The Guidelines answer an increasingly urgent question: how to ensure that the transformative opportunities offered by the fintech revolution reach more of the world’s poorest people, and do so in a way that is transparent, fair and responsible.
Dirk Elsen, Director Emerging Markets at Triodos Investment Management: “We continue to see and follow fintech developments, which holds tremendous potential for the inclusive finance industry. As an investor we have a responsibility to understand, acknowledge and act in the interests of the consumers and small businesses that make use of these new technologies. These guidelines provide practical guidance to keep their interest at its core.”
New and exciting opportunities
Innovations in digital technology have created new and exciting opportunities to reach unbanked and underbanked low-income customers in emerging markets as well as developed countries.
Traditionally, these customer segments have been considered too risky and too poor to be of interest to banks and insurance companies. Mobile wallets and mobile money transfers, peer-to-peer and other alternative lending platforms, pay-as-you-go asset finance and digital micro-credit are examples of recent innovations that are reaching hundreds of millions of consumers and small businesses.
These innovations are radically changing the financial services landscape around the globe.
While the opportunities have increased, so too have the risks surrounding digital financial services for investors, investees, customers and wider digital ecosystems across markets and regions. An example is the rapid growth of digital lending products, some of which carry risks of overpricing and over-lending to customers.
One factor that is holding back investors in inclusive digital financial services is the lack of a framework to help them evaluate these risks. In a world where the old rules are being rewritten daily, it can be hard to know where best to invest your time, energy and money.
Touchpoints for responsible funding
Recognising this, over 40 leading organisations have joined up to develop a set of guidelines for investors who are interested in funding inclusive digital financial services in a responsible way.
The Guidelines comprise the following 10 touchpoints that financial investors and their fintech investees can use to evaluate opportunities, mitigate risks and contribute to a more responsible and inclusive digital finance ecosystem:
- Promote responsible investment in digital finance
- Establish customer identity, data privacy and security standards
- Promote fair and transparent pricing
- Enhance customer services for problem resolution and product innovation
- Prevent over-indebtedness and strengthen digital literacy and financial awareness
- Improve the disclosure of terms and conditions for customers
- Manage risks comprehensively with growth of digital inclusion
- Foster a proportionate legal and regulatory framework
- Facilitate interoperability and infrastructures for digital financial services ecosystems
- Track progress to mitigate risks and expand opportunities in digital financial services
Click here for more information about the Guidelines, including the full press release and list of signatories.
Read more about our Inclusive Finance strategy.