This year’s celebration focused, among others , on the role of the consumer associations in ensuring access of consumers to safe , secure and stable digital financial products and services. The preparation and the events were overshadowed by the unprecedented increases in world oil prices that resulted in high retail oil prices across oil importing countries , including the Philippines and affected most of the consumers .
I am privileged to be one of the five ( 5 ) panelists in the agenda of Managing and Mitigating Consumer risks in digital finance, products and services . The latest research from the Consultative Group to Assist the Poor or CGAP, a unit under the World Bank, has identified over sixty (60) consumer risks in digital finance, some of which has increased in scale over the past few years. How can innovative solutions protect and empower consumers from these emerging risks. The session spotlight tools and approaches to address these risks from the research of CGAP as well as the Peruvian Financial regulator.
The panelists were three ( 3 ) from CGAP, the Deputy Superintendent of Market Conduct and Financial Inclusion from SBS Peru and myself .
There are four (4) major risks identified in the study ,namely , Fraud ,Data Misuse, lack of transparency and inadequate redress mechanism .
Fraud includes sim swap fraud and mobile app fraud. Data Misuse include algorithmic bias , and unfair practices like social sharing. Both fraud and data misuse are directly linked to cyber security . Lack of transparency include undisclosed fees and complex user interface . Inadequate redress mechanism include complex redress procedures and expensive complaints handling system .
There are two cross cutting risks types, namely agent related risks and network downtime . They share some elements with all the four broad type of risks.
The scale of digital finance consumer risks has increased in most cases. On a global , regional and country scale , fraud and data misuse has an overall increase in value or volume.
The research study show examples of digital finance consumer risk for low income women. Under fraud are Ponzi schemes and algorithmic bias under data misuse . It is complex user interface under lack of transparency and social norms/fewer female agents .
Women are more likely to suffer losses in a Ponzi scheme , according to a study in China. Due to skewed data, women are more likely to experience algorithmic discrimination. More women have access to smart phones ,but few have appropriate digital skills to read contract terms and pricing information . Finally, women may fail to complain about digital finance issues when they find a male agent .
Sim swap fraud is rising faster than mobile cellular subscribers growth . The research used data from South Africa from 2017 to 2020 where Sim swap fraud incidents in the banking sector was up by 233 % vs mobile cellular subscribers which was up by 8.4 %. And the mobile channel accounted for more than 90% of Swim swap fraud incident.
Mobile app fraud is rising faster than mobile app usage .From 2016 to 2020, share of fraudulent transactions via mobile apps is up by 104 % vs. shares of transactions via mobile apps by 34%. A 2020 study of mobile app in 71 countries show mobile apps increased especially during the pandemic .
Likewise , digital borrowers ( 21 %) are more likely to default than informal borrowers ( 15.9%) and formal non digital borrowers ( 6.9 %) .
Finally , increase in data breaches is surpassing increases in data created . Eighty percent globally of data are exposed vs. 38 % of data created .
Amidst these data background, what tools are available for consumer associations in the Philippines to manage and mitigate the risks to consumers using digital finance .
Under the 6 year National Strategy for Financial Inclusion of the Bangko Sentral Ng Pilipinas , consumer associations like the Laban Konsyumer Inc. will be invited into working groups that shall work with the regulators and other stakeholders in crafting the appropriate financial literacy and education program which will be used in mitigating the risks of digital finance to consumers . This opportunity is a milestone for consumer associations to contribute their expertise , resources and collaboration with the regulators to sustain and manage the risks of digital finance .
A word of caution was raised by the Korea consumer association to consumer associations that they should not fall into a trap where the regulators place consumer associations to a limited and specified role in the collaboration and thus will be less effective in the overall financial literacy and education program of digital finance .
President , Laban Konsyumer Inc.
Email at email@example.com