Why banks need mystery shopping more than ever

In recent years, the financial services industry has started using mystery shopping to ensure compliance with a complex web of regulations and changing consumer expectations.

Mystery shopping is a tried-and-true method for businesses in nearly any industry to obtain unique insights into the effectiveness of their customer service operations. But in recent years, some industries have started using the basic techniques of such auditing practices to ensure compliance with a much more complex web of regulations and consumer expectations.

Questionable financial practices and lack of regulatory oversight have riddled many nations worldwide with economic trouble. But as those nations work to fix their economic problems and come out of recessions, the financial services industry has taken particular advantage of mystery shopping as a way to regain credibility.

New regulations
Banks have long utilized mystery shopping as a way to identify and prevent lending discrimination, which was a widespread issue throughout the U.S. during a large part of the 20th century. But with passage in 2010 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, financial institutions have started conducting mystery shopping campaigns to ensure compliance with a much wider variety of complex regulatory issues.

Part of the main focus of the Dodd-Frank Act is to protect consumers from abusive practices in the financial services industry. A financial industry expert told Reuters that mystery shopping programs can help banks adhere to these new financial regulations while also pointing them to different ways to increase revenue and improve customer service.

Worldwide trends
The trend is catching on worldwide, too. The United Kingdom's Financial Services Authority recently conducted a mystery shopping program that revealed a major bank was giving poor financial advice to its customers.

According to The Telegraph, the mystery shopping report found one in 10 customers received bad advice on how best to pursue essential banking services such as pensions and investment plans.

What to do with mystery shopping data
Banks can employ mystery shopping companies to help shape their individual programs and brainstorm proper corrective measures such as enhanced training techniques, closer review of consumer protection laws and compliance checklists.

In general, a secret shopping program presents a win-win situation to businesses within the financial services industry. In the U.S., for example, banks don't have to worry about confidential mystery shopping data coming back to haunt them in the event of a lawsuit. 

"The information obtained from mystery shoppers by a compliance department in Equal Credit Opportunity Act testing cannot be used in a lawsuit against a bank if corrective action is taken," Reuters said.