Digital financial services have a low activity rate which is due to variety of factors. But understanding these factors can help ensure that majority of the unbanked consumers do take up the digital financial services. The jump for unbanked consumers is extremely steep as not only do they have to jump from informal to formal financial services but also get used to transacting from cash to transacting with digital technology.
For the activity rate to increase the MFIs have to empower customers. Empowered customers have the ability to choose which financial services can bring the greatest value to them plus allowing greater control of their financial lives. There is a tendency to equate Consumer Empowerment to Financial Capability and Consumer Protection. Unfortunately, these concepts are not one and the same.
Financial capability interventions are usually geared towards enhancing an individual’s knowledge, skills, and attitudes with respect to his or her money management needs, with the aim of facilitating changes in customer behavior. Financial capability focuses on a household’s process of making decisions and taking action. Various stakeholders carry out variety of exercises to enhance consumer’s effective choice such as intervention like alternative financial education, school curricula and reports from providers, governments and civil society organizations.
Consumer protection allows people to voice their concerns and access recourse infrastructure designed to protect their rights. Consumer protection efforts aim to protect all customers, but especially the most vulnerable. It protects them against improper practices by financial service providers, supports fair and transparent products, and instills trust in the formal financial system.
Whereas, Consumer Empowerment puts more responsibility on the financial service providers to ensure that consumer choice and the use of financial services are relevant and easier to use. Positive customer experience and adequate channels for recourse for the customers are essential in building trust between the financial provider and the consumer.
Hence, the core difference between the three concepts discussed above is the role various stakeholders play and the nature and intensity of engagement between the provider and the consumer. No matter whatever might be the goal of intervention, each concept focuses on building trust and confidence of the consumers. As this will help BUILD EMPOWERED CONSUMERS and fuel the growth of the financial providers.