Overview
• The 2017 Global Financial Inclusion and Consumer Protection (FICP) Survey provides a global data source to benchmark efforts by financial sector authorities to improve the enabling environment for financial inclusion and financial consumer protection.
• The 2017 Global FICP Survey tracks the prevalence of key policy, legal, regulatory, and supervisory efforts to advance financial inclusion and financial consumer protection, including: national financial inclusion strategies, nonbank e-money issuers, agent-based delivery models, simplified customer due diligence, legal frameworks and institutional arrangements for financial consumer protection, disclosure and transparency, fair treatment of consumers, dispute resolution, and financial capability.
• Financial sector authorities in 124 jurisdictions - representing 141 economies and more than 90% of the world’s unbanked adult population - responded to the 2017 Global FICP Survey. The survey covers regulated financial service providers offering retail credit, deposit, and/or payment products and services. The reporting period was from November 2016 to June 2017.
Key Findings
Financial Sector Landscape. Diverse financial markets can lead to innovation and improved consumer choice. On average, responding jurisdictions report having a regulatory framework in place for four of the six institutional categories used to structure the Survey. The most common institutional categories beyond Commercial Banks (present in all jurisdictions) are Financial Cooperatives (present in 65% of responding jurisdictions), Non-bank E-Money Issuers (NBEIs, 59%), Other Banks (57%), Other Deposit-Taking Institutions (ODTIs, 56%), and Microcredit Institutions (MCIs, 52%).
Nonbank E-Money Issuers. NBEIs are a critical driver of digital financial services in many jurisdictions. Seventy-three responding jurisdictions (59%) report having a regulatory framework for NBEIs, including over 70% of jurisdictions in Sub-Saharan Africa and East Asia and the Pacific. Among the 59 jurisdictions with NBEIs that provided information on ownership structures, 63% report that at least some NBEIs in their jurisdiction are mobile network operators (MNOs) or their subsidiaries.
National Financial Inclusion Strategies. National financial inclusion strategies (NFISs) are an increasingly common tool to establish national financial inclusion objectives, strengthen reform efforts, and improve coordination among stakeholders. Thirty-four responding jurisdictions (27%) report having an NFIS in place, and 29 jurisdictions (23%) report such a strategy to be under development. There is significant variation across responding jurisdictions in the approval processes, coordination structures, and other key elements of NFIS. Just 14 NFISs include a gender dimension.
Use of Agents and Other Third Parties. Several jurisdictions have successfully leveraged agent networks to cost-effectively expand the physical reach of the financial sector. One hundred and five responding jurisdictions (85%) report that some institutional categories of financial service providers (FSPs) are permitted to contract with retail agents as third-party delivery channels. The use of agents also introduces new risks and many jurisdictions have established rules that regulate the relationships among FSPs, agents, and customers. For example, more than 75% of responding jurisdictions that permit agent relationships have rules in place that hold a financial institution liable for its agents’ actions or omissions.
Simplified Customer Due Diligence. More than 15% of unbanked adults worldwide cite excessive documentation requirements as a major reason for not owning an account, according to the 2014 Global Findex. Survey responses confirm that many jurisdictions require proof of address, income, or employment, in addition to basic identification documents, to open an account. The responses suggest that the documentation requirements in many jurisdictions go beyond what is recommended by the Financial Action Task Force. However, 60 responding jurisdictions (50%) have established simplifications or exceptions to customer due diligence requirements for certain types of customers (e.g., low income) or account products (e.g., small-value, low-risk transactions).
Safeguarding of E-Money Funds. The safeguarding of customers’ e-money funds is a key element of e-money regulatory frameworks. Sixty-one responding jurisdictions (86%) have put in place requirements that some or all of a customer’s e-money funds be separated from the funds of the e-money issuer and placed in a prudentially regulated financial institution. In 86% of relevant responding jurisdictions, NBEIs are prohibited by law from using customer funds for purposes other than redeeming e-money and executing fund transfers.
Institutional Arrangements for Financial Consumer Protection. Which financial sector authorities are responsible for financial consumer protection varies considerably across jurisdictions. The most common approach is an Integrated Sectoral Financial Sector Authority model, reported by 55 responding jurisdictions (45%). In this model, financial consumer protection supervision responsibilities fall under multiple financial sector authorities, each responsible for all aspects of supervision (e.g., prudential and financial consumer protection) for FSPs operating within a given financial subsector (e.g., banking). Eighty-six relevant responding jurisdictions (75%) report having a specialized unit dedicated to financial consumer protection within an institution that has a broader remit; 17 jurisdictions (21%) report having established the unit since 2013.
Disclosure and Transparency. Financial consumers benefit from clear and comparable information about financial products and services. Nearly all responding jurisdictions (94%) have some disclosure requirements for Commercial but the content, timing, and format of such requirements vary considerably. The required use of a key facts statement (or similar) for at least one product is reported by 81 responding jurisdictions (65%) as it relates to Commercial Banks, but is significantly less reported for other institutional categories.
Fair Treatment and Business Conduct. The fair treatment of customers is a core tenet of financial consumer protection. In 90 responding jurisdictions (75%), FSPs are prohibited from using any term or condition that is unfair, excessively unbalanced, or abusive in a customer agreement. One hundred and ten responding jurisdictions (90%) report having some provisions in existing law or regulations that restrict excessive borrowing by individuals, though approaches vary. Rules that enable customer mobility between financial service providers are significantly less common.
Complaints Handling and Dispute Resolution. Accessible and efficient dispute resolution mechanisms allow financial consumers to resolve disputes with their FSP. Ninety-two responding jurisdictions (78%) report having rules in place for complaints handling and resolution by financial service providers. Eighty responding jurisdictions (65%) report having an out-of-court alternate dispute resolution (ADR) entity (e.g., a financial ombudsman) in place for financial consumers who cannot resolve their disputes with their FSP. The functions and institutional arrangements of ADR entities vary significantly across jurisdictions. The most common topics of complaint among the 51 jurisdictions that provided data are (i) excessive interest or fees, (ii) unclear interest or fees, (iii) mistaken or unauthorized transactions, (iv) automated teller machine (ATM) transactions, and (v) fraud.