New technologies are rapidly changing the face of finance, breaking up financial services into smaller components digitally delivered by new players. Large retail chains, electronic money issuers, fintechs, and big tech and social media platforms such as WeChat, Apple Pay and Google are entering the financial arena, leveraging the vast amounts of data they harvest from consumers’ online purchases, chat conversations or Facebook posts and combining them to deliver new financial services.
While these innovations offer great potential for expanding financial services to larger numbers of people especially the financially excluded, they raise new questions for policy making in an environment that was largely built for banks. Should the newcomers be regulated and supervised and by whom? What rules on market competition apply? How should data privacy be managed? Where is the balance between fostering innovation and protecting consumers? What risks are posed to market stability?
As the financial services industry becomes increasingly modular, automated, disaggregated and transnational, CGAP believes that policy makers need a new approach. Successful financial inclusion requires a policy and regulatory framework that fosters responsible, inclusive financial systems and one that has the flexibility to adapt to rapid changes. Consumers must view the system as fair and stable, protecting their interests. Businesses must know there is a clear set of rules balancing innovation and stability while fostering appropriate competition and cooperation.
Customer Outcomes-Based Approach to Consumer Protection: A Guide to Measuring OutcomesBased on a pilot involving the Financial Sector Conduct Authority and five financial services providers (FSPs) in South Africa, this deck shares lessons on how financial supervisors and FSPs can measure customer outcomes, which reflect the experiences and results of a customer's access to and use of financial services.
The Evolution of the Nature and Scale of DFS Consumer Risks: A Review of EvidenceWhile digital financial services have delivered substantial financial inclusion benefits and unlocked life-changing opportunities for consumers, CGAP’s latest research finds that they have exacerbated existing consumer risks and continue to introduce new and ever-evolving risks—some outgrowing consumer adoption rates.
Digital Banks: How Can They be Regulated to Deepen Financial Inclusion?
This reading deck describes three regulatory approaches used by policy-makers to regulate digital banks. It has a focus on harnessing the potential of digital banks to bring welcome competition and innovation to the banking sector and advance financial inclusion. It will help policy makers...