> Posted by Sola Salako Ajulo, President and Founder, Consumer Advocacy Foundation of Nigeria (CAFON)
In fewer than twenty years, our concept of a market has evolved from a strictly physical location of commercial activity, to also include intangible, real-time e-locations. Research shows that up to 12 percent of all global commercial transactions now take place on the Internet – within and between countries, often across multiple currencies, and with little or no physical contact between seller and consumer.
Historically, consumer protection laws and guidelines attempted to protect consumers within physical locations and through the sovereignty of national policies. Our new worldwide market transcends physical and legal borders and confirms the maxim that the world has become a global village. It’s imperative that our consumer protection laws evolve as well.
Nigeria offers a case in point. E-commerce, enabled by electronic financial instruments, has become a reality. According to Babatunde Irukera, Director General of the Consumer Protection Council in Nigeria, research by the Council shows 67 percent of consumers in Nigeria between ages 18-40 now shop online. Online markets are increasingly important to commercial activity in the country.
Consumer protection regulators in Nigeria and elsewhere appear to be playing catch-up as the issues of online marketplaces often transcend the capacity of existing laws and regulations. The unique challenges to regulation in this space include the ubiquitous nature of many of these e-commerce platforms and the multiple sectors involved. Issues of exploitation, unfair trade practices, and sub-standard products and services now occur at breathtakingly alarming rates online. On a daily basis, consumers fall victim to issues like lack of grievance redressal, misleading advertisements, outright frauds and scams, and poor customer care with little or no regulation or intervention from regulatory agencies. Consumers International research shows that 49 percent of Internet users in Nigeria claim they are wary of e-transactions. Though a few of the more prominent online merchants in Nigeria have shown initiative by establishing their own consumer protection guidelines and structures, they are not adequately supervised by the government.
Another type of digital marketplace worth noting is informal platforms for personalized selling. Many individuals offer goods and services for sale on person-to-person platforms like WhatsApp, Instagram, Facebook, and so on. This form of e-commerce is even more challenging to regulate because it is a private transaction between two individuals. Yet the rate of fraud and scams is higher in these instances.
While comprehensive legislation might take years to materialize, the government needs to explore options that can immediately improve the standard and safety of online transactions for consumers. Here are a few options aside from regulation that should be considered.
Increased consumer education efforts could empower users with better information on the risks of e-transactions, how to identify scams and frauds, and how to insist on redress if their rights are violated. Consumer education is particularly important for person-to-person online marketplaces where it is often more difficult to verify the quality of the merchant and/or their products. Education can help consumers make informed choices on whether to take the risk of buying goods and services from individuals with weaker verification mechanisms.
Government can also work with providers to encourage peer-to-peer checks or self-regulation. When online marketplaces agree to sign up for a relevant code of conduct, digital markets become safer for consumers, which in turn builds trust and improves consumer patronage.
A good example of sector self regulation is found in the work of the Smart Campaign, and its experience is especially relevant for online platforms, such Alibaba in China and Amazon in the U.S. which extend credit based on how individual merchants use their platforms. While such platforms provide much needed options to conventional banking, many consumers are wary of patronizing their services because of a lack of trust. If such providers were to become Smart Certified, for instance, consumer confidence should improve. Government needs to encourage independent and credible sector self-regulating institutions, like the Smart Campaign, to improve consumer confidence in digital marketplaces.
Beyond these consumer protection concerns, when discussing online marketplaces it’s important to remember that there is a lack of fair access to the Internet for millions of consumers around the world. While the Internet is fast becoming an essential tool in developed countries, nations like Nigeria are still struggling to make it adequately available for the majority of consumers. With high prices for data access, it becomes a privilege reserved for those who will or can pay. This challenge becomes even more critical as essential services of governments, utility companies, and financial institutions become increasingly digitized.
This review of issues is definitely not exhaustive, but it shows the enormity of action required to keep consumers safe as they conduct commercial and banking transactions on digital platforms.
Distrust of digital marketplaces is not just about consumer protection, it has implications for economic growth. Nigeria is just one of many countries that must take bold steps to make digital marketplaces safer. Increasingly, these marketplaces will be a vital key to the globalization of local products and services.
A different version of this post was published in This Day.
Sola Salako Ajulo is a Consumer Rights and Protection Advocate and President/Founder of Consumer Advocacy Foundation of Nigeria (CAFON).
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