Consumer Protection CGAP

An Ecosystem Approach to Consumer Protection: What, Why and How?

The increase in account ownership over the past few years due to the explosion of digital financial services (DFS), further accelerated during the COVID-19 pandemic, is bringing low-income people into the formal financial sector. While financial solutions unlock life-changing opportunities by helping consumers save, borrow, and receive remittances, CGAP’s research shows that the nature and scale of financial consumer risks, particularly within digital finance, are evolving and growing. Is it time to reassess the existing approach to consumer protection? We think so.  

CGAP and other industry players have already begun developing various solutions that can help address financial consumer risks. We believe that a responsible digital finance ecosystem approach is the way forward. Its success rests on involving key ecosystem actors, building up capacities, and fostering collaboration to identify consumer risks and develop customer-centric solutions, policies and services that result in financial services that generate good customer outcomes.

What have we learned so far about consumer risks in digital finance?

Consumer protection efforts have struggled to keep track of a fast-evolving DFS market where bad practices grow faster than the increase in DFS usage and faster than the remedies. Findex 2021 uncovered concerning insights around potential users’ lack of trust in financial systems and existing users’ financial worry. CGAP has identified dozens of consumer risks facing DFS users around the world, and emerging evidence suggests women are more at risk than men. Digital consumer credit is of particular concern, according to CGAP’s research, which revealed troubling issues with transparency, fraud, data misuse and more. Also, with more people creating digital footprints and with financial services providers using these data trails to build their customer base and to develop new products, people in low-income countries are exposed to risks, such as data abuse and cybercrime.

Why is effective consumer protection rooted in building a responsible digital finance ecosystem?

Despite all the progress made in the past few years in the consumer protection space, the rapid digitization of financial services, the arrival of many new types of providers, the limited financial and digital literacy of consumers, and loopholes in the regulatory and supervisory frameworks require a more holistic approach. Consumers, DFS providers, policy makers, standard-setters, consumer associations, and market facilitators (such as funders) together constitute a digital finance ecosystem. They all play key roles in securing a responsible ecosystem by interacting in ways that protects and ensures positive outcomes for customers using financial services, especially poor, underserved, and vulnerable consumers. While a responsible digital finance ecosystem requires a multifaceted infrastructure and policy framework to ensure its success, CGAP calls for action around three primary conditions (3 Cs) that we believe are necessary to building this ecosystem: a Customer-centric approach, where all actors have the necessary Capability to ensure customers are served responsibly, facilitated through structured Collaboration mechanisms.  

In addition to the 3 Cs, CGAP aims to explore different kinds of solutions leveraged by different actors within the ecosystem that aim to address key stages of consumer risk management, such as prevention, identification, and mitigation. While many new tools are available to assess the situation and mitigate consumer risks in digital finance—and notable progress has been made by all the key actors—we believe we need to connect all the dots, rather than continue with a piecemeal approach. We began piloting this approach in the region of West African Economic and Monetary Union (WAEMU)  through a Digital Finance Consumer Protection Lab that has started work in Côte d'Ivoire, Senegal and Burkina Faso. 

How can we foster a responsible financial ecosystem and monitor progress?

Ensuring the success of a responsible digital finance ecosystem entails integrating consumer voices into financial regulations, particularly the voices of vulnerable consumers, which can be accomplished by engaging consumers associations, analyzing social media, and setting up consumer panels within regulatory authorities. It also entails new approaches to data privacy and protection in addition to monitoring collective progress and measuring success. A customer outcomes-based approach is emerging as promising consumer protection frameworks where the regulatory focus shifts from provider compliance with prescriptive check-the-box rules to customer results or outcomes achieved through provider actions.  

CGAP works with financial authorities to help them understand the risks generated by service providers through market monitoring tools and collaborates with the providers on monitoring customer outcomes throughout the customer's financial journey. We also work with DFS providers who have a critical role to play—either individually or through industry associations—to adopt customer-centric business models that create more value for customers while improving their bottom line. Our collaborations with several international funders as well as international partners, such as AFI, FinCoNet, SPTF, GSMA, Toronto Centre, Dvara Holdings, and the Responsible Finance Forum, are essential to enhancing knowledge and supporting capacity building in the ecosystem.   

Further Resources


In this World Consumer Rights Day blog, we discuss the ways consumer associations can make digital financial services more responsible, especially for women and vulnerable customers.

Recent qualitative research in Uganda conducted by CGAP and MicroSave Consulting (MSC) identified good practices for responsible agents in safeguarding their customers’ data and the role that providers can play in promoting these practices.

Emerging evidence shows digital finance consumer risks are increasing and, if not mitigated, could undermine users’ trust. We highlight risks that affect digital financial services users in Sub-Saharan Africa and measures to mitigate them.

As big techs and other platforms ramp up their financial service offerings in emerging markets, regulators can look at developments in advanced economies to get a glimpse into the data protection issues they will need to consider.

For digital financial services providers looking for a competitive edge in developing economies, better data privacy features could be the answer, according to CGAP research from India and Kenya.

Last year, news reports emerged of aggressive debt collection amid India's digital credit boom. New research shows that early warning signs on social media preceded the reports, highlighting the value of social media for consumer protection.

CGAP and Accenture LLP (Accenture) launched a pilot to help Peruvian authorities assess their consumer listening mechanisms and determine the necessary steps to design an integrated financial consumer protection platform.

For financial inclusion to work for the poor, it’s time to move beyond consumer protection frameworks that are more about protecting providers than customers.

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