Articles

Digital Financial Services: Nature and Scale of Consumer Risks

Photo for CGAP by Temilade Adelaja via Communication for Development Ltd.

While digital financial services have delivered substantial financial inclusion benefits and unlocked life-changing opportunities for consumers, CGAP’s latest research finds that they have exacerbated existing consumer risks and continue to introduce new and ever-evolving risks—some outgrowing consumer adoption rates. These risks undermine the delivery of financial services to underserved and low-income consumers, especially women, and are likely to erode consumer trust in digital financial services.

There is an urgent need for proactive measures that maintain customer trust in DFS and ensure positive outcomes. Regulators and supervisors can develop systems to detect and monitor risks. They can also collect disaggregated data and develop coordination mechanisms to engage other sector regulators. Donors and investors can integrate consumer risk analysis in DFS project design. DFS providers can design customer-centric services that promote financial health and positive customer outcomes. Consumer groups can raise customer awareness and alert supervisors about risks while researchers can continue to fill the gaps this research has identified.

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