Improving the effectiveness of banks’ service guarantees: Low usage patterns

Customer perspective

While the potential impact of the wait- time guarantee was substantial, the awareness level among customers was quite low. As indicated above, the findings reveal that 60.5 per cent of all surveyed customers were unaware of the guarantee. This result was quite surprising inasmuch as management felt that the programme was implemented correctly. Specifically, it was believed that the guarantee met the requirements recommended by the literature, and that the programme was communicated thoroughly to customers and employees. Apparently, the communication campaign was insufficient.

Lack of awareness, however, was only part of the problem. Among those who encountered a long delay and were aware of the guarantee, only 25.3 per cent, asked for it. What happened to the remaining 74.7 per cent? Why did they fail to invoke the guarantee? Open-ended questions from the customer study may shed some light on this issue. Given the open-ended nature of these responses, the data were analysed qualitatively. Part of what emerges from those answers is that some customers simply were not thinking about the guarantee at the time. While they had heard about it, it did not occur to them to ask for the guarantee when they encountered a problem. More importantly, however, a substantial segment of the respondents indicated that they did not feel comfortable asking for the guarantee. It seems that customers in many branches encountered an atmosphere that made them uneasy about exercising the guarantee. This suggests that some of the customers who reported that they forgot about the guarantee may also in fact have been expressing discomfort about asking for it. To gain a better understanding of what actually transpired in the branches, an additional viewpoint was sought. Specifically, it was felt that an employee perspective might be helpful. Accordingly, the results of focus group research conducted with a set of these employees are reported in the next section.


Representative APR 391%

Let's say you want to borrow $100 for two week. Lender can charge you $15 for borrowing $100 for two weeks. You will need to return $115 to the lender at the end of 2 weeks. The cost of the $100 loan is a $15 finance charge and an annual percentage rate of 391 percent. If you decide to roll over the loan for another two weeks, lender can charge you another $15. If you roll-over the loan three times, the finance charge would climb to $60 to borrow the $100.

Implications of Non-payment: Some lenders in our network may automatically roll over your existing loan for another two weeks if you don't pay back the loan on time. Fees for renewing the loan range from lender to lender. Most of the time these fees equal the fees you paid to get the initial payday loan. We ask lenders in our network to follow legal and ethical collection practices set by industry associations and government agencies. Non-payment of a payday loan might negatively effect your credit history.

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