Research & Analysis

Understanding Consumer Risks in Digital Social Payments

Low-income recipients of cash transfers—whether government to person (G2P) or donor to person (D2P), and whether conditional or unconditional—increasingly receive their payments digitally. This digitization trend is expected to continue. The value of electronic transfers that are delivered into store-of-value accounts and accessible via debit cards or mobile money wallets, referred to here as “digital social payments,” is estimated to more than triple between 2010 and 2017 to over US$194 billion (Riecke 2014).

DSPs offer a variety of potential benefits over traditional cash, voucher, or in-kind methods. Proponents most often cite increased efficiency, reduced leakage, and faster, more convenient and more secure payments to recipients. When linked to bank accounts or mobile wallets that offer store-of-value opportunities or access to additional financial services, DSPs to the bottom of the pyramid could pave a way to fuller financial inclusion. However, evidence shows that the financial inclusion benefits of DSPs have thus far been limited: most recipients withdraw 100 percent of their payment at once and by and large do not use the account again until the next transfer takes place, let alone take advantage of additional financial services that may be available to them. This lackluster use has led some to question the promise of DSPs as a financial inclusion gateway.

There may be several reasons for recipients’ limited (active) use of their digital accounts, including limited ubiquity, convenience, value proposition, and trust. CGAP’s “Doing Digital Finance Right” (McKee, Kaffenberger, and Zimmerman 2015), however, suggests that the experiences and perceptions of several risks among low-income DFS consumers are, at best, adversely affecting customer trust and confidence in DFS and, at worst, causing actual loss or harm. It also revealed that DSPs recipients—a unique segment among low-income DFS clients that tends to be more vulnerable, less literate, and less familiar with new technologies—experience some identified consumer risks particularly acutely or in distinct ways.

Applying the consumer risk lens outlined in McKee, Kaffenberger, and Zimmerman (2015), this Brief focuses on the particular experiences of low-income and vulnerable recipients. It reviews existing evidence from DSP programs in 12 emerging markets to identify the most common and consequential consumer risks and challenges experienced in their design and deployment. These consumer risks include (i) inability to transact due to network or service unreliability; (ii) insufficient agent or automatic teller machine (ATM) liquidity; (iii) complex user interfaces and payment processes; (iv) poor or no recourse mechanism; and (v) fraud that targets the recipient. Drawing on promising practices by governments, development agencies, and providers, it then recommends that DSP programs and their payment service providers should consider three critical basics—reliability, communication, and monitoring—to better mitigate these risks. While these three elements of “doing digital finance right” are basics that apply to any DFS offering, getting them right in a DSPs context will provide a solid foundation for ensuring that these programs achieve both their social protection goals and their financial inclusion potential.

Related Resources


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