This article was written by Sasha Lünsche, Antonia Esser and Christine Hougaard. The original article was published by Cenfri. You can find the article here.

Digital financial services are transforming global financial service provision and access. Rapid developments in fintech are disrupting and transforming financial landscapes worldwide, leading to new partnerships, including those with traditional financial service providers, to better serve existing customers and reach previously underserved consumer segments.

However, the benefits of DFS are also accompanied by additional risks. The digital nature of these innovations leads to increased opportunities for and sophistication of cybersecurity and fraud-related risks. Regulatory grey areas and arbitrage further compound these challenges. Consequently, consumers of DFS are increasingly vulnerable to risk.

We recently contributed to Consumers International’s annual financial sector index, ‘Digital finance: The consumer experience in 2024‘, which analyses the state of digital financial services in low- and middle-income countries. In its second year, the report offers a unique perspective from the vantage point of consumers themselves. Four key insights stood out from the report:

• Fraud-related risks have remained steady since last year’s index, with 73% of consumer bodies perceiving fraud to be a significant challenge to consumers. This is largely driven by the prevalence of phishing scams and fake online shopping sellers, noted as the most prominent risks by 87% and 83% of bodies, respectively.
• Since the last index, the Financial Consumer Protection (FCP) framework pillar has experienced growth, propelled by recent data from the World Bank’s Financial Inclusion Country Partnership (FICP) survey. This growth is due to an increased number of Fair Digital Finance Accelerator countries implementing specific financial consumer protection frameworks, rising from 11% in 2017 to 56% in 2023. Additionally, there has been a notable increase in the adoption of laws and regulations that establish standards for alternative dispute resolution, climbing from 65% to 78% within the same timeframe.
• Despite positive instances of cooperation, there is cause for concern regarding consumer body engagement. The past year saw a notable increase in the proportion of consumer bodies that never engage with central banks and other financial regulators.
• While various aspects of the index have improved, ultimate consumer outcomes remain precarious across sampled countries. Notably, 57% of consumers in the index countries express concern about their ability to cover medical bills in case of a serious illness or accident. Worries related to insufficient funds for old age (47%), monthly expenses and bills (45%), and school fees or education (41%) follow closely.

These insights underscore the urgency of addressing consumer concerns to build a more inclusive and resilient digital finance ecosystem.

For those interested in delving deeper, the full report is available here: Digital Finance: The consumer experience in 2024.