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In light of the Synapse-Evolve fiasco, we figured it might be a good idea to do a quick and short primer on structuring a customer complaints program.

(Quick tl;dr on Synapse:

• Synapse is (was) a banking as a service provider (a BaaS). That means they’re not a bank, but just a tech layer between the fintech and the banks.
• In this case, one of the banks working with Synapse was Evolve Bank.
• When you deposit money with a fintech or even a bank, the money is usually not going into a separate account created just for you. It often goes in an aggregated master account.
• The way to keep track of everyone’s money is through a ledger, which is like a fancy spreadsheet. It is usually the BaaS or fintech that keeps the ledger, and the bank verifies it.
• If the ledger has missing or wrong information, well that then is a big problem
• Synapse’s ledger didn’t quite balance out as it should have, which triggered alarm bells at Evolve, which led to the discovery of other errors on the ledger accounting
• Now, no one knows whose money is what and who is owed what.)

Whenever there’s a scandal that makes it to the fintech headlines, there’s usually a long trail of customer complaints that preceded it. We don’t know for sure that is the case with Synapse-Evolve but from how Synapse seems to have managed its accounting (not well) and is now managing customer outreach (thank you to excellent reporting by Jason Mikula at Fintech Business Weekly), we suspect Synapse was never amazing at handling customer frustrations.

This is why regulators also pay attention to customer complaints — they’re usually a precursor to bigger issues. There’s even a publicly available CFPB portal for customer complaints.

So, if you’re a fintech, it is important to have a good program in the place from the start to address customer complaints.

And if you still think this is theoretical, Chime, a company rumored to be going public soon, was fined $2.5 million earlier this year for having flaws in its customer complaints program.
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First, what is a complaint?

A complaint is an expression of dissatisfaction made to your company by one of your customers about your products or services where a response and reasonable resolution is explicitly or implicitly expected.

What does that mean?

It means that to be a “complaint”, two things have happened:

1. You customer is upset and
2. It is over something you can fix.

Here are examples of complaints:

• You promised I would receive my credit card in 7 days. It has been 3 weeks and I have not received it. (Your fix: deliver products as you promised them, fix operational issues)
• You denied my loan application because I am too old? (Your fix: don’t discriminate on age!)
• Your ad said I would get a 0% APR. You are charging me 8%. (Your fix: improve your marketing language)

Not a complaint:

• You guys are jerks.
• Your product is useless.
• I only gave you one star because I couldn’t give you zero.

(Fun fact: It takes 12 positive customer experiences to make up for 1 negative experience. (Source: Ruby Newell-Legner’s “Understanding Customers”)).

Your bank partner (if you have one) will also ask you track “serious complaints”. Generally, “serious complaints” are complaints that:

• come from regulatory or government agencies.
• are directed to the executives of your company.
• threaten litigation, escalation to regulators, or to harm employees, or;
• allege discriminatory practices by the company or employees.

How to manage complaints?

You need to do three things to manage your complaints:

1. Identify
2. Respond
3. Track.

First, Identify.

1. Classify your customer interactions as regular inquiries or complaints, and then
2. Determine if any complaints are “serious complaints”.

Second, Respond.

1. Develop an internal complaints management policies. Train your team to identify complaints and then set clear rules on response times
2. Serious complaints involve third parties and usually have a response due date. If you have a bank partner, coordinate with them to respond to serious complaints.

Third, Track

1. Develop analytics that can help you track the volume of complaints; the nature of complaints (e.g., product specific, marketing related, error resolution, etc.); and your response time.
2. Trend analysis of customer complaints can provide insights about your products and services and areas where you can improve.
3. Banks typically require complaints reporting from their fintech partners on a monthly basis. Spot the trends before they do!

Ultimately, you want to be answer the following:

• How many complaints are we getting?
• What are our customers complaining about and why?
• Are we responding timely?
• What can we learn or improve?

Who at your company is responsible for managing your customer complaints program?

Front Line Teams. These are employees who regularly interact with your customers, intake and handle complaints, and analyze customer interactions and complaints data (e.g. customer support and operations teams).

Legal and Compliance. Your Legal and Compliance team can help spot complaints or trends that may have legal or regulatory implications. Legal and Compliance should be involved in responding to any serious complaints.

Bank Partner. Bank partners or banking as a service providers usually require fintechs to report customer complaints. They should also be involved in responding to serious complaints.

Ultimately, creating a customer centric approach is a team effort. Some very thoughtful start-ups will even develop the muscle memory early and do a monthly meeting once a month with the executive team to track trends with customer complaints.

Is this early behavior correlated with a more customer centric culture later on when the company scales? Almost certainly yes, usually yes, absolutely almost 100% of the time.

And if you still think this is just another compliance check-box, think of all the product feedback you get when you actually pay attention to what your customers are telling you.

Listening to your customers is almost always a sure fire way to build a lasting and compelling product.

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While we hope you found this post helpful, please note that the information in this post is not intended to be legal, financial, tax, or regulatory advice. Please consult your own advisor when considering your stock options…options.

Fintech Law and Compliance 101 is affiliated with https://www.itsaffinity.com/ a compliance learning management platform built specifically for banks, bank sponsors, and fintechs

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