This report highlights the importance of consumer representation in financial sector regulatory decisions, especially in low and middle-income countries. It introduces a fair digital finance index from the consumer perspective, based on findings from the Consumers International fair digital finance survey and supplemented by secondary data. By directly measuring consumer viewpoints through consumer bodies across various indicators, the report aims to track progress over time and identify key areas for improvement. The fair digital finance index consists of four pillars, each encompassing several elements. While the findings reveal mixed results across these pillars, there's overall progress indicated by the index score, which increased from 41 in 2022 to 48 in 2023.
Potential explanations for the shift are discussed:
- Pillar 1 - Protection needs: Sharp awareness of risk, low ability to respond.
The consumer protection pillar slightly improves, focusing on digital finance risks and literacy. Concerns remain regarding fraud, inadequate redress, and data misuse, with a notable rise in perceived redress risks. Major fraud risks include fake online shopping and phishing scams. Improved consumer literacy contributes to the overall index score increase. - Pillar 2 - Protection framework: Progress on paper, but more engagement needed.
Pillar 2 scores higher, indicating progress in consumer protection frameworks and engagement with consumer bodies. While improvements are noted, gaps remain, including the absence of national data protection laws and limited consumer body involvement in policy-making. - Pillar 3 - Playing field: Need for greater inclusivity, better lived experience.
Pillar 3 covers digital financial services infrastructure, inclusivity for vulnerable groups, and consumers' experience using digital finance. Despite strong infrastructure, inclusivity and usage among vulnerable groups are low due to barriers like limited device access. Actual usage for daily needs is also low, and trust levels are disappointing due to issues like inadequate complaint channels, poor customer service, and fee transparency. - Pillar 4 - Ultimate user outcomes: Financial well-being, resilience and fair customer outcomes remain aspirational goals.
Pillar 4 covers financial health, fair customer outcomes, and sustainability: Financial health remains poor, with concerns about meeting various obligations, especially medical costs and emergency funding. Few countries report positive consumer outcomes, including for vulnerable groups, according to the CGAP framework. Sustainability efforts, particularly in response to climate change, are still limited, with few reported initiatives.
The progress of the overall index could be misleading on its own. The results show some areas for action by the financial sector and regulators that require collaboration between regulators, providers and consumer organizations. The goal of promoting a responsible digital financial ecosystem, improving financial literacy and using inclusion for climate resilience should continue to be pursued.