Three things we've learned about building a consumer-first marketplace in digital financial services
From online banking to Buy Now, Pay Later, digital financial services (DFS) have opened up a new world of opportunity for consumers. They’ve allowed us more control over our money, greater flexibility, and more convenient, efficient access to our accounts. Inevitably, DFS also presents new risks and challenges for consumers. As the delivery of financial services for consumers is digitised, the urgency to close the digital gap becomes greater, as does the need to address mounting issues such as protecting consumer privacy and safeguarding data.
When services are built for consumers, it only makes sense that they be built in collaboration with them. With consumer voices at the forefront of DFS development, services ultimately become fairer, safer, more sustainable and reach their max potential. But such an approach isn’t the default. Right now it’s down to consumer advocacy groups to ensure that the DFS marketplace is truly consumer-centric.
So, what are the obstacles? First, we are yet to achieve equal access to digital services – one third of the global population remains offline and women in lower income countries are 52 percent less likely to have internet access than men . Second, different demographics have different needs — ‘consumers’ are not one homogenous group and so cannot be represented fairly if they are considered as such. Third, consumer groups, particularly in low and middle-income countries, are underfunded and in many nations, there are no legal obligations for governments to financially support them.
But progress is being made. Since the launch of our Fair Digital Finance Accelerator (FDFA) – an initiative helping consumer associations in low and middle income countries advocate for fair digital finance – around one-third of our consumer association Members have reported consumer-friendly changes in consumer protection policies in their countries. Where change has happened, Consumers International Members have often been involved. This is what we can learn from their work so far.
Lesson One: Building consumer association capacity and knowledge is effective in contributing to change
In a recent report, the Consumer Council of Fiji (CCoF) noted a rapid rise in digital financial services across the country, something that it calls a “quiet revolution”. But certain demographics continue to fall behind in terms of access and their ability to use DFS in their full capacity.
It defines inclusive DFS as when “everyone, regardless of location or background, has the opportunity to participate in the digital economy and manage their finances effectively”.
Through a recent survey of over 1,100 individuals, made possible through the FDFA programme, the Council found that consumers were concerned over limited access to technology, because of the unaffordable cost of smartphones and data plans or inadequate infrastructure for internet connectivity, particularly in remote regions. Additionally, consumers were worried about a lack of digital literacy, down to unfamiliarity with tech, limited knowledge of financial concepts needed to understand certain DFS functionalities and language barriers, particularly for those not comfortable using English.
The council identified the groups particularly vulnerable to those issues as women, elderly persons and persons with disabilities. Due to societal norms women are more likely to have restricted access to mobile devices, while elderly individuals have more difficulty understanding tech involved in DFS and there is a lack of support and accessibility functions for disabled users. This makes each group more vulnerable to fraud and scams as well as exclusion from financial services.
With that knowledge, CCoF recommended enhancing digital literacy programmes, promoting accessibility features, implementing targeted outreach programmes for marginalised groups and streamlining complaint resolution in order to create a more inclusive DFS marketplace. Thanks to the FDFA, it was able to produce and dispense informative brochures, run more than 80 workshops and educate over 10,000 people in financial literacy.
Lesson Two: Progress is made by addressing both government and businesses
Transparency campaigns are incredibly effective in getting the attention of financial institutions, encouraging productive discussion with regulators and enforcing change.
Last year, the Brazilian Institute for Consumer Protection (Idec) led a six-month campaign highlighting the vulnerability of mobile banking to scams. It focused specifically on scams via remote access, which is when a scammer pretends to be a bank employee and contacts a victim via email, phone call, WhatsApp or SMS and convinces them to download a remote access program to their phone, from which the scammer can take control of the device
After surveying online and social media complaints regarding the remote access scam, it launched an investigation and requested information from four of Brazil’s largest private banks about what they were doing to prevent such scams and whether they were paying out compensation to victims. Idec discovered that the technology to stop remote access scams does exist and therefore concluded every financial institution should be obligated to use it.
With the information it had gathered, the organisation released a report criticising the vulnerability of mobile banking accounts to scams and called on financial institutions to take action. Six months of persistent pressure applied to these major banks successfully prompted them to organise face to face meetings with Idec and commit to enhancing protections and ensuring the right to compensation in cases of fraud.
While FDFA membership is made up of low and middle income nations, high income nations face obstacles of their own when it comes to digital finance and similarly offer valuable lessons.
Following repeated advocacy from Consumers International Member Which?, over greenwashing and investors and bank account holders being in the dark on where their money was going, the Financial Conduct Authority (FCA) introduced strict new rules on the use of sustainability terms and new labels to identify the extent of green investments.
Research by the FCA found that 81 percent of Brits wanted their money to “do some good” while providing a return. To be fair and consumer first, all digital financial services should be completely transparent about where consumer investment is going and eventually become net zero aligned.
The anti-greenwashing rules, implemented in May, require finance firms to provide strong evidence to back up any “green” claims in adverts, statements, policies, information or images. The four labels available cover funds that invest in assets that: make a direct positive impact, meet a “robust, evidence-based standard of sustainability”, have the “potential to meet a robust, evidence-based standard of sustainability” or are a mix of all three.
Lesson Three: Consumer associations can be trained to build their status and influence
A Consumers International survey in 2022 found that Rwanda’s Consumers’ Rights Protection Organisation’s (ADECOR) main concerns with DFS were around the lack of redress mechanisms, high finance charges, limited digital skills and financial education.
Damien Ndizeye, executive secretary at ADECOR, told Consumers International that consumers they had spoken to wanted to feel safe when they use mobile money, weren’t aware of hidden fees involved in transactions and weren’t sure who to turn to when they needed assistance.
“It’s important for the regulators to make things clear for financially illiterate people to know better what is happening, the tools used in mobile transactions and why they charge differently depending on the money they receive or the money they transfer. Many of them have lost money by accident sending money or sending funds to the wrong number and some of them have also been victims of fraud through mobile money services.
“The importance of placing the consumer at the head of digital financial services policy cannot be overstated.”
Since becoming part of the FDFA in 2022, ADECOR has contributed to three major policies within Rwanda. Ndizeye told Consumers International that the FDFA had been “instrumental” to its advocacy work.
“The training has given us a good understanding of digital financial regulation, consumers rights and the complexities of new financial technologies. It equipped our team with the tools to engage effectively with stakeholders such as regulators, financial service providers, policy makers and consumers and develop evidence-based arguments for policy change.
“It also exposed us to international best practices and frameworks and helped us to align the Rwanda approach with global standards.”
With help from the FDFA initiative, ADECOR was involved in updating Rwanda’s Electronic Payment Systems Regulation to better ensure the security of consumers' financial data and improve protection against fraud. It additionally contributed to the revisions of the Digital Financial Services (DFS) Guidelines to enhance consumer protection, transparency, and fair practices in the sector and the passing of the Mobile Money Services Regulation, which promotes responsible lending, protects consumers from excessive fees and ensures that mobile money services are accessible and fair for all users.
The case studies in Brazil, Rwanda, Fiji and the UK are testament to the influential relationship that consumer rights groups can have with regulators and show a growing cohort of financial bodies and businesses committing to consumer centricity.
Through empowering consumers with knowledge, initiating discussion with governments and businesses and working to increase the influence of consumer advocacy groups, Consumers International envisions global DFS policy-making processes in which consumer groups are considered essential and there exists a collaborative market-place that protects individuals and is truly consumer-centric.