Do you ever actually read the full document of terms and conditions when signing up for another credit card? If you do, you are definitely not among the majority of financial customers. These terms and conditions contain a lot of details (important and not very) for almost any possible outcome of the service use that probably don’t even cross the minds of most customers.
While seen as a minor red-tape problem, transparency on terms, conditions, fees and customer rights is one of the five main customer protection issues recognized by the World Bank in the report published in April 2016 on the payments aspects of financial inclusion. As fairly stated, the fees, terms and conditions associated with transaction account services and/or individual payment instruments can be quite complex. In the modern financial services ecosystem when every other day a new payments service provider appears, the situation with terms can get even more complicated. Moreover, as The World Bank states, in some innovative service models characterized by an absence of direct interaction with the payment service provider, the potential for miscommunication and misunderstanding of product features and costs is quite high.
The next important issue raised by the organization is the matter of liability for unauthorized transactions. While well-established payment instruments (credit/debit cards) normally provide customer protection against unauthorized transactions in the form of limited customer liability, few e-money products do so. In the absence of such protection, newly included customers using such e-money products could suffer significant losses.
Customer support, recourse and dispute resolution never lose relevance when it comes to finances. Users of electronic retail payments are often uncertain about how to address service problems, whom to contact, how to report unauthorized transactions or errors and how these issues will be resolved. Hence, dispute resolution mechanisms play an important role in preventing customer abuse and frustration. Payment service providers need to address operational weaknesses that may be causing low-quality service, errors or security breaches. In this sense, such mechanisms help build confidence in retail payment services. It is important for financial institutions to create clear ways for customers to contact the right people within the organization and get assistance in solving the issues.
The World Bank suggests some critical steps for payments companies to ensure that they operate properly, enabling customers to exercise their rights effectively:
- The possibility of filing the recourse complaint via the same channel as the original transaction
- Some degree of separation of the unit responsible for recourse from the service provider’s profit centers, and
- Independent oversight of the recourse mechanisms
The privacy of customer transactional and personal data is another never-ending story. The matter of privacy is such an important and relevant issue that it can never be left aside even outside the financial services industry. Given the level of modern connectivity and the amount of data financial institutions gather about their clients, transactional data privacy can impose a significant risk in the wrong hands. Sometimes, customers may not even be aware how their sensitive data is used by payment service providers not mentioning the absence of permission in some cases. A lack of clarity regarding what can be disclosed, and to whom, may deter the use of a payment service by some potential customers, which is why complete transparency, respect and honesty of financial institutions when it comes to personal data is critical. We have already discussed the issue with discriminatory practices powered by data that may be leaving lower-income groups of the population out of certain services, and the latest report by the World Bank especially emphasizes the importance of that issue. However, sometimes the opposite – the disclosure of some types of data with permission and prior notification to some third parties – may prove valuable to the client. But even in those cases, complete transparency is important to build trust with current and future clients.
Finally, protections and due process related to the potential seizure of a customer’s funds is also considered to be an important issue. In some cases, governmental structures or creditors seek to claim customer’s assets including the funds on accounts. The clarity of terms and of the extend of the legality of such practices are important to communicate with clients and, again, create a transparency on possible risks at which the funds could be and what are the actions clients should take in those cases.