Overview
• The Global State of Financial Inclusion and Consumer Protection Report, 2022 (‘FICP Report, 2022) is an extensive data source benchmarking efforts by financial sector authorities to improve the enabling environment for financial inclusion and financial consumer protection.
• The FICP Report, 2022 – which is follows reports published in 2013 and 2017 – focuses on the financial sector landscape, financial inclusion policies and strategies, regulatory enablers of financial inclusion, financial consumer protection, and financial capability. The 2022 Report also includes new content on fintech, innovation, and consumer credit, among others.
• Financial sector authorities in 118 jurisdictions, representing 130 economies, responded to a survey conducted in the first half of 2022. To date, this is the only longitudinal and global survey of this nature. The following details the distribution of those economies the responded to the survey:
Composition of survey respondents in 2022
Key Findings
Financial Sector Landscape. Currently, most jurisdictions have a diverse ecosystem of non-bank financial institutions, with consumer credit providers being the most prevalent of this category. Despite their ubiquity, in many jurisdictions, consumer credit providers remain unregulated, which poses consumer protection risks. Financial cooperatives and non-bank e-money issuers are the third and fourth most common institutional categories. Non-bank e-money issuers are most active in emerging markets and developing economies, which is unsurprising given the rise of mobile money as a means of financial inclusion among underserved groups in these economies. Financial cooperatives exist in 100 percent of low-income jurisdictions, and non-bank e-money issuers are most prevalent in emerging markets and developing economies.
Financial Inclusion Strategies and Policies. Policy makers are deploying various strategies to drive inclusion. National financial inclusion strategies are most common. Sixty-three jurisdictions have one either in place or under development. Along with the acceleration of fintech, digital finance and fintech strategies have also grown in popularity; 56 jurisdictions have them in place or in development. Not all strategies or policies have a gender lens, action plans, or monitoring and evaluation frameworks; the absence of these makes for less effective instruments overall.
Fintech. Fintech innovations are on the rise across the globe and can serve as catalysts for financial inclusion. Fintech has the potential to lower costs while increasing speed and accessibility, allowing for more tailored financial services at scale. Digital credit is the most widely used – and still growing – fintech innovation globally. The second, third, and fourth most common fintech innovations, respectively, are crypto-assets (issuance, exchange, and custody), crowdfunding, and peer-to-peer lending. These developments do raise concern among regulators on new and enhanced risks to consumers from fintech.
FCP Regulation. In recent years, there has been a growing focus on FCP regulation. Over 97 percent of responding jurisdictions have some form of legal framework for FCP. Many jurisdictions employ several, often overlapping, approaches to FCP. Though this is a welcome trend, simply having an FCP framework is not sufficient. It is important for jurisdictions to implement FCP regulatory frameworks that comprehensively cover all types of financial products and services while maintaining the flexibility required for an evolving financial sector.
Institutional Arrangements for FCP. An integrated sectoral financial sector agency model of supervision - where the mandate to oversee FCP falls under multiple authorities with broader supervisory responsibilities over specific sectors - is present in seventy jurisdictions. The next most popular model is the integrated single agency model, followed by the general consumer protection agency, and then by the dedicated market conduct authority model. High- and middle-income countries are more likely to have prudential and market conduct supervision functions separate and equal. Low-income economies, however, are more likely to have market conduct supervision embedded within prudential supervision functions or have them separate but at differing hierarchal levels.
Complaints Handling and Dispute Resolution. Ninety-two percent of the responding jurisdictions have laws or regulations establishing internal dispute resolution (IDR) standards. Standardized formats for collecting complaints data by financial service providers can allow supervisory authorities to analyze overall market trends, identify emerging consumer issues, and track inquiries and complaints trends. Despite this, only 49 jurisdictions require such data collection. Supervisory authorities should also consider the level of granularity of data needed as well as the amount and frequency collected. The number of jurisdictions with an out-of-court alternate dispute resolution (ADR) mechanism has increased globally, across all income groups. However, only about 41 percent of the jurisdictions said that their decisions were binding on the financial service providers, while 28 percent issue non-binding decisions or recommendations. The remaining 40 percent of jurisdictions offer mediation services. About half the jurisdictions report that ADR mechanisms are located within the financial regulator, underscoring the need to separate FCP regulatory and supervisory functions from dispute resolution.
Data Privacy. Data privacy and security are more important than ever before. Customer consent is imperative in situations such as open banking, the use of alternative data for creditworthiness evaluation, or when data is used for purposes other than those for which it was originally collected. Ninety eight percent of responding jurisdictions require that customers provide informed consent, having understood the nature and purpose of the data sharing/disclosure. However, even if consent is the appropriate lawful basis for processing personal data, it is just the first step. Policymakers should also consider frameworks to enhance data protection particularly for low-income and vulnerable populations.
Financial Capability. With the rapid rise of complex digital financial products, a more nuanced and expanded approach to financial literacy is very much needed. Seventy-eight jurisdictions have a financial education or financial capability strategy either in place or in development. While heading in the right direction, there is a need to include a wider range of content on digital financial literacy. For example, education focused on data protection and the use of DFS are still only being implemented in 42 percent and 56 percent of jurisdictions, respectively. Policymakers should focus on inherent risks to consumers and improve the impact of their programs by seeking partners for implementation and developing effective monitoring and measurement.