> Posted by Deepak Saxena, George Cheriyan and Amol Kulkarni, CUTS International, India

The Consumer Care Center managed by CUTS International in Jaipur, Rajasthan

When a business makes a mistake, does that influence your decision to keep using its product or service? How about if that mistake costs you money and you can’t get the business to correct the mistake?

To date, the importance of efficient and effective grievance redress as a building block for consumer trust has unfortunately remained understated. Across sectors, focus remains predominantly on enabling access to goods and services, with limited thought on post-sale customer engagement and grievance redressal.

This holds true for the financial inclusion sector as well. The success of financial inclusion efforts have mostly been calculated in terms of number of accounts opened or the amount of credit disbursed. Limited thinking goes into putting in place timely and effective recourse processes capable of dealing with fraud and related consumer protection issues. In many countries, state capacity in managing consumer grievances has also remained limited. This is a huge missed opportunity. In the inclusive finance sector, more than in many other industries, establishing trust among first-time users of services is essential.

Consumer Care Centers in India

In recent years the Government of India has decided to combat such shortcomings in recognition of the challenges faced by consumers in accessing grievance redress and obtaining speedy resolution of their complaints. There was also a recognition that the government had shortcomings in this area.

In 2015, the government launched a new initiative called Grahak Suvidha Kendra (GSK or Consumer Care Center) creating one-stop-centers providing a spectrum of services for consumer welfare across industries. The operation of the GSKs was outsourced to expert independent civil society organizations. The objective is to offer information and professional advice to citizens faced with every day practical consumer problems, thus promoting consumer education and empowerment. The GSKs offer consumers a wide range of services, such as information on consumer rights, one-on-one advice, guidance and assistance on consumer complaints through counseling and conciliation, and assisting consumers in approaching formal grievance redress mechanisms.

Experiences in running the GSK

CUTS International, an independent non-profit economic policy research and outreach organization, was one of the civil society organizations tasked with managing the regional GSK in western India, based out of Jaipur, Rajasthan. It started operations in July 2015.

CUTS’ GSK accepts complaints in English and Hindi through a variety of mechanisms including walk-ins, online forms, telephone calls, emails, fax messages, and letters. It also has complaint collection centers in rural areas throughout Rajasthan including Bhilwara, Chittorgarh, Udaipur, Ajmer, Kota, and Sawai Madhopur.

In its 18 months of operation, the CUTS’ GSK received complaints pertaining to a range of sectors, with close to 11 percent of complaints related to the financial sector. Understandably, given the shift to digital payments following the government’s recent demonetization initiative, many of the recent complaints involved digital payments.

Here are some of our key findings from running the GSK to-date:

  • Services quality remains a huge concern – Around 35 percent of the financial services complaints related to errors, missteps, and deficiencies in services, such as: mismanagement of accounts, non-receipt of periodic statements, withdrawals by unauthorized individuals, misselling of products, and overcharging. A significant proportion of complaints (12 percent) related to unauthorized/unexpected deductions from accounts (such as penalty deductions when users are unable to maintain minimum balances). Long wait times surrounding claims and refunds and related dues were also a focus of complaints.

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  • Consumers need more information – Consumers did not use the GSK platform simply for registering complaints, but also for obtaining information and advice. The nature of inquiry varied, but we found significant information asymmetry exists with respect to charges involved in digital payments. Close to 11 percent of queries related to debit cards and credit cards. Additionally, as the Center was functioning during the demonetization period in India, it came as no surprise that a large number of queries (30 percent) related to shortage of currency, and alternatives to cash payments. This case of limited awareness was the same for the role of and mode of engagement with banking ombudsman.

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  • Resolution of complaints takes time – The process of complaints resolution includes initiating conversations with service providers, furnishing necessary evidence of consumer grievances, and conducting follow up. In our experience, this process typically takes more than three months. As a result, only roughly 33 percent of complaints (across sectors, financial and otherwise) logged in the year ending June 2016 had been resolved as of December 2016. For the period July-September 2016, only 5 percent of complaints (across sectors) were resolved by December 2016. Generally, resolution is faster when government has enabled or deputized civil society organizations to carry out grievance redress.
  • Most complaints are filed through letters while advice and clarification is sought in person – In our experience at the GSK, consumers are not adept in using technology for filing complaints or for obtaining information and advice from the GSK. More than 50 percent of complaints were filed through letters, perhaps indicating the seriousness and formality associated with complaint filing. In contrast, more than 90 percent of advice and information was sought through in-person visits to the Center. This perhaps is indicative of the informal nature of seeking advice. Alternatively, perhaps it indicates that people don’t want to make a trip just to file a complaint, while in seeking advice there is the possibility of instantly receiving valuable information and following up with further questions.

Need for greater awareness

GSK and similar initiatives have significant potential for resolving consumer complaints and encouraging communication between consumers and service providers. However, our experiences suggest that, owing to a lack of awareness and the absence of a ‘compliant filing culture’ in the country, such services are being sub-optimally utilized.

Another reason for sub-optimal usage of such platforms is the low priority attributed to grievance redress by service providers. This limited buy-in exacerbates difficulties navigating such platforms. Providers must begin to realize that one bad consumer experience can dissuade an entire extended family from using a particular product or service.

It is high time service providers in the financial sector get their act together with respect to grievance redress. High quality recourse mechanisms are an important tool to retain consumers and generate trust in formal financial services. It’s time financial service providers invested the time and money in such mechanisms to make them work well. This might not be possible without consumers demanding speedy and effective grievance redress mechanisms.

Image credit: CUTS International

Have you read?

What Does Effective Human Touch Look Like in India’s Digital Age?

What Does India’s Demonetization Experiment Mean for Financial Inclusion?

Indian Microfinance Gets Serious about Grievance Redressal