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. This Focus Note explores consumer risk in digital finance—particularly through the lens of lower-income and less-experienced consumers—by asking three related questions:
- What risks do consumers and customers perceive and experience when using DFS?
- What are the consequences of those risks for consumers, providers, and financial inclusion?
- How can those risks be addressed?
The paper reviews available evidence on DFS consumers’ risk perceptions and experiences, focusing on risks that can cause financial loss or other harm. Its main goal is to advance responsible digital finance by helping the diverse industry actors engaged in DFS delivery better understand which problems are most important from the consumer perspective and motivating them to strengthen risk mitigation practices. The paper analyzes consumer research findings from 16 countries, including surveys and qualitative research in nine countries, four country case studies, and other research. It also presents findings from an initial landscaping study of relevant risk mitigation efforts by FSPs, as well as observed consumer protection regulatory and supervision measures. The analysis finds seven key consumer risk areas. While many customers report high levels of satisfaction with DFS, accumulating evidence shows that consumers also perceive or encounter common problems that can open them up to risks including financial loss. These include the following:
- Inability to transact due to network/service downtime
- Insufficient agent liquidity or float, which also affects ability to transact
- User interfaces that many find complex and confusing
- Poor customer recourse
- Nontransparent fees and other terms
- Fraud that targets customers
- Inadequate data privacy and protection