The COVID-19 pandemic has accelerated the adoption of digital financial services. In the midst of global lockdowns, banking apps have boomed across developing regions and fintech platforms have changed the way consumers interact with payments. However, with greater access to financial accounts comes greater vulnerabilities. Consumers who are unfamiliar with a new marketplace find themselves at risk from the bad practices of some financial services providers. These vulnerabilities also have heightened during the pandemic, with millions of consumers at risk from financial exploitation and scams.
In this context, as the global membership organization for consumer advocates, it is critical that Consumers International’s collective voice is at the forefront of protecting consumers and creating safe, fair and sustainable financial services marketplaces for all. Using our network of 200 consumer organizations in over 100 countries, and working closely with CGAP, we have identified several key opportunities to strengthen the consumer voice in financial services consumer protection in low- and middle-income countries.
From the development of apps that can aid in managing and prioritizing consumer complaints, to the establishment of regional and international communities of practice, our research recommends practical, scalable and replicable solutions to a range of stakeholders.
The state of consumer advocacy in low- and middle-income countries
In May and June 2020, Consumers International partnered with CGAP and engaged with 36 member consumer organizations in 32 low- and middle-income countries to assess their level of involvement in financial services consumer protection advocacy. We also wanted to understand the stakeholders they work with, the challenges they face and the strategies they use.
We found that consumer organizations work with a range of partners to overcome their resource constraints. To boost their expertise, almost 80 percent of those surveyed work with experts. To access grassroots networks, more than 70 percent work with volunteers. In Rwanda, the leading consumer rights protection organization, ADECOR, uses volunteers to run 20 district-level committees in four provinces, where consumers can raise financial service issues with ADECOR directly. These broad networks are critical pathways to reach vulnerable consumers across many low- and middle-income countries.
At the government level, our members consider consultations with financial services regulatory agencies to be a valuable avenue for change. However, out of the two-thirds that are engaged in these consultations, only one-third of our members have regular meetings. In many cases, it is left up to consumer organizations to deal with the growing consumer protection challenges. Members surveyed consider unclear terms and conditions, data violations and over-indebtedness to be among the key risks to vulnerable consumers.
In the space left by a lack of a regulatory engagement, our members deliver change using a range of key advocacy strategies. The six tools below are a crucial and effective part of their efforts to support consumers of financial products and services:
- Handling complaints and facilitating dispute resolution on behalf of consumers
- Providing consumer debt counselling
- Conducting market research to monitor providers’ service quality and understand consumers’ perceptions and behavior
- Raising awareness of consumer protection issues through campaigns and financial education
- Representing consumer voice in the legislative and policy-making process
- Pursuing public interest litigation to enforce consumer rights
Out of these six tools, three of them in particular offer great opportunities for scalability and future development.
1. Complaints handling
Complaints handling is an effective tool for advocates to directly engage with consumers at the first point of redress and guide them through complicated redress mechanisms. In Côte d 'Ivoire, the Fédération des Associations de Consommateurs de Côte d 'Ivoire developed an app that automatically sorts consumer complaints and forwards them to the appropriate regulator. Across the world, our members in countries as diverse as Peru, India, the Philippines and Morocco are using digital technologies to receive complaints and to support consumers.
Streamlining this complaints process with appropriate technologies is an activity that can be replicated and scaled across all low- and middle-income countries. There is a significant opportunity to strengthen the voice of vulnerable consumers by using existing technologies and developing apps to help manage and prioritize consumer complaints and by using analytics to aid in reporting to a regulatory body.
2. Market research
Market research is a key strategy for understanding the services in the marketplace and developing an advocacy position to take to policy makers. In Russia, the International Confederation of Consumer Societies (KONFOP) has conducted 13 waves of mystery shopping to monitor how financial institutions treat consumers. After KONFOP presented its results to the Ministry of Finance, the country’s consumer protection regulator, the Bank of Russia and financial services providers issued a standard on investment insurance products.
Given the appropriate resources, there is an opportunity for market research activities to be scaled to all regional contexts. Through tools such as the CGAP mystery shopping guide consumer advocates can develop the capacity to conduct a sophisticated analysis of financial products across all markets.
3. Representing the consumer voice in the legislative and policy-making process
When it is available to them, legislative advocacy is one of the most effective tools that our members employ. In Brazil, the Instituto Brasileiro de Defesa do Consumidor (IDEC) has developed key relationships with lawmakers and is invited to parliamentary hearings, where it provides technical context and materials to hearings on consumer issues. IDEC is currently working on a bill that mandates financial institutions to provide fair restructuring of loans to vulnerable consumers who are over-indebted.
Establishing regional and international communities of practice where Consumers International members can share expertise on how to engage with the policy-making process is a great opportunity for those who operate in structures that are difficult to access. Sharing examples like IDEC’s through global networks can strengthen the collective voice of consumers.
Toward safe, fair and sustainable financial services for everyone
Despite having limited resources, our members in low- and middle-income countries have shown that it is possible for consumer organizations to successfully navigate the financial services marketplace with effective advocacy strategies.
These strategies could be replicated, scaled-up and implemented across all regions, giving consumer organizations the capacity to deliver real change for all consumers. Adopting digital technologies, conducting sophisticated market research and establishing international partnerships with regulators, governments and multilateral and bilateral organizations are just some of the ways we can strengthen the collective consumer voice now.
Looking forward, we also must work to place consumers at the heart of future developments. Through effectively shaping sustainable finance initiatives and supporting the design of consumer-centered fintech models we can help create a marketplace that works for all.
By doing so, we can help ensure that every consumer has access to safe, fair and sustainable financial services now and in the future.
Helena Leurent is director general of Consumers International.