A responsible digital finance ecosystem is crucial for customers
CGAP is exploring this new consumer protection approach, leveraging what has been done thus far, while taking a more holistic and proactive stance. We believe that the three key building blocks of responsible digital finance ecosystems are customer-centricity, capability, and collaboration.
The digital financial services (DFS) ecosystem includes a range of key actors such as authorities, providers, funders, and industry and consumer associations. While regulators, supervisors, and other public authorities play an essential role in building responsible finance ecosystems, the task of making sure that DFS are offered in a responsible manner requires the active engagement of providers as well. With this in mind, we undertook qualitative research looking at how industry associations promote responsible digital finance.
Coverage of CGAP’s industry association research
Our research covered 23 associations globally, including those made up of fintechs, digital lenders, and traditional financial institutions actively offering DFS. We identified 10 types of activities typically carried out by industry associations to support the three key building blocks of responsible DFS ecosystems.
Customer-centricity activities
A customer-centric culture looks at the outcomes that consumers experience from using DFS and directly engaging with DFS providers and is essential to fostering trust, loyalty, and customer satisfaction.
Regarding customer-centricity, consumer awareness is the most common activity among associations surveyed. It includes media information campaigns for customers on specific topics, such as how to avoid online fraud (e.g., the Anti Fake Fintech Campaign by the Association Fintech Indonesia) and how to choose a legal digital loan that best fits a customer’s needs (e.g., the Selecting Loan Apps campaign by India’s Fintech Association for Customer Empowerment (FACE)). It also includes structured financial education projects (e.g., “Know More, Be More”, a dedicated website offering a set of financial education resources including on how to avoid fraud risks, maintained by the Association of Banks and Financial Entities of Colombia (Asobancaria)).
Providing recourse mechanisms for consumers is another key activity that industry associations typically undertake. Recourse services for customers include solutions that employ digital technologies in an effective and efficient way, such as a call center established by the Microfinance Institutions Network in India, which includes fintechs that serve low-income customers. The call center has only a few employees, yet with the use of artificial intelligence, covers the whole country and has reached an impressive complaints resolution rate of up to 95%. Another example is FinScarga – an online complaints-handling platform set up by the Ukrainian Association of Fintech and Innovation Companies. It allows customers to file complaints against any financial institution free of charge and track their status and outcomes, with platform managers and lawyers advising customers in the process and channeling the complaints to respective providers or supervisory authorities.
Activities on price disclosure seem rare; we found just one association, the Association of Banks of Peru (Asbanc), which aggregates links to their members’ websites with pricing information on their services, including DFS.
Capability activities
Most of the associations surveyed focus on strengthening their members’ capability in acting responsibly. 
The most common activity is the adoption of a code of conduct (CoC) that outlines ethical principles and responsible finance standards for members. While most associations have a CoC, some do not make it publicly available. CoCs may differ significantly in terms of scope, language, and form, ranging from a one-pager listing key values of the association to a detailed document, such as the one developed by Asbanc, with annexes on self-assessment for members, templates guiding implementation, and agreements with members to confirm adherence to the CoC. The language of CoCs can also vary, from consumer-friendly messaging (e.g., the Banking Code of the Australian Banking Association (ABA), to technical documents speaking to providers, including those offering DFS.
Yet enforcing CoC is not straightforward unless there is regulation in place that requires compliance. We found only seven associations that have some kind of enforcement mechanism, determined primarily by the self-regulatory status of the association in the country (e.g., in India and Singapore) or a legally binding agreement (ABA in Australia).
Industry associations are also actively engaged in market monitoring activities, ranging from surveying users or provider staff (e.g., The State of Digital Lending snapshot by Digital Lenders Association of Kenya, or Fintech Lending Trends report by FACE) to systems to track and respond to risks (e.g., Asobancaria’s cybersecurity management and monitoring platform). Associations also actively organize different types of capacity-building activities, from ad-hoc webinars and workshops (e.g., Digital Finance Practitioners Ghana and Philippines’ FintechAlliance events on data protection and privacy) to certifications including consumer protection components (e.g., Singapore Fintech Association).
Only eight associations engage in standardization activities. They include the development of standards of customer service (e.g., Business Correspondent Federation of India), key facts statements (e.g., one for off-grid solar PAYGo purchases by Global Off-Grid Lighting Association), and security and fraud prevention processes (e.g., GSMA’s Mitigating common fraud risks: Best practices for the mobile money industry).
Collaboration activities
Collaboration with policymakers is a common activity for industry associations. An association, by nature, provides an opportunity for different DFS providers to collaborate and become more responsible. Collaboration can support joint engagement with authorities, including the development of rules and standards. Some associations establish dedicated working groups or committees, such as the Policy Committee of the Canadian Lenders Association which works to promote open marketplaces to “encourage innovation, the use of technology and healthy competition to advance the needs of borrowers and provide products and services to meet 21st century needs.”
The promotion of fair competition by associations does not appear to be a widespread activity – we primarily saw this in countries with strong anti-trust laws already in place, such as the UK, where CryptoUK (an association of stakeholders of the crypto assets sector) adopted a special antitrust policy.
Finally, regional and global associations (typically second-tier), can be well-positioned to collaborate with global standard-setting bodies for digital finance and financial consumer protection. For instance, the International Banking Federation – which represents several national banking associations with over two-thirds of the largest 1,000 banks worldwide – maintains an active exchange with international standard setters and global supervisory bodies by developing position papers on a broad range of subjects, including digital finance, with an international dimension (e.g., a position paper to BCBS on crypto assets). GSMA, an association representing mobile money operators worldwide, works with policymakers to help create a responsible mobile ecosystem by generating reports on industry developments and policy papers (e.g., mobile industry safety, privacy, and security principles).
Looking ahead
Our research showed several opportunities for industry associations to learn from each other about how to promote responsible DFS ecosystems and replicate successful activities implemented in different jurisdictions.
For example, associations can ensure their CoCs are customer-centric by making them more visible (i.e., easy for consumers to find on an association’s website) and written in plain language, and by establishing effective enforcement systems. Associations could be more active in monitoring the market, identifying DFS consumer risks and issues that can erode public trust (e.g., fraud, over-indebtedness), developing related consumer awareness activities, and advocating for regulatory frameworks that address such risks and issues. The role of associations in setting key principles, good practices, and quality standards is especially important in the early stages of industry development where DFS providers are not regulated at all, or lightly regulated and supervised (e.g., digital credit, crypto assets).
As CGAP continues its work on developing responsible digital finance ecosystems and responsible digital credit, we will actively engage with associations that have a positive influence on mobilizing providers on these topics.
