Originally published by Mastercard
By Vicki Hyman – Director, Global Communications, Mastercard
Since the launch of the World Bank’s Findex database in 2011, bank account ownership among adults has grown from 51% to 79%. But a new report by Consumers International, the global membership organization for consumer associations, suggests that this progress masks an underlying fragility, with as many as 75% of consumers considered financially vulnerable to some degree.
In some low-income countries, less than half of people can come up with emergency funds within 30 days, says Helena Leurent, the director general of Consumers International. “That’s just not a level of resilience that is reasonable,” she says. “You can’t wait for another financial crisis to amend this issue, to build resilience.”
Though policy can be a powerful tool, you can’t regulate a community into resilience. Digital financial systems need to be designed with inclusion as a core principle, says Shamina Singh, the president and founder of the Mastercard Center for Inclusive Growth.
The Center has supported Consumers International’s “Building the Consumer Voice in Digital Finance,” an initiative that calls for regulators, policymakers, financial services providers and consumer organizations to adopt a common framework for building consumer resilience. The work includes designing and implementing outcomes-based regulation, integrating real-time consumer risk monitoring, strengthening and modernizing enforcement, and updating and developing financial products and services with consumer protection and feedback baked in.
Leurent and Singh recently spoke with the Mastercard Newsroom about the role of transparency in fortifying consumer trust, the need for greater collaboration to build resilience, and how to ensure vulnerable communities aren’t left behind as technology and financial services change faster than ever.
The following interview has been edited and condensed.
Digital finance has changed drastically since 2011. What is the answer to building consumer resilience? New policies? Better technology? More industry buy-in? More consumer education?
Leurent: In 2011, the world was exiting the financial crisis, and there was an important moment when the OECD said that consumer protection had been overlooked and that we needed a common, cross-sectoral set of principles for financial consumer protection. Their implementation is worth celebrating: They’ve become a reference standard for the need for, and importance of, consumer protection. Since then, the landscape has shifted dramatically. You’ve got so much more innovation — just look at the number of fintechs — more providers, the growth in mobile money, all sorts of shifts. There is greater recognition that consumers need to be included, but that in doing so, they can become more exposed. It means that the consumer outcomes are not progressing in tandem with that thinking about access and inclusion.
“Consumer protection builds trust, builds resilience. It means you can lean into the future. It means you can lean into innovation with confidence.”
Helena Leurent
There is a recognition that growth and consumer protection go hand in hand. Consumer protection builds trust, builds resilience. It means you can lean into the future. It means you can lean into innovation with confidence.
Singh: If the outcome that we’re looking for is resilience — being able to withstand shocks, being able to recover from financial hardships so that consumers can continue on their journey to financial health — then an essential component is protection. And protection in some respects can be legislated, can be implemented in policy. But a written policy doesn’t equal enforcement. To build resilience and protection, regulators, consumers, product providers and advocacy organizations all play a part. It requires constant communication and collaboration across various centers.
Do you think the lack of transparency in digital finance depresses access and usage for consumers, particularly those who are just entering the formal financial system? What’s the long-term impact for them and for the economy as a whole?
Leurent: Over time the meaning and value of transparency has shifted. In the past, it might have been enough to give people more information, but they could not make sense of it. Now we understand that disclosure is not the only solution. There must be well-designed products and process along the consumer journey where you factor in relevant, timely, inclusive information. It’s not just about telling me the price or the term, but answering the questions like: Is this product suitable and right for me? Are the distribution practices fair? Am I given a meaningful explanation? It’s a broader definition of what real transparency is.
Price transparency is a known issue. Asking consumer advocates around the world, close to 60% say that the lack of transparency in fees and charges is a significant factor that causes lack of trust in digital finance. But transparency in digital finance isn’t just on the demand side. There are supply-side issues that can be improved: Our research also shows that 88% of financial services regulators in low- and middle-income countries collect complaints data, but only 44% make that data available publicly. Doing so can help consumer advocates and financial service providers improve. If all parts of the ecosystem can see what’s happening behind the scenes in an increasingly complex marketplace, they can work together to improve it.
“Transparency is critical as part of the entire user experience. User experience and early interactions with the financial system will develop trust if they are repeated, predictable positive experiences.”
Shamina Singh
Singh: Transparency is critical as part of the entire user experience. User experience and early interactions with the financial system will develop trust if they are repeated, predictable positive experiences. One of the lessons that we can replicate from the Mastercard experience is protection by default, security by default, resolution by default. You know that when you use a digital form of payment, whether it’s a phone or a wallet or a card, protection is built into that experience. So that if something happens, if the purchase doesn’t work, you have a way of getting your money back. If you don’t, then that defeats the purpose of ensuring that a digital economy works for everyone, everywhere.
Can you point to an example of recent policies or an initiative that is already proving itself by empowering consumers in practical ways or making communities more resilient? Are there any common threads that could be easily replicated?
Leurent: In our report, we highlighted the U.K.’s relatively recent Consumer Duty regulation, which was a move from a “do no harm” approach to a “doing good by default” approach. In Malaysia, the Fair Treatment of Financial Consumers policy integrated a principle related to vulnerability, in which financial services providers should develop policies, procedures and controls to ensure fair treatment of vulnerable consumers through their entire journey. There are also examples of when regulators have intervened in specific circumstances, such as capping the cost of short-term credit, or stepping in to reduce the risk of mortgage defaults in the wake of interest rate rises after the COVID-19 pandemic. These are instances where different parts of the ecosystem have coordinated to focus on consumer and systemic outcomes and have been able to quickly design and implement effective solutions.
Singh: I’ll give you two examples around our work with women entrepreneurs that I’m really proud of. Through Mastercard Strive, we have a program called Strive Women that aims to turn cultural norms into opportunities in places like Pakistan and Peru. In Pakistan, we worked with a leading microfinance bank to remove male guarantor requirements and allow women to serve as loan guarantors. Now, instead of requiring a male co-signer, these women can use gold jewelry, which many South Asian women acquire in preparation for marriage, as collateral against a loan. These gold-backed loans make up 40% of total borrowers, and the repayment rate is an incredible 100%.
Separately, we have also been working to help digitize wages in the textile space, which builds trust and increases safety and autonomy for workers. By working with RISE in Egypt, where 93% of 24,000 garment workers now receive digital payments instead of cash, we’re reducing wage exploitation and theft while improving financial wellness and health. Across the two examples, the common thread is inclusion. When we think about bringing everyone, especially underserved or underrepresented communities in, we are creating systems that are resilient and sustainable.
The latest Global Findex showed significant strides in access to financial services, although there is more work to do. What do you think is the next gap or challenge that you’re looking to tackle?
Leurent: The reason we care so much about consumer resilience is that we don’t know what the next big shock could be. I could give you agentic AI, whatever comes after agentic AI, stablecoins, digital identity, energy costs and how we connect digitization with energy provision and energy services — major shifts coming down the pike, but we won’t know. If we thought back even five years, would we really know what was heading our way, and even faster?
If you build consumer resilience — that is a huge challenge on its own — if you get that right, then no matter what comes along, you’ve got a framework to be able to face it. The next challenge is this one: resilience.
Singh: Cybersecurity and fraud protection is the name of the game, especially for small businesses, where it’s very tough to withstand a cybersecurity attack. At the Center, we are working with many partners to create cyber toolkits bundled with our cyber products.
I would also say AI. The Center can intervene in this space by reducing the gap between the data-haves and the data have-nots. That’s why we’re working with organizations like data.org and Datakind and others that are fit for purpose and built for this moment, along with international consumer protection organizations, to ensure that the distance between those who understand data and AI and those who don’t isn’t insurmountable. So our area of focus has been on building the capacity of social sector organizations to realize the power of data and AI. And if I have one call to action, it’s please join us in this important work. Everyone has a part to play and we welcome your partnership.
From excluded to empowered
Shamina Singh on the latest Global Findex report, which shows that 79% of adults now have access to formal financial services, up from 51% in 2011.
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