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Policy paper

Doing Digital Finance Right: The case for stronger mitigation of customer risks

June 2015 — By Katharine McKee, Michelle Kaffenberger, Jamie Zimmerman

Low-income consumers stand to benefit greatly from more accessible and affordable digital financial services (DFS) offerings. Indeed, evidence from consumer research in 16 markets analyzed for this paper indicates that customers highly value and benefit from many basic DFS. However, many users are not only new to both formal finance and technology, they also live precarious financial lives that allow little room for error. Enabling users to understand and mitigate risks and minimize potential losses when using these new products and services will be critical for DFS to meet users’ expectations and needs and, in turn, achieve sustained financial inclusion.

Mitigation of customer risks is also important for financial service providers (FSPs) and the broader DFS ecosystem. Private investments will not pay off unless mass-market consumers come to trust the services and respond with high uptake and sustained, active use of diverse DFS. This has, so far, not proven easy: only one-third of registered mobile money users worldwide are active. Moreover, in some markets, use of over-the-counter (OTC) services dominates even where users can register for mobile money wallets (hereafter referred to as wallets) that offer more value-added features and services.