IPA Consumer Protection Quarterly

What's New and What's Next

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New: Chatting About Consumer Protection

At IPA we are excited about the potential of social media and chat services for consumer protection, and we are testing new methods to better sort and make sense of this data.

Our latest work in this space is a partnership with the Bangko Sentral ng Pilipinas to analyze the first year of data from their consumer complaints chatbot, BOB. Some of our key findings were shared in a recent blog.

So what do consumers chat with a regulator about? All kinds of things. But as the chart below shows, customer service and lending were the most common themes identified.

To classify chats, we used keyword analysis of the text, which is a simple way to organize unstructured text like online chats. BSP is updating the chatbot scripts based on the analysis, and we look forward to sharing future updates on this exciting new solution for consumers.

Next: IPA Launches 2nd Consumer Protection Request for Proposals

The Consumer Protection Research Initiative’s new Request for Proposals is live! We are excited to see what ideas researchers come up with to add to our growing list of consumer protection research projects addressing issues such as fraud, redress, and responsible lending. The deadline to submit proposals is August 19, 2022, and we will make award announcements in September. Stay tuned for more updates.

New: Bangladesh Consumer Protection Survey

IPA has completed its fourth consumer protection survey of digital finance users, surveying consumers in Bangladesh. Similar to our surveys in Kenya, Nigeria, and Uganda, scam attempts were the most common challenge consumers reported, while other challenges were reported at very low levels compared to the other markets. 

Next: Buy Now Pay Later: What’s the Role for Researchers?

Buy now pay later (BNPL) is a type of e-commerce that allows consumers to delay payment of goods they purchase online. BNPL has become quite popular with online shoppers across the globe and is growing fast in emerging markets like India. But like all consumer credit, BNPL raises significant consumer protection concerns, many of which are not being addressed yet given the early stages of this new market. In Kenya, mobile money giant M-PESA announced a new BNPL-style product in June, only to delay the product’s launch due to reported concerns raised by the Central Bank of Kenya.

The debate over BNPL is an area where we would like to see more research and evidence, so we can ensure consumer protection keeps pace with innovation. IPA’s Lauren Perlik and Tanvi Jaluka suggest several ways the research community could help inform the BNPL debate:

“How can we implement consumer protection measures within the design of BNPLs, similar to how jurisdictions have put restrictions on credit products like payday loans? Can we design and test improvements in product information or financial literacy that may improve consumers’ understanding of the terms—and risks—of BNPL? For which consumers is BNPL most successful in improving their financial health, and conversely which consumer segments are most at risk of negative outcomes when using BNPL?”

What research questions would you like to prioritize in the BNPL space? Email us at [email protected] if you have a research idea you would like to discuss.

Things that Make Us Think

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A few links to recent research that are sparking excitement on our team:

1. BNPL and Credit Cards: Speaking of BNPL, Benedict Guttman-Kenney, Chris Firth, and John Gathergood analyzed credit card data in the United Kingdom, and found that 19.5% of active credit cards in their dataset had charges to BNPL providers. Charging of BNPL to credit cards was more common with younger consumers and lower-income locations. Bonus BNPL: Dvara Research has published a report which flags several consumer protection concerns in India’s BNPL market that have important implications for consumer protection policy globally.
2. Default Settings in Debt Payments: More research on credit card data from the UK! Sakaguchi et al. shared more evidence on the power of defaults in consumer finance—for better and for worse. Looking at credit card data, they found that minimum payment prompts and minimum automatic repayments led to more credit card interest than the total late payment fees these minimums help consumers avoid–meaning a higher overall cost to cardholders. They then tested prompts for full repayment and for paying more and found they reduced these unintended effects of default minimum payments.
3. Texting for Timely Repayment: A more positive story about consumer debt from Colombia. Barboni et al tested several versions of text messages encouraging late-paying clients of a Colombian bank to repay their debt. Those receiving these messages were 4% less likely to be late repaying a loan with the effects most pronounced when messages used social norms, and those with higher credit scores.

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