Protecting Customers
To have impact at the base of the pyramid, measures taken by regulators and formal financial service providers must be grounded in an understanding of the reality of low-income consumers’ financial behaviors and experiences and the specific opportunities and risks they face in fast‑moving markets.
Consumer protection rules and actions by providers to deliver responsible products in a responsible fashion are essential for financial inclusion. If effective, they can ensure transparency and fair treatment for current users of formal financial services; they can also instill overall confidence among potential consumers regarding formal financial services and providers. Most policy makers and regulators in emerging markets and developing economies now view effective consumer protection as an essential enabler of financial inclusion.
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Important Objectives of Consumer Protection Include the Following:
- Transparency
Consumers understand the prices, terms and conditions, and risks associated with use of financial services, so they can make good choices and use products to their benefit. - Fair treatment
The financial products on offer are not deceptive or unsafe, and financial service providers ensure that product features, their policies, and the conduct of their employees and agents are ethical, not abusive, and respect consumers’ rights. - Risk mitigation
Financial service providers take reasonable steps to identify, monitor, and mitigate customer risks such as fraud or inadequate handling of customer data, which evolve with innovations in products and business models and with the entry of new market actors. - Effective recourse
When customers have queries, complaints, or other problems, financial service providers have accessible and effective systems in place to address them.
Strategies and measures to achieve effective consumer protection and responsible financial markets fall into these main categories: Governments set out and enforce the rules of the game to safeguard financial consumers’ welfare and ensure the above objectives through consumer protection regulation and supervision. Retail financial service providers contribute to responsible market development by offering appropriate services, respecting consumer rights, and observing business conduct and technical service standards. Consumers choose providers and products carefully, taking action to self-protect such as handling personal identification numbers carefully and meeting their obligations.
CGAP’s Protecting Customers Initiative aims to develop effective, behaviorally informed consumer protection strategies that are practical and cost-effective. These strategies must respond to rapid innovations in financial inclusion products, channels, and business models.
FY2015 Highlights/Outputs
“Doing Digital Finance Right: The Case for Stronger Mitigation of Customer Risks” (June 2015) (with associated CGAP-commissioned country cases on emerging consumer risks in 16 markets) was published and launched during a one-day public and private event. In an invitation-only workshop CGAP discussed with 45 practitioners the role and priorities of key stakeholder groups involved in digital financial services. Findings were also presented to partners and stakeholders in Kenya, China, Tanzania and Brazil, as well as at the 2015 SEEP network annual conference. View Publication
CGAP played a lead technical role in organizing the global Responsible Finance Forum on digital finance, which convened leading regulators, industry actors, consumer advocates and researchers to identify practical next steps to address the consumer risks and action agenda identified in the Focus Note. To advance practice in specific risk areas, CGAP designed fraud mitigation training for providers and regulators and researched emerging good practices in digital recourse, credit delivery, and data privacy.
Published a Technical Guide for Mystery Shopping in financial services that provides design guidance and templates based on CGAP’s work designing mystery shopping experiments for financial inclusion in more than a half dozen markets to date. View Publication
Guided and supported the World Food Programme in Kenya in developing a “Toolkit for Behavioural Programme Monitoring in Digital Cash Transfer Programmes” to conduct ongoing monitoring of recipients’ experiences and payment service providers’ behavior. The toolkit includes a technical guideline for research design and implementation, sample tools, and two case studies where program adjustments have improved recipients’ experience and reduced the risks of fraud, discriminatory treatment and insufficient data protection.