Digital Finance: Why we must close the protection gap
We are all consumers, each with unique needs and circumstances. For many, digital financial services are efficient and reliable. But for others, these same systems can be difficult to navigate — or even out of reach.
The technological revolution we are living through has increased access to digital services for millions of people in different markets, and financial services is no exception.
At the same time, this rapid evolution has outpaced the consumer protections needed to effectively secure people’s data and finances. Such explosive growth has increased exposure to fraudsters, professional bad practices, data misuse and below-par service provision.
Among the drivers of these risks is vulnerability – a word that requires more attention. It’s a term that applies to almost three quarters of global consumers to some extent, according to research by Consumers International.
Consumers experience vulnerability in different ways. People with disabilities may face accessibility barriers; those with caring responsibilities can face time and financial strain; and workers in informal employment often lack stability or protections. In all cases, these factors can leave consumers adversely impacted if financial services or providers fail to account for their specific needs. This can also disadvantage people speaking a different first language to the country they live in, those with a high debt-to-income ratio, or simply an insufficient savings buffer. All of us are likely to know someone like this.
We also know that personal circumstances can change suddenly, through shocks like a health diagnosis, loss of income, loss of capability, unexpected costs that we cannot pay, a dependent that needs caring for or other unforeseen events that can dramatically impact our lives.
If vulnerability is about consumers’ exposure to risk, resilience is about their ability to deal with and recover from shocks. While resilience has become a buzzword for building better digital financial systems, it’s clear that inclusion without protection is not a formula for delivering more robust systems and services. We need to close the gap between the protections that exist on paper and the lived experiences of people around the world.
Negative outcomes
The World Bank’s 2025 Global Findex Database report shows 79% of adults now hold a financial account, increasing from 74% in 2021, and 51% in 2011.
Financial sector innovation like open finance models, embedded services and the expansion of digital public infrastructure have helped broaden the sector’s reach and fuel competition – the number of fintech startups almost doubled between 2017 to 2021.
While increased access to payment systems and other financial services is a positive, this unchecked evolution has downsides. Risks have intensified alongside market growth: scams, data misuse, fraud, identity theft, hidden or excessive charges, poor redress systems… the list goes on.
Data breaches jumped by more than 4,500% between 2015 and 2020, far exceeding growth in data generation (314%), smartphone penetration (4.6%) and mobile money account ownership (17%) for this period, according to CGAP.
And there is a direct correlation between greater vulnerability and negative outcomes for digital financial services users.
A Consumers International survey of 3,000 people across eight countries found that consumers in higher vulnerable circumstances are two and a half times more likely to be scammed, with 52% falling victim to scammers compared to 19% of consumers in lower vulnerable circumstances. And 61% of digital finance users in higher vulnerable circumstances had problems seeking redress, compared to 38% of users in lower vulnerable circumstances.
the erosion of trust
The widening protection gap has led to a loss of trust among some users in how the financial sector safeguards their information and finances. The 2025 Findex report found a lack of trust in financial institutions dissuades about 20% of adults without accounts across low- and middle-income economies from having accounts; this increases to about one third in Latin America and the Caribbean. It’s a situation that undermines financial resilience and inclusion as systems fail to meet some users’ specific needs.
Other research shows widespread skepticism about how personal data is handled, with just 39% of global consumers believing their data is used responsibly, and 49% believing companies exceed the terms of their consent for data use.
“Financial privacy is the biggest challenge, particularly around protecting sensitive information like mother’s name, date of birth and mobile number”, said Nadeem Iqbal, CEO, The Network for Consumer Protection in Pakistan.
As services expand, the lack of built-in protections adversely impacts many users, particularly in low- and middle-income countries.
Consumer advocates have been at the forefront of these issues for some time, identifying key risks. This shows their value as critical partners to regulators and financial service providers, by highlighting people’s lived experiences and contributing to finding solutions.
A 2023 Consumers International survey of consumer bodies in lower middle-income countries found 75% of consumer advocates thought fraud and scams were the top threats facing consumers; 70% found data misuse a serious challenge; and 90% thought consumers had poor, if any, access to fair, effective redress. A lack of transparency was also a concern, with 57% of respondents identifying opaque fees and charges as a main barrier undermining trust.
Exposure to these types of shocks and the ensuing loss of trust could help explain the consistent share of totally inactive accounts – totaling 8% of accounts in 2025 – used solely to receive payments, which are then withdrawn in cash used for daily transactions in many developing countries. Here, digital payments are 4% less likely among women than men.
Persistent usage gaps are a clear indication that digital inclusion has not translated into financial resilience.
bridging the gap
There is a growing consensus that consumer protection must evolve. What appears as a crisis of consumer protection, vulnerable circumstances and exposure to shocks in digital finance is also an opportunity to reimagine financial consumer protection systems around consumer outcomes. Doing so calls for a shift from reactive safeguards to proactive design, where resilience is embedded from the outset.
Consumer advocacy group CONSENT Uganda works with mobile money regulator the Uganda Communications Commission, for example, to increase consumer awareness of how best to handle fraud, misinformation, impersonation and digital financial safety, particularly in rural areas.
As part of the Building Consumer Resilience in Digital Finance report, made possible with support from the Mastercard Center for Inclusive Growth, Consumers International developed the “guiding star” framework, comprising five key design elements: consumer voice; consumer wants and needs; representation and engagement; supervision; and consumer impact measurement.
This framework for action puts consumer voices at the heart of efforts to help systems deliver stable, secure, equitable and usable financial services. Consumer advocates are often best placed to identify weaknesses and threats in digital financial services offerings and help turn them into strengths.
By amplifying consumer voices, regulators, policymakers and financial services providers have an opportunity to embrace shared values and redesign products that both strengthen consumer protections and improve redress systems.
Integrating vulnerability considerations into future financial services can help rebuild user trust and begin to bridge the protection gap with services that work for everyone. In effect, turning resilience from a buzzword to a catalyst for positive change.
Read our report on building consumer resilience in digital finance