Customer Outcomes-Based Approach to Consumer Protection: A Guide to Measuring Outcomes

Categories : Consumer protection, Regulation of Digital Financial Services


Author: CGAP

There is strong international interest for better regulatory and supervisory approaches to consumer protection that put customer outcomes at the center of actions taken by regulators and supervisors (i.e., “authorities”) and financial service providers (FSPs). While authorities have traditionally allocated their limited consumer protection resources to issuing detailed rules and enforcing FSP compliance actions, some have shifted their focus to the effects those actions have on FSP customers, known as “customer outcomes.”

According to CGAP, a “customer outcomes-based approach” to consumer protection focuses on the experiences and results of a customer’s access to and use of financial services, which are consequences of an FSP’s products, delivery, conduct, and practices . The approach starts by defining good “intermediate customer outcomes,” which suggest that services are designed and delivered to give the customer what was promised, what they need, and what they can fairly expect, thereby “meeting the customer’s purpose.” These intermediate outcomes are then translated into business practices, policies and regulations, and design—and accompanied by metrics that can track outcomes. This puts the customer in a position to increase control over their financial situation and better manage financial shocks (thereby improving their financial health) and attain longer-term financial goals that empower them to capture opportunities and build resilience. By putting special emphasis on customer segmentation, the indicators used to monitor customer outcomes empower authorities and FSPs to better identify and understand the experiences, risks and outcomes of low-income customers, including women.

This reading deck summarizes lessons from a pilot exercise that involved the Financial Sector Conduct Authority (FSCA) and five FSPs in South Africa focused on measuring intermediate customer outcomes from a supervisory perspective. While this deck provides guidance and recommendations primarily to authorities for measuring and monitoring customer outcomes, it also provides guidance and recommendations to FSPs for leveraging internal data and tracking progress toward achieving better customer outcomes. By sharing the perspectives of authorities and FSPs, it aims to deepen understanding around the role each plays in adopting a customer outcomes-based approach.