Consumers who stand to benefit the most from innovative digital financial services (DFS) are the 2 billion adults globally who have never had access to formal financial services. The world’s poorest people perceive cash to be more reliable and cost-effective than money stored electronically – their perceptions of the risks attached to digital finance differ from those of consumers more experienced in the use of financial services.
DFS offerings must be designed with the least-experienced, most-skeptical user in mind. The adoption of DFS will never achieve significant scale if levels of trust are low. If DFS are to fulfill their potential to achieve full financial inclusion, we must assure DFS customers of a near-perfect user experience, which also implies effective, fair and free recourse mechanisms when consumers encounter problems with DFS.
‘Consumer experience and protection’ is one of the primary work streams of the ITU-T Focus Group on Digital Financial Services, a group which has developed guidelines and tools to assist countries in their efforts to increase financial inclusion. This Focus Group is holding its final meeting in Geneva, 6-7 December, where we are presenting the results of our two-year study on the key components to protecting the DFS consumer.
The approach taken by the working group on consumer protection and experience
Our working group has undertaken legal and regulatory reviews of Bangladesh, India, Nigeria and Uganda to better our understanding of the degree to which DFS users are protected by existing legislation.
These reviews also included interviews with regulators – specifically ICT and financial-services regulators – to confirm whether our understanding of their legal frameworks was accurate, and if they, too, had identified legislative ‘gaps’ which need to be addressed to improve DFS consumer protection. In asking how regulators planned to address these gaps, we learned more about whether they see new regulations as the potential solution, or whether they prefer to use new measures to monitor and supervise the DFS market.
In addition to this intensive legal and regulatory review, we also conducted a desk review of 22 countries’ legal and regulatory frameworks for DFS; identifying trends in DFS consumer protection, as well as significant gaps that may need to be addressed through new legislation, or DFS-specific regulations.
Consumer surveys via SMS was another important element of our research to highlight issues such as consumer challenges related to recourse.
Our working group has also reviewed the standard-form DFS user agreements on offer in nine countries in East, South and West Africa, as well as in several Asian countries, to identify areas where providers need to improve consumer protection and compliance with domestic laws.
In comparing national legislation with the substance of user agreements, we have found some very distinct, recurring problems. We have reported on the consumer protection problems, as well as the potential legal implications.
We have all signed a standard-form user agreement where our only option was to agree to the terms and conditions on offer, or ‘opt’ not to receive the service or good. Rather than being an impediment to consumer protection, these user agreements could become a powerful regulatory tool. Regulators could systematically review these agreements to identify what the DFS business practices are vis-à-vis the law. And, if business practices are found to be in conflict with the law, regulators should then take action to protect the interests of consumers.
With these three components in place: 1) an understanding of consumer-protection legislation in place (to determine the protection afforded to consumers by legislation); 2) the substance of DFS user agreements as a proxy for practices; and 3) direct reports from consumers on their experiences with DFS – we will be able to provide regulators with recommendations on how they could resolve existing consumer protection challenges.
We will present these analyses and associated recommendations at the final meeting of the ITU-T Focus Group on Digital Financial Services this week in Geneva.
We look forward to meeting you there to discuss how we can work together to build trust in the DFS environment.
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