “five questions to always ask about your loan” or similar such tools for display in branches, or for dissemination via government or consumer advocacy organizations.

Automate sharing of product information and comparisons where possible. As financial services go digital and remote, there is increasing ability to remove the human element from product sales. This carries some risks—inability to easily ask follow-up questions—but also could minimize some of the opportunities to steer consumers towards less suitable but higher commission products. For example, could providers offer in-branch screens that allow consumers to enter their financial information and preferences so they receive non-binding, automated advice on best fit products before sitting down with sales staff? This could help address challenges of information asymmetry such as when consumers don’t even know a lower cost option exists. It would also help address the challenge of timing, when mandatory product disclosure information is only provided late in the sales process, after the consumer has already mentally committed to purchasing the product.

Don’t let regrets stay regrets. Cooling-off periods combined with a mandatory product registration/confirmation process after purchase could offer consumers a chance to take a second look—and get a second opinion—on the product they purchased outside of a high-pressure sales visit. This is a fairly extreme approach, so it’s likely best suited for particularly problematic product types such as personal investments and investment-linked insurance policies.

Monitor and discipline your sales staff. Tools like the Mystery Shopping Technical Guide CGAP just released can be used by providers to spot-check their sales staff, and discipline those who do not provide clear explanation of product terms, assess consumers’ needs, and offer the lowest cost option available based on those needs.

This is of course just a start towards finding ways to incentivize better sales staff behavior. What works in your institution? What would you like to see providers do to address this challenge? Please take a moment and share your experiences in the comments section below.

Have you read?

Why Does Consumer Protection Lag in Africa?

Behavioral Research and the Client Protection Principles

Helping Consumers Understand Their Digital Data: Initial Experiences from Tanzania