With the holiday shopping season upon us, it’s likely you’ll find yourself jostling with other shoppers at a crowded store in the coming weeks. Although, some of these “shoppers” might be better described as secret agents.
The holidays are a prime time for mystery shoppers: people contracted by market researchers, watchdog groups, and retailers to mimic the interactions of real customers in various shopping scenarios. These mystery shoppers provide detailed reports on their experiences – a valuable source for measuring quality of service and compliance with regulations. Mystery shopping has reportedly grown into a billion-dollar industry, which contracts 1.5 million shoppers annually, and it’s no longer limited to the retail sector. These contractors are increasingly found in industries ranging from hospitality to health care.
The practice of mystery shopping also provides insights into the ways financial service providers interact with their customers, and some of these insights have been eye-opening. According to recent mystery shopper reports from the financial services industry:
- When selling overdraft products to customers, bank staff at 39 branches in 4 major U.S. cities provided explanations that were often inconsistent, unclear, and incorrect, leading to misinformation concerning overdraft fees, how they’re triggered, and how to avoid them.
- In India, where government-mandated financial inclusion policies require banks to provide a zero-balance, no-fee savings account to all customers, none of the 42 bank branches visited offered this product as a first suggestion to mystery shoppers. Even after shoppers pressed them, only 14% of these banks revealed the existence of these accounts, pushing them toward products with high initial deposits instead.
- In Mexico, basic savings accounts were offered in only 2 of 54 shopper visits to 31 separate financial institutions, even though these accounts were likely the most appropriate products for the low-income customers in question. Banks also failed to provide printed information to customers or presented it in complex formats that were difficult to understand, while frequently omitting information about avoidable fees.
It’s hard not to notice a theme among these encounters: when interacting with low-income potential customers, bank staff often steered them away from less profitable products, like basic savings and no-fee checking accounts, even when these products would have better served their needs. And, in many cases, bank staff failed to inform these clients about ways they could avoid fees and other expenses.
It would be easy, in light of these findings, to jump to the conclusion that banks are deliberately taking advantage of low-income customers, however there are more charitable explanations, including: poorly trained staff, lack of understanding of regulatory requirements, sales staff incentives that don’t align with customers needs, and the human tendency to make assumptions about customers’ needs or possible limitations based on their appearance.
Better training and appropriate incentive structures could alleviate many of these problems, but it wouldn’t address the underlying problem: the challenge of serving low-income customers’ financial needs while making a sustainable profit. This dilemma has driven financial institutions, both large and small, to seek out more innovative approaches. New approaches are often based on the recognition that while individual low-income customers may not be profitable, low-income populations as a whole are. For example, the explosive growth in mobile connectivity, which provides an affordable way to link banks to customers on a scale that was once unimaginable, let’s customers sidestep the unpredictable service and potential biases of staff at brick-and-mortar branches.
Ventures that employ forward-thinking approaches are diverse, and they span the globe. Young companies like First Access and Cignifi are using data generated by mobile phone usage to create credit scores for underserved individuals, linking banks with a new pool of potential customers in countries in Africa and Latin America. Lenddo is taking a similar approach, but it’s helping users access financial services by analyzing their behavior in online social networks to determine their creditworthiness. Both Moven and Simple provide mobile access to free checking accounts, while providing users with data on their transactions that can help them optimize their spending habits. Major players like WalMart and American Express are even getting into the game, with low or no-cost mobile checking accounts like GoBank and Bluebird, which are aimed squarely at the low-income market. And Meed, slated to launch early next year, plans to take things a step further by offering a mobile-based, full-service product suite, including paperless checking, an interest-bearing savings account that acts as collateral for credit, and unlimited international and domestic money transfers between members.
The notion that digital interfaces provide better customer service than human staff may sound counterintuitive, but for many customers today, the convenience and predictability of mobile banking are hard to match. Factor in the global reach, granular data, and efficiencies that these approaches provide, and it’s easy to see why so many people view mobile as the future of banking. If they’re right, mystery shoppers at bank branches – and possibly branches themselves – may one day be a thing of the past.