SPECIAL FEATURE: How to set up responsible digital financial services: opening of the European Microfinance Week

In the opening plenary of European Microfinance Week, where more than 500 participants are now meeting in person and online, Tidhar Wald of the United Nations Better Than Cash Alliance noted that over a billion more people around the world have achieved financial inclusion over the past decade. While this has helped some improve their livelihoods, many have accessed financial services through digital services, which carry different risks than in-person services. Data protection is an obvious example, as more and more customer data is digitized and fraud is on the rise. Other risks, although well known to in-person financial service providers, require 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 redress in the event of complaints are also very different for DFS.

Amelia Greenberg of the Social Performance Task Force raised the question of how to go beyond a user clicking “I accept” when using a new service without actually reading their rights and responsibilities. . Examples include translating teaching materials into local languages, simplifying the wording used in these materials, and making it easy for users to ask any questions they might have.

CGAP’s Eric Duflos cited the latest Global Findex database, in which the World Bank has incorporated consumer protection for the first time. Twenty percent of users worldwide said they were charged expected charges. In India, 35% of respondents have access to financial services but choose not to use them, half of them due to a lack of trust in the services. To address this, Duflos argued that investors should do more to incentivize financial service providers (FSPs) to strengthen consumer protections.

Demet Canakci of the Toronto Center noted that peer-to-peer exchange between regulators and supervisors can help them take action to reduce fraud, increase consumer protection, and thereby build user confidence in financial services. She also noted the importance of interoperability and the fact that 86% of central banks surveyed are considering instituting a digital currency. Duflos cited the example of a regulator in India that sought to learn more about emerging threats as quickly as possible and used artificial intelligence to analyze complaints about DFS that social media users post online. line.

FMO’s Jeroen Harteveld cited the contrast between new DFS vendors and some existing FSPs who are reluctant to digitize. He cited young people in Kenya and Nigeria who are launching DFS providers that serve as many people in one year as traditional FSPs might not be able to reach with 10 years of development. When FMO staff visit some of these traditional FSPs to discuss digitization, Harteveld says, “It’s not an easy conversion! »

Ms. Greenberg argued that the voice of the customer is often overlooked by DFS providers. Too many suppliers are copying each other rather than finding a customer problem to solve. To identify these issues, DFS providers need to talk to a wide range of potential clients – men and women, young and old, urban and rural. For example, is the barrier queuing too long, are branches too far from users, is the cost of services too high, or lack of trust? Once the DFS vendor knows the common barriers, they are in a much better position to create a useful product.

This feature is part of a sponsored series on European Microfinance Week, taking place in Luxembourg and online until November 18. MicroCapital has been contracted to report on the conference every year since 2012.

Additional Resources

European Microfinance Week 2022

European Microfinance Award

MicroCapital coverage of European Microfinance Week since 2012, including the European Microfinance Award

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