5 Consumer Risks in Digital Social Payments to the Poor

The rise of digital social payments (DSPs)—governments and development partners paying cash transfers to the poor into bank accounts or mobile wallets—offers an unprecedented opportunity to provide the world’s most vulnerable and excluded people with formal financial access that can stimulate greater resiliency. Yet, despite all the promise and potential benefits of digitization (and the growing interest and investment in promoting it), many recipients of DSPs—who are often new to formal financial services and “virtual” money in particular—do not always have a positive experience when accessing or using their digital cash transfers.

Applying CGAP’s Responsible Digital Finance lens, CGAP has released a brief which reviews consumer research from DSP programs across 12 different markets to understand how consumer risks can erode the financial inclusion potential of these programs. The brief reveals that there are five common consumer risks faced by DSP recipients that need to be tackled in order for DSPs to achieve their intended outcomes, including building trust, confidence and value in the use of digital payments and basic financial services.

  1. Inability to transact due to network downtime or service unreliability;
  2. Insufficient agent or ATM liquidity;
  3. Complex user interfaces and payment processes;
  4. Poor or no recourse mechanism;
  5. Fraud that targets the recipient.

We have seen these risks manifest themselves in a variety of contexts. Take, for example, the experience of Rael Lopeyo.* Rael is a mother of six children, lives with her family in the drought-prone lands of Northern Kenya. In 2014, she got a bank card from WFP to receive benefits for food purchases during the dry season. Once she receives notice that a payment has been deposited into her account, she takes her card to a participating merchant to buy staples, oil and soap. The card has certain benefits: it (and its value) is secure and private; it eliminates the need to queue for food or voucher distribution and allows to store value or make deposits into the account linked to the card. With these benefits, Rael is on a clear pathway to financial inclusion. Or, is she?

"I don't have control over the payment and I cannot negotiate with this merchant as I can do at street vendors, so I pay more."

Photo by Silvia Baur

In an interview with WFP Kenya and CGAP, Rael explained that she would prefer to just get cash instead of the card, which she says restricts her from buying what she wants. With the card, she can only buy from a small selection of merchants that only sell staples and no fresh produce. Also, she has experienced that merchants charge higher prices or a fee to recipients that pay with the card.

For Rael, the card is complicated and inconvenient, and she does not consider using any other linked services that might improve her money management. Even though the card is designed to improve the privacy and security of her finances, a mystery shopping exercise showed us that Rael did not enter her personal identification number (PIN) herself during the visit—yet, she confirmed us that she memorized her PIN and knew how to enter it—nor did the merchant check and tell her the remaining balance or provide her with the customer receipt from the point-of-sale (POS) device. All of these factors undermine the intended benefits of the initial design of the DSP program.

This and other evidence summarized in the brief reveals that all too often DSP recipients face problems that undermine the clear potential of DSP models. These negative experiences can, at best, adversely affect customer trust and confidence in—and ultimately any sustained use of—digital financial services, and at worst, cause actual financial loss and harm to already vulnerable people.

Getting the design and deployment of these systems right—finding customer-centric solutions that provide value, reliability, convenience and safety to recipients—should be a priority for any DSP program or provider seeking to unlock the larger potential benefits for the poor. How to get there is more complicated. The brief (and the previous Doing Digital Finance Right Focus Note which inspired it) provides recommendations and ideas for solutions, including some exemplary practices from the field that could help build a more solid foundation for ensuring that these programs achieve both their social protection goals and their financial inclusion potential.

* The name has been modified from the original one for privacy reasons.



This Focus Note explores consumer risk in digital finance—-particularly through the lens of lower-income and less-experienced consumers.

Digital social payments (DSPs) are a fast-growing, yet often overlooked, digital financial services (DFS) segment. Acknowledging and addressing the most common and consequential consumer risks should be a priority for any program or provider seeking to unlock the potentials of DSPs for the poor.
Sub-topics: Payments


04 April 2016 Submitted by jamie (not verified)

Thanks Helen! Glad you enjoyed the piece, and we totally agree! Customer-centric solutions for this population has not always been as high a priority as efficient solutions. We are hoping that exposing and discussing the issues will all of us find more and better ways to achieve both efficiency and effectiveness outcomes through better customer-centricity.

03 April 2016 Submitted by RAJAN N S (not verified)

Very informative and eye opener article, especially in the context of digitilisation of the DTB exercise being done on a much larger scale in India to pass on Govt. subsidies on Food, fertiliser, etc. directly to the beneficiary and where more than 50% of the population is either semi literate or illeterate. Unless the use of digitial platform through proper education is done to this hapless population the misuse of the DTB by unscrupulous traders/middlemen/other intermeidaries can not ruled out. The role of NGOs in this field will become more important to make the larger population of semi literate/ illeterate really knowledgable so that they do not become the victims of technology illetaracy!

04 April 2016 Submitted by Jamie Zimmerman (not verified)

Rajan, thanks for sharing this interesting example and context! The role of NGOs as a trusted and known quantity in recipients' lives can't be undervalued in terms of helping boost program and payment literacy, trainings to help recipients know how to solve programs, feedback loops to improve design and implementation, monitoring and evaluation, etc. They may in some instances make value chains longer and more complex, perhaps more expensive than simply a direct payment into an account, but it would seem that at the very least in the early period of digitization of a scheme, that the benefits of that high-touch would outweigh the risks, as you mention here.

Thanks again for the insights and thoughts!

04 June 2016 Submitted by Ayaz Hussain (not verified)

Dear sir. In 2012 Thardeep Microfinance Programe implemented the branchless banking and we have realized that the client is much happy from this service instead the banks. currently we collect the repayment 94% through branchless banking and we got success so far, now a days our clients get all loan facility at their home door. we conduct the electronic appraisal and disburse the loan through BlB, all the process of loan now 2-3 days maximum. we maintaining all the disbursement and recovery digitalized and we have got good result so far.

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