At the opening plenary of European Microfinance Week, where over 500 attendees are gathering now in-person and online, Tidhar Wald of the UN’s Better Than Cash Alliance noted that over 1 billion more people worldwide have achieved financial inclusion over the past decade. While this has helped some to boost their livelihoods, many have accessed financial services via digital services, which carry different risks than in-person services. Data protection is an obvious example, as more client data is being digitized, and fraud is on the rise. Other risks, even though well-known to providers of in-person financial services, require different risk management strategies in the context of digital financial services (DFS), such as over-indebtedness. Strategies to steer users away from inappropriate products and give them access to recourse in case of complaints also are quite different for DFS.
Amelia Greenberg of the Social Performance Task Force brought up the question of how to get beyond a user clicking “I Agree” upon using a new service without actually reading about her rights and responsibilities. Examples include translating educational materials into local languages, simplifying the wording used in these documents and making it easy for users to ask any questions they may have.
Eric Duflos of CGAP cited the latest Global Findex Database, into which the World Bank incorporated consumer protection for the first time. Twenty percent of users worldwide reported being charged an unexpected fee. In India, 35 percent of those surveyed have access to financial services but choose not to use them – half of these due to lack of trust in the services. To address this, Mr Duflos argued that investors should do more to push financial services providers (FSPs) to boost consumer protection.
Demet Canakci of the Toronto Centre noted that peer exchange among regulatory and supervisory authorities can help them act to reduce fraud, increase consumer protection and thus boost users’ trust in financial services. She also noted the importance of interoperability and the fact that 86 percent of central banks surveyed are considering instituting a digital currency. Mr Duflos cited an example of a regulator in India that was looking to learn about emerging threats as fast as possible and used artificial intelligence to analyze complaints about DFS that social media users are posting online.
Jeroen Harteveld of FMO cited the contrast between new DFS providers and some existing FSPs that are reluctant to digitize. Young people in Kenya and Nigeria launching DFS providers that serve as many people in a year as traditional FSPs might not be able to reach after 10 years of growth. When FMO staff members go to some of these traditional FSPs to discuss digitalization, Mr Harteveld says, “This is not an easy conversion to have!”
Ms Greenberg argued that the voice of the customer is often neglected by DFS providers. Too many providers are copying each other rather than finding a customer problem to solve. To identify these problems, DFS providers need to talk to a wide range of potential customers – male and female, young and old, and urban and rural. For example, is the barrier waiting in line too long, branch locations being too far from users, the cost of services bring too high or lack of trust? Once the DFS provider knows the common barriers, it is much better poised to create a useful product.
This feature is part of a sponsored series on European Microfinance Week, which is taking place in Luxembourg and online through November 18. MicroCapital has been engaged to report on the conference each year since 2012.
Additional Resources
European Microfinance Week 2022
https://emw2022.eu
European Microfinance Award
https://www.european-microfinance-award.com
MicroCapital coverage of European Microfinance Week since 2012, including the European Microfinance Award
https://www.microcapital.org/category/european-microfinance-week/
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