Protecting Customers

Consumer protection is an essential element of inclusive financial systems, both to ensure that current users of formal financial services get transparent and fair treatment in the market and to instill overall confidence regarding formal financial services and providers among potential consumers. Most policy makers and regulators in emerging markets and developing economies view effective consumer protection as an essential enabler of financial inclusion.

The most important objectives of consumer protection include:

  • Transparency – consumers understand the prices, terms and conditions, and risks associated with use of financial services;
  • Fair treatment – the financial products on offer are not deceptive or unsafe and the conduct of financial service providers and their employees and agents is not abusive or aggressive, reflects appropriate ethics, and is respectful of consumers’ rights;
  • Risk mitigation – financial service providers take reasonable steps to identify, monitor and mitigate customer risks such as fraud or inadequate handling of customer data, which evolve with innovations in products and business models and with the entry of new market actors; and
  • Effective recourse – when customers have queries, complaints or other problems, financial service providers have access and effective systems in place to address them.

Photo Credit: Hiu Huenh, 2013 CGAP Photo Contest

Strategies and measures to achieve effective consumer protection and responsible financial markets fall into three main categories. Governments set out and enforce the rules of the game to safeguard financial consumers’ welfare and ensure the above objectives through consumer protection regulation and supervision. Retail financial service providers contribute to responsible market development by offering appropriate services and observing standards of business conduct. Industry associations and private standard-setting bodies can lead establishment of collective “self-regulatory” measures such as codes of conduct or technical service standards. Consumers also have an important role to play, by choosing providers and products carefully, taking action to self-protect such as handling PINs carefully, and meeting their obligations. Interventions to improve consumers’ “financial capability” and advocate for their interests also contribute to an enabling but protective environment and stronger client value from use of formal financial services.

CGAP’s Protecting Customers Initiative aims to develop effective, behaviorally-informed consumer protection strategies that are practical and cost-effective to implement. These strategies must respond to rapid innovations in financial inclusion products, channels, and business models. Three distinct but closely-linked learning agendas work together to achieve these objectives:


Contact: Kate McKee



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