Digital finance is now widely recognized as one of the most powerful tools to reach financial inclusion targets at low cost, to create opportunities for people in remote communities, to provide them with the financial tools and services to grow their businesses, and to enable them to channel more household resources into education, health, and other key household expenses and investments.
As the market for digital finance expands, it is important to consider the consequences, risks and benefits of transitioning to such products in a manner that reaps benefits for the customers, especially the poor. While there is a great opportunity to leverage digital technology, there are a number of challenges to be considered. Such challenges include increasing fraud, process and distribution risks in managing innovative and branchless products, liability for mistaken and unauthorized payments, the formation of electronic contracts and disclosures, low financial and technology awareness amongst customers and inadequate training of agents. These challenges, if not met, may become barriers to financial inclusion per se as they lead to a lack of trust in the use of digital financial services, resulting in low product uptake and rising costs for businesses and customers. The Fifth Responsible Finance Forum held in Perth, Australia on 28-29 August aimed at filling the dialogue and evidence gap on consumer risks to digital finance. This event was particularly exciting since it is the first time that the various stakeholders—government, private sector, and consumer capability community (see Annex 2 for forum participants list)—came together to discuss what it means to ensure that digital financial services are delivered responsibly. This is particularly crucial as digital finance lives at the intersection of so many different industries and regulatory authorities. It is not enough to ensure that one set of players has practices in place to ensure that DFS is done responsibly. Because there are so many different players in the digital finance ecosystem, it is essential that there is a common understanding of what responsible digital finance looks like when implemented—and with all players. The forum was structured to facilitate an open and collaborative dialogue among many different players in the digital finance ecosystem.
The objectives of the Fifth Responsible Finance Forum on Responsible Digital Finance were to:
- Identify consumer risks that arise when financial services are delivered digitally;
- Explore the approaches to manage these risks;
- Examine the role that regulatory, industry and financial capability interventions/measures can play in minimizing the risks to consumers while maintaining the business case;
- Identify collective action and specific next steps to advance responsible digital finance;
- Launch the RFF Community of Practice Virtual Platform.
With support from the Bill and Melinda Gates Foundation, The MasterCard Foundation, and the Netherlands Ministry of Foreign Affairs, the RFF V was organized and further supported by the Better Than Cash Alliance, Consultative Group to Assist the Poor (CGAP), the German Federal Ministry for Economic Cooperation and Development (BMZ/GIZ), the International Finance Corporation (IFC), the United Nations Capital Development Fund (UNCDF) and the World Bank.
This report highlights the nature and content of an engaging and open two-day discussion on the current state and collective vision for responsible digital finance globally (see Annex 1 for forum agenda).