Innovative Ways for Responsible Digital Financial Services

With the increasing use of mobile money or digital finance, services have their own merits and demerits. We all know about the various advantages of digital transactions and some of us have also experienced the dark side of it. Alongside the comfort, we should be also concerned about the risk of online transactions as responsible digital investors.

I want to start this article with the most important question, how safe is digital finance in 2024?

In 2020,  at the FI2020 conference in London, the financial experts discussed the risks related to digital finance. They addressed the risks of the consumers in this digital world. The experts together agreed to the point that there are some areas in this digital world that require special attention. During the conference, they also found out that they did not have enough data about the experiences of the consumers and their perceptions regarding digital finance.

So what did they find from the conferences? What are the steps taken after that? What are the areas in digital finance that demand improvement? Are consumers safe in the digital world? You will get all these answers in this article. Sit tight, and read the blog till the very end, this is going to be a very essential one for your daily life, if you are related to any finance forums.

Let’s start!

Manage Digital Finance

As we discussed above the fast-growing digital financing world is surely making our lives easy but we are not safe.

What are the steps or measures that must be taken to ensure a “responsible digital finance.” To find reasonable solutions it is important to survey every group that is connected to digital finance including the industry bodies, retail providers,  consumer advocates, regulators, development agencies, and the community at the base of the economic pyramid.

The approaching research from InterMedia’s Financial Inclusion Insights and CGAP agreed to the conclusion that unless they have proper data about the different groups and communities they would not be able to study the risk to the digital investor and could not proceed to the investing forum. They also shared that it is possible that the group at the lower economic status would not be able to fully utilize the advantages of digital finance either. They would be able to meet the business goals if they stick to the traditional method of money transactions.

The Response to the Survey

Below are the top ten insights from the survey. Go through them to get a proper idea.

• 17% Believe that Digital Financial Services are Effective

Only 17% of the total users agree that digital finance is safe and it is helpful for the users to use the medium. However, 35% believe that it is okay to use the service for transactions. However, most of the consumers shared that they do not feel safe while working on the digital platform.

• 34% Users Believe That It is Safer Than the Traditional Transaction

One-third of the consumers in the developing countries shared that the digital transaction is safer than the physical transaction mode. A fair percentage of the digital investors i.e. 57% believe that the customers feel it is easy to pay digitally.

• A large number of Users Believe that Digitally Delivered Credit is Risky

There are 94% of customers are skeptical about digitally transferred credit. They explained them as risky. The consumers also shared that they feel that their insurance products are at greater risk.

However, 60% of them feel that the products could or could not be very risky.

• According to 8%, Digital Finance Does not Serve Much to Some Community Population

Using the digital finance service is difficult for the lower base of the economic pyramid or the technically illiterate. The people who have less knowledge or no knowledge about the technology are also the ones who come under the radar of being conned. According to the studies, there are 72% of the rural population, 77% of older consumers, and 50% of women are considered technically illiterate.

• 85% Believe the Cases of Fraud are Concerning

There is a huge number of the population that believes that digital fraud is one of the biggest concerns while performing online transactions and it should be taken care of. They expressed that the issues are risky and the experts must find some solutions for the same.

• 27% Able to Mitigate the Consumer Risks

The users shared that mitigating risks is relatively new and hence difficult. They are even resplendent, they are not satisfied with the available ways to resolve or diminish the digital financial service.

• 90% Policy policymakers express the Need for Standards or Established Principles

Policymakers shared that there must be some principles or guidebooks of the digital services so that consumers can avoid the risks and fraud as much as possible.

Risks of Digital Finance

We will first address the risks of digital finance first and then gradually move towards the solutions.

• Frauds

It should be the main concern and hence at the top of the list.

As the market of digital finance is increasing the risk of fraud and digital theft is also growing. In Africa, online fraud cases have increased by 11%. Some of the common modes of fraud are dishonest ages, external fraudsters, and loss of revenue. However there are other ways that consumers have faced fraud in the digital finance mode.

The frauds are getting much smarter with every passing month, however, the supervised agents still have quite a long run in the matter of training and technical advancement.

• Data Privacy and Protection

Another risk is the poor management of the data. The customers have to share a lot of data during an online transaction, the information could be later misused without the consumers’ permission. Imposters could exploit the identity information of the user. Sometimes the government also uses the knowledge without consent.

• Agent Misconduct

Some consumers opt for agents to handle their digital transactions. However, due to the poor service quality, the consumer may also lose their money.

• Inadequate Consumer Recourse

It is another important factor that is decreasing the quality of Digital finance. The ineffective remedy of the financial services also causes distrust in the consumer.

• Smartphones

Every month there are some new sets of phones in the market. Smartphones are rapidly changing and enhancing in the BOP markets.

Solutions for Responsible Digital Finance

The researchers have provided some brightest ideas to resolve the problem and deal with the risks. I have shared and explained them below.

1. Track Fraud Better

By improving the tracking quality, cyber security can regulate the increasing digital threats. The services can be improved by better cooperation of the intelligence.

2. Better Agent Management

As discussed earlier, agent service is another main factor of fraud. The customers have to trust the agents for the transactions. By improving the agent management the user safely can use the easy method for digital finance. The solution would also make digital finance accessible to those who have little or no knowledge about online transactions.

According to this, the banks and no-banks are also refining their agent network to minimize the risk of theft. It will definitely empower the users.

3. Set and Enforce the Service Standards and System Reliability

In developing countries like Bangladesh, Colombia, the Philippines, and Uganda, more than agent mismanagement and other fraud, the user suffers poor network connections and interrupted mobile transactions. The following is a list of such problems:

4. The downtime of the system

Most users do not know if their transaction has been successfully transferred or not.

5. Time out issue

It is hard to navigate two or three screens quickly and effectively using small and cheap phones. Therefore they often face the problem of being timed out.

6. Unable to Use Money in the Wallet

Due to poor services, customers often were not able to access the funds when they needed the wallet money.

7. Develop a User-friendly Interface

The user-friendly interface of the digital finance services also helps the users to improve their performance. The menu of such online transaction software is a commonly available informal format that is not understandable to many users.

The difficult interface often leaves chances for mistakes and therefore fraud.

Take Away!

Be careful while using digital finance services. The researchers and experts are still working to make it better for use but you also need to take care of your safety. If you know someone who has little or no knowledge about it.

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