Paving the Way for Responsible Digital Finance

Digital finance is quickly changing the financial services industry and enabling millions of unbanked people from around the world to build financial assets, grow their businesses, and improve their lives. Yet the expanded access made possible by digital delivery—whether through mobile phones, prepaid cards, point of sale devices, or other means—also brings new risks to the industry, especially given the short innovation cycles and the rapid pace of growth. These risks are all the more acute for previously un- and under-banked customers, many of whom may not be familiar with financial services or have little experience with digital technology.

The speed, affordability, and accessibility of digital financial services are increasing financial inclusion in even the most rural communities around the globe. When social welfare payments from government are delivered digitally, they can provide new onramps for the poorest and most vulnerable to financial inclusion. And the privacy made possible by digitally delivered financial services can be particularly important to women. So there is no doubt that digital finance can be a powerful means to bring real benefits to a wide range of people.

Yet the electronic nature of the transactions can bring transparency challenges when terms are not adequately disclosed. Identities can be stolen when customers share their PINs to seek help navigating complex customer technology interfaces. Customers may not know where to seek recourse for a problem when something goes wrong without the familiarity of dealing with a person. These are just some of the issues that can arise for customers that are unique in a digital environment.

So how can these digital financial services be provided responsibly—and sustainably? What approaches have been successful in designing and delivering digital financial services that meet customers’ needs, warrant their trust, and bring them real benefits? What are the responsibilities of the providers—be they banks, mobile network operators, card companies, or others? What is incumbent upon the regulators? Whose role is it to ensure that customers have adequate financial capability to make sound decisions regarding the use and uptake of financial services? And importantly, what is required at a broader ecosystem level to ensure that these responsibilities are complementary and are focused on a common understanding of the key risks facing customers?

These are just the questions that are being asked—and will start to be answered—at the Fifth Annual Responsible Finance Forum (RFF V), being held on August 28-29, 2014, in Perth, Australia. The two-day event is convening government, development, and private sector leaders to discuss how digital financial services can be delivered in a transparent, fair, and safe way. Organizers include the Better Than Cash Alliance, BMZ/GIZ, CGAP, IFC, the United Nations Capital Development Fund (UNCDF), and the World Bank, with support from the Bill and Melinda Gates Foundation, The MasterCard Foundation, and the Netherlands Ministry of Foreign Affairs.

The Better Than Cash Alliance and UNCDF see RFF V as particularly important because it is the first time such diverse stakeholders are coming together to focus on the topic of responsible digital finance. And these leaders are bringing their insights and experiences from all over the world, including from Australia, Brazil, Ghana, India, the Pacific Islands, Peru, the Philippines, and Tanzania.

During the two-day working forum, leaders will seek to:

• Identify consumer risks that arise when financial services are delivered digitally;
• Explore the approaches to manage these risks;
• Examine the role that regulation, industry, and financial capability can play in minimizing the risks to consumers while strengthening the business case; and
• Identify collective action and specific next steps to advance responsible digital finance.

Participants at the event will seek to better understand what distinct customer risks arise with digital delivery of services related to promoting transparency, preventing fraud, safeguarding client funds, implementing effective recourse, and ensuring data privacy and protection, and will take a close look at designing and delivering suitable products.

We invite everyone—those coming and those who cannot attend—to join the conversation before, during, and after the event through the Twitter hashtag #2014RFF. We look forward to sharing the key insights and outcomes of RFF V in early September, here on the Better Than Cash Alliance blog.