Risk Mitigation Necessary as DFS Consumer Risks Grow 

An analysis conducted by CGAP, a consortium of more than two dozen development organizations, highlights the growing risks posed in digital financial services (DFS) provision as it gains a better foothold in Sub-Saharan Africa.

An analysis conducted by CGAP, a consortium of more than two dozen development organizations, highlights the growing risks posed in digital financial services (DFS) provision as it gains a better foothold in Sub-Saharan Africa.

“DFS have introduced several new consumer risks, including mobile app fraud, synthetic identity fraud, authorized push payment scams, and artificial intelligence risks such as algorithmic bias,” reads a blog published by CGAP. “Concurrently, pre-existing consumer risks such as SIM swap fraud, data breaches, social engineering scams, and Ponzi schemes have become more complex. “

Another study conducted by CGAP identified 66 consumer risks, grouped into four categories – fraud, data misuse, lack of transparency, and inadequate redress mechanisms. 

The analysis warns that digitization fueled by the COVID-19 pandemic can come to a halt unless the growing consumer risks in digital finance are mitigated.

All but two of the 26 countries that score “very high” or “high” on the Mobile Money Prevalence Index are from Sub-Saharan Africa which poses high-risk in relation to mobile money services.

Research in Côte d’Ivoire and Kenya suggests that negative experiences have discouraged some users, especially women, from using mobile money

Digital literacy also contributes to the growing risks. 

Afrobarometer’s digital literacy index, which denotes digital literacy as a measure of how often people use a mobile phone and the internet, indicates that only about a third of respondents used both a phone and the internet frequently.

Market actors in Sub-Saharan Africa are working to mitigate DFS consumer risks by: 

  • Gathering and sharing information on consumer risks 
  • Promoting responsible practices among DFS providers 
  •  Instituting appropriate regulation
  • Empowering customers through digital financial literacy and elevating their collective voice

Read the full blog here.

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