Responsible Digital Finance

By the end of 2013, there were 219 mobile money services reaching over 200 million registered users spread across 84 countries. Low-income consumers stand to benefit greatly from more accessible and affordable DFS offerings, and indeed, evidence from multiple markets confirms that the basic services are highly valued. However, many if not most DFS customers are new to formal finance and have very limited margin of error in their precarious financial lives. Getting their “digital journey” right will be important to meeting their expectations and needs. It also matters to their providers, which need trust from the mass market, large-scale uptake of services, and active usage of diverse services to get the long-term pay-off from their investments in DFS operations. Thus, innovation and the rapid scaling of DFS in some markets raises a question that is central to effective consumer protection in a financial inclusion context: 

What risks do customers perceive and experience with DFS, what are the consequences of those risks for consumers, providers, and financial inclusion outcomes, and how can those risks be addressed?

CGAP’s new work stream on Responsible Digital Finance seeks to build the evidence base and menu of industry and policy solutions to address evolving consumer risks and ensure strong trust and high levels of uptake and usage. A first line of recent work focuses on building a cross-country comparative evidence base through CGAP-commissioned deep dives in four markets and comprehensive analysis of available data on consumer risks from other markets. The problem spots identified through this review include risks arising from unreliable networks and DFS services (which can deny customers access to funds stored in their wallets or lead them to engage in unsafe behavior such as giving cash and PINs for agents to transact once the service is back up), complicated and confusing customer interfaces (which also contribute to high levels of agent-assisted and over-the-counter transactions), agent misconduct including charging of unauthorized fees, fraud of various types, and inadequate complaints handling and data privacy and protection practices.

CGAP is beginning to explore potential industry and regulatory solutions to the most common and significant problems in the customer journey. The next step is engaging with key reference firms and forward-looking policy makers to support practical action and analyze the cost-effectiveness of different solutions.

CGAP is also one of the founding members of a Community of Practice around responsible finance. Through this Community of Practice, CGAP provided technical leadership on the first global convening of industry players, policy makers, consumer advocates, and researchers on responsible digital finance at the fifth annual Responsible Finance Forum (RFF V), held in Perth, Australia in August 2014. Focusing exclusively on the use of technology to provide financial services and products for the poor, RFF V enabled participants to share specific approaches that private and public sector actors can take to address emerging risks from the expansion of digital financial services. There was broad consensus among the participants at the Responsible Finance Forum to explore the development of global principles, standards and codes of conduct for responsible digital finance as part of a multi-year global dialogue among all stakeholders.



19 April 2017
Insights gained from Mystery Shopping exercises can be critical for regulators and supervisors charged with overseeing DFS markets.
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English (24 pages)
17 April 2017
Mobile financial services (MFS) have rapidly become a conduit for fraud and other criminal activity. Various fraud types have been noted in key MFS markets, including consumer-facing fraud from agents and third parties and fraud perpetrated against agents.
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English (4 pages)

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