New report: How consumer organisations can maximise their impact in digital finance policy
As financial technology rapidly evolves, and regulators race to keep up, an ever more complex web of policy instruments and actors within the digital finance policy space is formed. Within this web there are gaps, overlaps, and hidden threats, leaving consumers - all of us - at risk of harm. The lack of an established legal and regulatory framework presents challenges, while also offering an opportunity for consumer organisations to deeply integrate themselves within the policy-making process.
Consumer organisations can be a linchpin within an inclusive and protected financial services eco-system. They provide essential support to people in the marketplace, from advice on how to seek redress, to education on consumer rights within digital financial services. They are often trusted pillars within their communities, and are uniquely placed to collect consumer data essential to evidence-based policy-making.
But with thinly stretched resources and unstable funding, many find it difficult to engage regulators and policy-makers. When we speak to our Members - consumer organisations based in over 100 countries around the world - they repeatedly tell us that they feel held back from improving financial consumer protection.
Today, we launch a new report - Maximising consumer voices in digital financial services policy-making: Consumer organisations' engagement strategies.
At a glance
- For digital financial services to have significant economic and societal benefits, they need to be promoted in an environment that is fair for consumers.
- As the digital finance policy-making space evolves, it is becoming increasingly challenging for consumer organisations in low- and middle-income countries to navigate the complex policy space around them.
- Consumer organisations should aim to leverage the structures and processes of state interventions into digital financial services by fostering institutional arrangements in which the consumer voice is heard.
- Consumer organisations should build on existing strengths, such as relationships with government and other stakeholders, access to original consumer-focussed data, and more.
The Challenge
Influencing public policy is rarely a linear process, evolving through complex interactions and negotiations among a range of stakeholders. For those with limited power and resources, intercepting and exerting influence over this process can be difficult, especially where it is dominated by powerful groups.
These issues are exacerbated within digital financial services. The cross-cutting nature of the sector means it involves multiple regulators; the central bank, the financial regulator, the data protection authority, consumer protection authority. And in low- and middle-income countries, the regulatory environment is often underdeveloped and overly complex.
Moreover, many challenges that consumers face go beyond the scope of consumer policy; issues like access, cost, safety and security. Developing strong digital public infrastructure and a robust digital framework requires long-term investment, political will, and market development.
Guidelines for maximising the consumer voice in digital finance policy-making
This report is a guide for consumer organisations in low- and middle-income countries to maximise their impact on digital financial services policy-making. Building on interviews with Consumers International Members, it showcases the advocacy strategies of consumer associations worldwide.
1. Build on existing foundations
When looking at how to influence the digital financial services space, consumer organisations should look at how they can build on their existing networks, expertise and skills.
For example, in Rwanda, ADECOR has more than 30 consumer ambassadors or consumer representatives in each district helping with field research, data collection, awareness campaigns, consumer complaint management and other related activities. They have used this expertise and connections to research levels of fraud consumers have experienced in digital financial services in seven districts across the country.
2. Foster institutional structures and processes
Consumer organisations should support the creation of stable institutional foundations for digital financial services policy-making structures and processes. Because such institutions are still fluid in the digital financial services space, this is where consumer organisations can build an impact, positioning themselves as dependable, valued and essential partners within these structures.
3. Provide an essential source of original consumer data
Due to the newness of the field, many consumer challenges regarding digital financial services have not yet been clearly documented. Consumer associations can fill this gap. Tools like a well-functioning consumer complaint management system can be a unique data source. Low-cost options include ‘consumer listening’ through social media monitoring.
For example, between 2006 and 2010, Korea saw a widespread mis-selling scandal in which credit card companies sold add-on products to millions of consumers via mobile and telemarketing. Consumers Korea investigated internet blogs and portals (such as Naver) to identify flaws in the nation’s financial consumer redress system, proposing ways of improving the nation’s financial consumer redress system to policy-makers.
4. Leverage relationships
In the short term, building a team of experts working exclusively on digital finance will be difficult for many organisations. Consumer associations should supplement their existing expertise by focussing on strategic partnerships with civil society, academic institutions, industry and other stakeholders.
5. Focus on initiatives for vulnerable consumers
Digital financial services have the potential to offer real benefits for vulnerable consumers, but financial inclusion will be tempered if advances are not accompanied by strong consumer protection. Consumer organisations are often already serving underprivileged populations in their regions – and are trusted advisors on issues like cost-of-living, energy, food, and product safety.
For example, CUTS (India) work in partnership with the government to enhance the digital financial literacy of women consumers
Get involved
The Fair Digital Finance Accelerator is working to improve the state of digital finance in low- and middle-income countries. We train and build capacity among 65 consumer organisations worldwide, linking consumer advocates to national and international policy-makers. To join the Accelerator, or find out how you can support this work, contact impact@consint.org.
