Digital Financial Services: 14 actions to increase inclusion and protection

Written By Alexis Ditkowsky
 

As new and underserved groups start using Digital Financial Services (DFS), each sector plays a vital role in creating a web of inclusion, accountability and protection.

In context

Account ownership and use has increased over the years, with mobile money becoming an important driver of financial inclusion. Despite the advancements in achieving equal access, the gender gap in ownership and usage still persists.

Consumer protection plays a key role in reducing the gender gap by creating safeguards that empower consumers while building trust in the formal financial system.

Regulators, the private sector, civil society, and development partners can take action — individually and together — that help customers take advantage of the opportunities of Digital Financial Services while minimizing potential harm.

Roles and opportunities

Policymakers and regulators

Role

  • Create, implement, monitor and supervise policies and regulations that include and protect women, low-income customers, and underserved groups (among others)

Actions to increase inclusion and protection

  • Collect, analyse, and use sex-disaggregated data

    • What are the constraints that women and underserved groups face when it comes accessing and using financial services? Regulators and policymakers won’t know unless they look at the specific experiences of different groups. Data can provide insights they might otherwise be missing.

    • For example, since 2012, Mexico has been using sex-disaggregated data to redesign financial products and services. This approach has allowed Mexico to make significant strides towards women’s financial inclusion, especially among low-income groups.

  • Increase resources for financial supervision and for awareness campaigns on consumer risks, recourse mechanisms, financial literacy, and digital skills

    • As new DFS products come to market, low-income and rural women are more exposed to risks given their low levels of digital literacy and financial skills. As CGAP highlighted in its analysis of DFS consumer risks, some of the risks include mobile app fraud, SIM swap fraud and data breaches in addition to long-standing risks like agent fraud, social engineering scams, and Ponzi schemes, which have become more complex. New consumer risks like algorithmic bias, synthetic identity fraud and authorized push payment scams have also emerged.

    • Strengthening supervision for financial consumer protection can help ensure that policies and regulations intended to protect consumers work as designed and can help ensure regulators keep up with the new threats facing consumers.

  • Include consumer voices in the policy design and decision-making process

    • In the process of gazetting the Financial Consumer Protection Guidelines in Sierra Leone, the Bank of Sierra Leone with support from UNCDF consulted on a regular basis with civil society groups, which led to the inclusion of a specific paragraph in the Guidelines related to the protection of vulnerable customers.

  • Increase representation of women in decision-making positions

  • Include women’s perspective, experience, and needs when drafting strategies, policies, and interventions

    • For example, to spur women’s financial inclusion, the government of Rwanda collects and uses sex-disaggregated supply and demand-side data, establishes partnerships with diverse stakeholders, and leverages high-level political commitments and champions. This approach has also proven beneficial in the private sector for creating the business case for creating financial products and services tailored to women.

Private sector

Role

  • Listen to customers and respond to their needs and aspirations

  • Develop internal policies and procedures that align with regulations with regards to disclosure, transparency, fair access, privacy and data protection, re-dress mechanism and guarantee schemes, and insolvency

Actions to increase inclusion and protection

  • Design products and services that address the needs of female and low-income customers (and potential customers)

    • FinDev Gateway’s guide “Incorporating Gender-intelligent Design in Financial Services” provides resources on how to design financial services that are targeted to women and create value for them.

    • CGAP’s case study on TymeBank, a fully digital South African bank that primarily serves low-income rural customers, highlights the bank’s approach, their product offerings, and the impact on customers that might otherwise be underserved or unable to access financial services

    • Specific opportunities for reaching underserved segments include targeting by:

      • Gender

        • Ignoring gender norms during the design process can limit the effectiveness of financial inclusion interventions. In fact, taking a “gender-neutral” approach can lead to negative impacts on women. Read more from CGAP.

      • Age (e.g., youth, working adults, the elderly)

      • Profession (e.g., rural vs. urban workers)

      • Social, cultural or religious norms (e.g., financial products that comply with Islamic law, services adapted to women’s daily chores)  

      • Safety and security concerns 

        • For example, Vodafone Idea India learned that female customers were generally concerned about safety. Mobile phone-related safety concerns included unsolicited harassing phone calls and text messages, online harassment, mobile theft, and feeling unsafe or uncomfortable when purchasing or topping up devices. In response to these concerns, in 2018 Vodafone launched “Sakhi,” a service which includes an emergency alert, an emergency balance and a private recharge.

      • Challenges to accessing products and services

        • Lower the barriers to entry for hard-to-reach customers (e.g., capital requirements, KYC requirements, high costs)

        • Deliver products and services through channels that reach the desired end user (e.g., female agent networks)

        • For example, in early 2021 SHE Investments, a social enterprise based in Cambodia, launched KOTRA Riel, an app to help female business owners in Cambodia access financing and grow their businesses. The app is designed for users with low financial literacy and enables users to export transaction history when applying for loans.

  • Be transparent about fees

    • Financial service providers should be transparent when disclosing rates or fees, including terms and conditions for opening and using an account. Kenya has made great strides in promoting fee disclosure among DFS providers, and its example can provide ideas for other markets. Read more from CGAP.

  • Take the perspective of the end user when providing customer service and support

    • Read more from the Center for Financial Inclusion about how to see financial services through the eyes of customers and how financial service providers can provide a positive experience to customers.

  • Increase representation of women in decision-making positions

Consumer advocates, champions and civil society

Role

  • Lift up the voices of consumers — especially female consumers — while pushing the government and the private sector to address consumer needs and reduce harmful practices

Actions to increase inclusion and protection

  • Represent consumers and excluded groups’ needs in discussions with policymakers, regulators and the private sector and hold government and private sector accountable

    • For example, UNCDF created an advisory panel with more than 40 women and men in the CEMAC region to share expectations, concerns and recommendations for women financial inclusion. In July 2022, UNCDF published their report, highlighting 23 recommendations, eight of which focus on consumer protection. UNCDF will work closely with Consumers International to support the advisory panel in implementing these recommendations.

  • Educate consumers on financial education and digital literacy through awareness campaigns on how to mitigate or avoid risks and how to activate recourse mechanisms

  • Build meaningful partnerships with regulators and the private sector, especially during the design and implementation phases of Financial Consumer Protection frameworks 

Development partners 

Role

  • Provide neutral third-party perspective, convening power, and resources 

Actions to increase inclusion and protection

  • Create coalitions to support the policy change process and increase the chances of more customer-centric outcomes

    • For example, in 2022 UNCDF launched with Women’s World Banking the Women’s Digital Financial Inclusion (WDFI) Advocacy Hub. The Hub, with initial pilot programs in Ethiopia and Indonesia, promotes participation in WDFI policy change across sectors and supports the creation of gender-inclusive digital economies.

  • Provide capacity-building and technical assistance  

    • Trainings and scholarships provide opportunities to develop the technical knowledge and specific skills around the regulatory enablers of DFS, Fintech, and gender. They can also emphasize the importance of using sex-disaggregated data in policy-making.

    • Technical assistance can come at different stages of the policy-making process. At the design stage, technical assistance providers can, for example, identify opportunities to include specific and inclusive language in draft policy and regulation. At the implementation stage, technical assistance can focus on monitoring the impact on end-users and setting up the necessary supervisory structures.

Next steps 

Each sector can take specific, practical steps to meet the needs of women and underserved customers. Forefronting gender while focusing on consumer protection can help ensure that everyone has the opportunity participate — safely — in the digital economy.

Authors

Sophie Falsini

Friederike Rühmann

Alexis Ditkowsky

 
Alexis Ditkowsky
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