After launching and operating mobile money businesses in a number of markets over the last ten years, I was aware of the necessity of protecting consumers. I knew it was a regulatory priority alongside important issues such as AML and interoperability, but that’s where I left it: in the compliance box, while I waited to be told what to do. All the consumer protection literature I read gave me the same heavy feeling, laden as it is with long lists of requirements: protect customer’s funds from loss and fraud, ensure proper disclosure and transparency, keep their data private, make sure customers can have their complaints resolved, and so forth. These looked like the core business processes I needed to implement anyway, so I felt we would be in fine shape if we were ever to have a supervisory inspection. I never looked any deeper.
In the days when enabling regulation meant “Please leave us alone to grow,” I kept my head turned firmly in the direction of my business goals, growing a base of active customers to reach scale, and then taking advantage of those network effects. After all, financial inclusion was also an objective we shared with the regulator, and as long as we were growing they maintained a light touch.
Now that mobile money and other digital financial services (DFS) are more pervasive with millions of customers entering the formal financial world for the first time and graduating from using basic transactional accounts to more advanced services like digital credit, we are seeing more and more providers entering the market, eager to reap the opportunity for profits at the base of the economic pyramid. Increased competition, the fintech explosion, and exceptional growth in financial inclusion are all great, of course, but we must ensure that we are building an industry that is sustainable in the long term, and not harming vulnerable customers. Now is the time for consumer protection to take the DFS stage, front and center.
But how can we make sure that consumer protection in DFS will become like breathing: a natural, automatic, even unconscious act? How can we make it business as usual?
A one-size-fits-all approach does not work. What’s rational for one set of consumers or one type of product might not be for another. And over-regulation and enforcement can lead to product withdrawal if financial services providers feel the compliance cost is too high, leading to less choice and perhaps forced exclusion for the most vulnerable. While consumer protection regulations and market conduct supervision are an important part of the solution, they are just one part.
So where then is the opportunity for making consumer protection an automatic reflex instead of a compliance issue? I believe it can only exist in the markets themselves. It is naïve to think we can achieve perfect competition in financial services markets, however, I do believe we can educate DFS providers to realize that consumer protection goals and their own business goals are completely aligned.
When I was in-market chasing active customers, if you asked me what the most important condition was for success, I would answer without hesitation: it is trust. But the thing is, I could never define what trust truly was, and whether we had achieved it. I believed we built consumer trust with a great product and brand, honest marketing, and a visible, high-quality agent network. While this was not entirely wrong, as demonstrated by the fact that the mobile money businesses I was involved with are successful with millions of active customers, we did spend a lot of time going two steps forward and one step back, burning a lot of vulnerable customers along the way. There is too much collateral damage in the drive for financial inclusion.
I have spent the last year putting together a course for the Digital Frontiers Institute (DFI) on consumer protection in DFS. Looking back at my provider-side days, I wish I knew then what I know now. I should have dug a little deeper into consumer protection and realized just what it was: a robust definition of trust in DFS, and a way to achieve it! Perhaps then we might have only gone one step forward and no steps back, carefully building up a customer base that felt more in control, more informed, and more active. And perhaps we would have achieved much faster incremental growth rates. As an added benefit, it would have provided the perfect scope of work for every customer-centricity program I had to work on.
Consumer protection is no longer in my compliance box, it’s now firmly in the revenue sustainability driver box: a significant part of any DFS business strategy to drive scale and higher customer activity rates. To share what I have learnt about consumer protection and how it relates to DFS business strategies, DFI is offering my four-week online course on Consumer Protection as a Business Strategy, which will first be available in February 2018 and then again later in the year.
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