The Global State of Financial Inclusion & Consumer Protection 2022 © 2023 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be construed or considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. RIGHTS AND PERMISSIONS The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. CONTENTS Acronyms and Abbreviations x Acknowledgments xi EXECUTIVE SUMMARY 1 INTRODUCTION 5 FINANCIAL SECTOR LEGAL, REGULATORY, AND SUPERVISORY FRAMEWORKS 7 2.1 Financial Sector Landscape 7 2.2 Permissible Activities 11 2.3 Consultative Processes for Developing Financial Service Regulation 12 SELECTED CATALYSTS FOR FINANCIAL INCLUSION 13 3.1 Financial Inclusion and Digital Inclusion Strategies 14 3.2 Policies and Programs to Promote Financial Inclusion and Digital Financial Inclusion 18 3.3 Data Collection 20 3.4 Access to Basic Accounts 21 3.5 Simplified Customer Due Diligence 24 3.6 Remote Account Opening and e-KYC 25 3.7 Use of Agents and Other Third-Party Distribution Channels 27 3.8 E-Money 28 3.9 Fintech Innovations 31 3.10 Credit Reporting Systems 35 FINANCIAL CONSUMER PROTECTION 36 4.1 Introduction 38 4.2 Laws and Regulations 38 4.3 Institutional Arrangements 42 4.4 Industry Self-Regulation 44 4.5 Licensing 45 4.6 Supervisory and Enforcement Activities 46 4.7 Disclosure and Transparency 49 4.8 Fair Treatment and Business Conduct 53 4.9 Responsible Lending 57 4.10 Complaints Handling, Dispute Resolution, and Recourse 60 4.11 Data Protection 66 viii   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report FINANCIAL EDUCATION AND CAPABILITY 69 KEY TAKEAWAYS AND POLICY IMPLICATIONS 77 REFERENCES 79 APPENDICES 82 Appendix A: List of Responding Jurisdictions 82 Appendix B: Overlapping Jurisdictions Under the Time Series Analysis 85 Appendix C: Institutional Arrangement Models for Financial Consumer Protection 86 Appendix D: Data by Region and Income Group 86 LIST OF BOXES Box 3.1: Digital Strategies and Financial Inclusion 16 Box 3.2: Leveraging Geospatial Data for Financial Inclusion 20 Box 3.3: Basic Account Features 24 Box 3.4: Consumer Risks in Fintech 31 Box 3.5: World Bank Global Payment Systems Survey 31 Box 3.6: Digital Credit: A Double-Edged Sword 33 Box 4.1: Good Practices and Resources to Help Authorities Build an Effective FCP Approach 38 Box 4.2: Moving to More Comprehensive FCP Regulatory Frameworks 41 Box 4.3: Establishing and Strengthening Market Conduct Supervision Units 44 Box 4.4: General Data Protection Regulation 66 Box 5.1: Comparing Financial Literacy, Financial Education, and Financial Capability 70 Box 5.2: Integrating Financial Capability into Government Cash Transfer Programs 73 Box 5.3: Building More Effective Financial Education Approaches: Lessons for policymakers 76 LIST OF TABLES Table 1.1: Composition of 2022 FICP Survey Respondents 6 Table 2.1: FSP Institutional Categories and Definitions 8 Table 2.2: Financial Sector Landscape, 2022 8 Table 2.3: Number of Providers across Institutional Categories 11 Table 2.4: Permissible Activities Across Institution Types 12 Table 3.1: Types of Financial Inclusion Strategies and Instruments 14 Table 3.2: Elements of NFISs, for All Responding Jurisdictions and in Selected Jurisdictions 18 Table 3.3: Additional Policy Approaches to Advance Financial Inclusion 19 Table 3.4: Data Collection Measures, 2022 21 Table 3.5: Basic Account Features, 2022 23 Table 3.6: Use of Agents by Institutional Category, 2022 27 Table 3.7: Rules Regulating the Relationship between FSPs, Agents, and Consumers, 2022 28 Table 3.8: E-Money Regulatory Landscape 29 Table 3.9: Type of E-Money Issuers 29 Table 3.10: Legal and Regulatory Requirements on Separation of Customer E-Money Funds, 2022 30 Table 3.11: Types of Accounts Used for Safeguarding E-Money Funds, 2022 30 Table 3.12: Innovation Related Activities Undertaken by Authorities 35 Table 3.13: Access to and Usage of Credit Bureaus and Credit Registries 37 Table 4.1: Approaches to FCP Legal Frameworks 39 Table 4.2: FCP Regulation Types 40 Table 4.3: Institutional Arrangement Models for FCP 42 Table 4.4: FCP Unit Relationship with the Prudential Function 43 Table 4.5: Code of Conduct on Social Performance and FCP 44 Table 4.6: Supervisory and Regulatory Activities Undertaken by Authorities 46 Table 4.7: Prevalence of FCP Enforcement Activities 48 Table 4.8: Complaints Data Collection and Storage by FSPs, 2022 49    ix Contents   Table 4.9: Disclosure Requirements at the Shopping or Pre-Contractual Stage 51 Table 4.10: Requirements for FSPs to Provide Information to Consumers in a Document  52 with a Standardized Format Table 4.11: Requirements for FSPs to Provide Customers with Account Statements 52 Table 4.12: Disclosure Requirements for Periodic Statements 53 Table 4.13: Approaches for Regulating Product Design and Distribution 55 Table 4.14: Market Assessment Requirements for Product Design and Distribution 55 Table 4.15: Management of Conflict of Interest 55 Table 4.16: Restrictions or Prohibitions on Limiting Customer Mobility 56 Table 4.17: Assessing Product Suitability 58 Table 4.18: Requirements to Collect/Validate Customer Information to Determine  58 Repayment Capacity, Table 4.19: Types of Unsupervised CCPs across Regions, 2022 60 Table 4.20: Requirements for IDR 62 Table 4.21: Types of Data Protection Regimes 66 Table 4.22: Requirements for Data Protection 67 Table 5.1: Financial Education Activities Undertaken by Authorities 71 Table D.1: Types of Unregulated CCPs in a Jurisdiction 86 Table D.2: Practices Pertaining to Industry Consultations across Jurisdictions, 2022 87 Table D.3: Practices Pertaining to Consultation with Consumers across Jurisdictions, 2022 87 Table D.4: Strategies to Promote Financial Inclusion 88 Table D.5: Fintech Products for Financial Inclusion, 2022 88 Table D.6: Requirement to Offer Basic Accounts 89 Table D.7: Eligibility Criteria for Basic Accounts 89 Table D.8: Simplifications or Exemptions to CDD Requirements 89 LIST OF FIGURES Figure 2.1: Financial Sector Landscape, 2017 vs. 2022 9 Figure 2.2: Extent of Supervision and Regulation of CCPs 10 Figure 2.3: Issuance of E-Money by Non-Bank Financial Institutions 10 Figure 3.1: Digital Strategies to Promote Financial Inclusion 15 Figure 3.2: Public and Private Sector Involvement in the Development of Various Strategies 16 Figure 3.3: Lead Entity in the Development of Various Financial Strategies, 2022 17 Figure 3.4: Selected Provisions Contained in Financial Strategies 17 Figure 3.5: Requirement to Offer Basic Accounts 22 Figure 3.6: Document Requirements for Account Opening 25 Figure 3.7: Remote Account Opening, 2022 26 Figure 3.8: Pathways of Remote CDD, 2022 26 Figure 3.9: Fintech Product Innovations for Financial Inclusion, 2022 32 Figure 3.10: Most Common Regulatory Protocols around Fintech Products, 2022 32 Figure 3.11: Adoption of Data-Sharing Models, 2022 34 Figure 3.12: Access to Credit Bureaus and Credit Registries, 2017 vs. 2022 37 Figure 4.1: FCP Legal Frameworks, 2017 vs. 2022 40 Figure 4.2: FCP Regulation Types, 2017 vs. 2022 41 Figure 4.3: Institutional Arrangement Models for FCP, 2017 vs. 2022 43 Figure 4.4: FCP Criteria as Licensing Requirement 45 Figure 4.5: Supervisory and Regulatory Activities Undertaken by Authorities, 2013 vs. 2017 vs. 2022 47 Figure 4.6: Comparison of FCP Enforcement Activities, 2013 vs. 2017 vs. 2022 48 Figure 4.7: Disclosure Requirements by Stage of Customer Relationships 50 Figure 4.8: Restrictions or Prohibitions on Unfair Business Practices, 2017 vs. 2022 54 Figure 4.9: Restrictions or Prohibitions on Limiting Customer Mobility, 2017 vs. 2022 56 Figure 4.10: Laws or Regulations on Competency of Staff or Agents 57  Figure 4.11: Access to Credit Registries and Bureaus for Financial Institutions Required 58 to Assess a Borrower’s Ability to Repay a Loan x   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report Figure 4.12: Interest Rate Caps or Limitations on Loan Pricing, 2022 59 Figure 4.13: Provisions in Law or Regulations Establishing Minimum Standards for  59 Debt Collection Practices, 2017 vs. 2022 Figure 4.14: Presence of Laws or Regulations for IDR, 2022 61 Figure 4.15: Requirements for IDR, 2017 vs. 2022 62 Figure 4.16: Prevalence of ADR Mechanisms 63 Figure 4.17: ADR Fee Structure 64 Figure 4.18: Funding Sources for ADR Entities 64 Figure 4.19: Institutional Models of ADR Entities 64 Figure 4.20: Issues Commonly Addressed by ADR Entity 65 Figure 4.21: Financial Products Commonly Addressed by ADR Entity 65 Figure 4.22: Distribution Channels Commonly Addressed by ADR Entity 65 Figure 4.23: Functions of ADR Entities with Respect to Complaints Data, 2017 vs. 2022 65 Figure 4.24: Conditions for Sharing and Disclosing Customer Data to Other Parties, 2022 68 Figure 4.25: Consent Requirements for Sharing Personal Data, 2022 68 Figure 5.1: Types of Institutional Arrangements for Financial Education, 2017 vs. 2022 71 Figure 5.2: Coordination Structure to Promote and Coordinate Financial Education, 2017 vs. 2022 71 Figure 5.3: Requirement for FSPs to Provide Financial Education 72 Figure 5.4: Issuance of Written Guidelines on Integrating Financial Education 72 Figure 5.5: Elements of M&E Systems for Financial Education 73 Figure 5.6: Incorporation of Financial Education in Government Programs 73 Figure 5.7: Types of Financial Education Programs Regularly Implemented 74 Figure 5.8: Financial Education Programs Specifically Focused on Digital Literacy and Awareness 75 Figure 5.9: Differentiation of Financial Education Programs by Segment 75 ACRONYMS AND ABBREVIATIONS ADR Alternative Dispute Resolution CCP Consumer Credit Provider CDD Customer Due Diligence DFS Digital Financial Services e-KYC Electronic Know Your Customer EMI E-Money Issuer FCP Financial Consumer Protection FICP Financial Inclusion and Consumer Protection FSP Financial Service Provider IDR Internal Dispute Resolution M&E Monitoring And Evaluation MNO Mobile Network Operator NBEMI Non-Bank E-Money Issuer NFIS National Financial Inclusion Strategy ODTI Other Deposit-Taking Institution    xi ACKNOWLEDGMENTS This report is a product of the Financial Inclusion, Infrastructure Finally, the team is also very thankful to Oya Pinar Ardic Alper, & Access team in the World Bank Group’s Finance, Competitiveness Douglas Randall, and Marco Nicoli (Senior Financial Sector Special- and Innovation Global Practice. The Global State of Financial Inclu- ists, World Bank), Eric Duflos and Juan Carlos Izaguirre (Senior sion and Consumer Protection Report 2022 was undertaken by a Financial Sector Specialists, CGAP), and Anna Wallace (Head of team led by Buddy Buruku and comprising Saba Bint Abbas, Arpita Consumer Protection and RegTech, Bill and Melinda Gates Founda- Sarkar, and Fiorella Risso Brandon. tion) for serving as peer reviewers. Charles Hagner provided edito- rial assistance, and Gail Welsh provided design and layout The team is grateful for the substantive inputs in the question- assistance. The team benefited from the overall guidance of Mahesh naire and report development stage from the following World Bank Uttamchandani, Niraj Verma, and Jean Pesme. staff and consultants: Jennifer Chien, Gian Boeddu, Minita Var- ghese, Veronica Trujillo, Fredesvinda Montes, Nicola Sladden, Ser- Finally, the team would like to thank the officials in the 118 gio Mesquita, Aute Kasdorp, Anna Zita Metz, Harish Natarajan, responding jurisdictions for their generous contributions of time Doug Pearce, Stefan Staschen, Juan Carlos Izaguirre, Matei Doho- and expertise in responding to the survey. taru, and Sharmista Arpaya. We also thank the following external experts for their inputs: Ahmed Dermish (UNCDF), Rafe Mazer (Innovations for Poverty Action), Anna Wallace (Bill and Melinda Gates Foundation), and Mayada El-Zoghbi (Center for Financial Inclusion). EXECUTIVE SUMMARY The Global State of Financial Inclusion and Consumer Protec- nearly as many jurisdictions with or developing a DFS or fintech tion (FICP) Report, 2022 – which is an update to the 2013 and strategy as those that either have or are developing a NFIS. 2017 iterations of the Global FICP Survey report – details the key findings and provides a source of global data to benchmark efforts Fintech innovations are on the rise across the globe and can by financial sector authorities to improve the enabling environment serve as catalysts for financial inclusion. Fintech has the potential to for financial inclusion and consumer protection. lower costs while increasing speed and accessibility, allowing for more tailored financial services at scale. Digital credit is the most Globally, the overall landscape of financial institution types is widely used – and still growing – fintech innovation globally. The a robust ecosystem of non-bank financial institutions, with Con- second, third, and fourth most common fintech innovations, respec- sumer Credit Providers (CCPs) being the most prevalent cate- tively, are crypto-assets (issuance, exchange, and custody), crowd- gory. CCPs remain unregulated in many jurisdictions, which poses funding, and peer-to-peer lending. These developments do raise consumer protection risks. The highest unregulated number is in concern among regulators on new and enhanced risks to consum- South Asia. Non-bank e-money issuers (NBEMIs) are most active in ers from fintech. Crypto-assets, in particular, pose significant risks emerging markets and developing economies (EMDEs), unsurpris- related to financial integrity, financial stability, fair competition, and ing given the rise of mobile money as a means of financial inclusion monetary sovereignty. To address these risks, regulators must take among underserved groups in EMDEs. Jurisdictions have also a step-by-step and risk-based approach that is tailored to their become more proactive in implementing measures to safeguard country context and balances risk mitigation with financial sector customer funds held by NBEMIs. In 20171, 59 responding jurisdic- development and innovation. For countries where e-money has not tions prohibited their NBEMIs from using customer e-money funds been codified in law, lawmakers should strengthen this important for purposes other than redeeming e-money and executing fund enabling legal framework among lower-income jurisdictions. transfers. By 2022, this number had risen to 73 jurisdictions. Regulators frequently face challenges in balancing policies on Policymakers are deploying a variety of strategies and other AML/CFT against imposing the least burden and costs on outreach policy instruments to achieve financial inclusion goals. National to the financially excluded. As financial services have increasingly Financial Inclusion Strategies (NFIS) are the most common of these, moved to digital forms, the customer due diligence (CDD) of indi- with 63 jurisdictions having or developing one. Between the 2017 viduals looking to open such accounts has also become more digi- and 2022 cycles, jurisdictions that had or were developing an NFIS tal. The combination of this trend and lockdowns during the increased from 28 to 34, while the number without such a strategy Covid-19 pandemic, have encouraged authorities to allow financial reduced from 68 to 59. Beyond NFIS, policymakers are also strate- service providers (FSPs) to onboarding their customers either par- gizing around digital financial services (DFS) and fintech. Nation- tially or fully remotely. An overwhelming majority of jurisdictions al-level strategies focused on digital development, DFS and fintech (91) report that they permit some form of remote account opening. to advance financial inclusion are all on the rise. There are now Of those that do, a majority allow people to self-enroll using mobile 1 When reporting on time-series trends across 2017 and 2022 survey cycles, this report looks at responses of the 95 jurisdictions that responded to both cycles, unless otherwise specified 2   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report or web-based apps/devices. These trends should be leveraged Financial sector authorities around the world are experiencing a along with the risk-based approach for identification and onboard- profound shift to data-driven supervision, enabled by robust tech- ing of clients, in line with Financial Action Task Force (FATF) require- nology and data solutions. Eighty-four jurisdictions have strategies ments and to help minimize documentation hurdles for the poorest to enable data-driven supervision. Web scraping on provider web- and most vulnerable populations. sites/social media/news articles and the use of natural language processing to analyze complaints data are two of the innovations In recent years, there has been a growing focus on financial con- most used for market conduct supervision. That said, most regula- sumer protection (FCP) regulation. Over 97 percent of responding tors use these methods only for supervising commercial banks jurisdictions have some form of legal framework for FCP. Many juris- rather than the broad spectrum of financial institution types. Super- dictions employ several, often overlapping, approaches to FCP. visors also appear to be lagging in the adoption of suptech solu- Though this is a welcome trend, simply having an FCP framework is tions for the supervision of non-banks, and in particular fintech/ DFS not sufficient. It is important for jurisdictions to implement FCP reg- providers. ulatory frameworks that comprehensively cover all types of financial products and services while maintaining the flexibility required for An accessible and efficient recourse mechanism for customers is an evolving financial sector. And while industry self-regulation can essential to an effective FCP framework. Ninety-two percent of the sometimes temporarily fill regulatory gaps, it is not a substitute for responding jurisdictions have laws or regulations establishing inter- a comprehensive FCP regulation. nal dispute resolution (IDR) standards. While most jurisdictions with these requirements are in higher income regions, 5 out of 9 jurisdic- Institutional arrangements for FCP supervision vary consider- tions that don’t have such requirements are upper middle-income ably. An integrated sectoral financial sector agency model of super- economies, suggesting a need to build out IDR mechanisms vision is present in seventy jurisdictions, where the mandate to beyond low-income economies. Collection of complaints data in a oversee FCP falls under multiple authorities with broader supervi- standardized format that allows for analysis across providers allows sory responsibilities over specific sectors. The next most popular supervisory authorities to analyze consumer satisfaction with spe- model is the integrated single agency model, followed by the gen- cific FSPs, identify emerging consumer issues early, and track inqui- eral consumer protection agency, and then by the dedicated mar- ries and complaints trends over time. Despite this, only 49 ket conduct authority model. High- and middle-income countries jurisdictions (42 percent) require this. Finally, in addition to stan- are more likely to have prudential and market conduct supervision dardized classification and format, supervisory authorities should functions separated but at an equal hierarchical level. Low-income consider the level of granularity of data needed as well as the economies, however, are more likely to have market conduct super- amount and frequency collected. Data should not be collected for vision embedded within supervision functions or have them sepa- its own sake but with an eye towards how it can be analyzed and rate but at differing hierarchal levels. While no single institutional used to improve supervision. model has been shown to be most appropriate across the board, it is imperative that prudential supervision and market conduct super- Alternative dispute resolution (ADR) mechanisms can be a useful vision functions (the latter focused on FCP) be kept separate. resource where financial consumers are unable to resolve their com- plaints with an FSP. The number of jurisdictions with an out-of-court Effective supervision, enforcement and monitoring are essential ADR mechanism has increased globally, across all income groups. to ensure that FCP frameworks have their intended positive impact. Except for South Asia, there has been an increase in both the abso- The topmost supervisory activity undertaken by authorities is the lute number and percentage of jurisdictions by region with an ADR drafting and provision of inputs into relevant legislation. The next mechanism between 2017 and 2022. There are a few areas of con- most prevalent activity is the collection and analysis of consumer cern. Only about 41 percent of respondents said they follow inter- complaints data. Despite the growth of this activity, market conduct national good practice of issuing decisions binding on the FSP, supervisors are still too reluctant to take more punitive enforcement while 40 percent offer mediation services. The remaining 28 per- actions against FSPs beyond issuing warnings and reprimands. cent issue non-binding decisions or recommendations. Addition- Authorities in middle income countries tend to be unwilling to ally, about half the respondents report that ADR mechanisms are impose harsher penalties, limiting their effectiveness. located within the financial regulator itself. This underscores the need to separate FCP regulatory and supervisory functions from dispute resolution to avoid diversion of valuable supervisory resources towards complaints handling.    3 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. Data controllers should minimize the amount of data they collect, limit third party sharing, limit the pur- poses for which this data is used, and ensure that data is stored for only for as long as it is needed. Policymakers should also consider frameworks to enhance data protection particularly for low-income and vulnerable populations. With the rapid rise of complex digital financial products and new manifestations of consumer risks, a more nuanced and expanded approach to financial literacy is very much needed. Currently, 78 jurisdictions (70 percent) have a financial education or financial capability strategy either in place or in development. The number of jurisdictions with a financial capability strategy, in place or in development, grew from 58 in 2017 to 66 in 2020. While heading in the right direction, there is a need to go beyond the traditional focus of financial education 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. Conversely, only 10 percent and 24 percent of jurisdictions include training on digital troubleshooting or digital money management, respectively. Policymakers should focus on inherent risks to consumers and improve the impact of their programs by seeking partners for imple- mentation and developing effective monitoring and measurement. The current financial inclusion and consumer protection land- scape is dynamic and promising, with regulators and policymakers taking concrete actions to address challenges and access to accounts growing rapidly. Gaps persist, with some being concen- trated by geographic and/or income grouping. A running theme of this report is the difference in oversight of commercial banks versus non-bank financial institutions. To close those gaps, regulators and supervisors need a risk-based approach, focused on the type of activity, rather than the type of institution. This report can help them avoid specific emerging issues or course correct. In any case, the ultimate outcome should be citizens that use financial services as a trusted tool to increase resilience and prosperity. 1 INTRODUCTION The 2022 Global State of Financial Inclusion and Consumer Pro- tory enablers of financial inclusion, FCP, and financial capability. The tection (FICP) Report is an update to the 2013 and 2017 FICP 2022 survey also includes new content on fintech, innovation, and reports. These surveys aim to provide a timely source of global data consumer credit, among others. These new topics have been added to benchmark efforts by financial sector authorities to improve the due do their increased significance in the two areas of financial enabling environment for financial inclusion and consumer protec- inclusion and consumer protection. In addition to being catalysts, tion. To date, this is the only longitudinal and global survey of this they also merit mention because of the risks and missed opportuni- nature. As such, this report serves as a valuable resource to shape ties they represent. the World Bank’s country engagements, a reference document for regulators and supervisors and, finally, a tool for both public and The survey includes responses from financial sector regulators in private sector actors with an interest in knowing the developments 118 jurisdictions,2 representing 130 economies.3 (See Appendix A in this sector. The Survey questionnaire covers key topics related to for a complete list of survey respondents.) Of the 118 responding financial inclusion and financial consumer protection (FCP) and jurisdictions in the sample, a majority (41) belong to Europe and aligns with international guidance to financial sector authorities in Central Asia, followed by Latin America and the Caribbean (26), these areas. Because the report aims to capture both a snapshot as Sub-Saharan Africa (19), the Middle East and North Africa (13), East well as trends over time, the survey questionnaire has been modi- Asia and Pacific (12), South Asia (5), and North America (2). By fied over the three cycles to reflect the changing policy and regula- income level, slightly over a third of responding jurisdictions are tory landscape of financial inclusion and consumer protection. high income, and another third are upper-middle income. Twen- ty-seven percent of jurisdictions are lower-middle income, and only The main themes covered under the survey include the financial five jurisdictions, representing four percent of the total sample of sector landscape, financial inclusion policies and strategies, regula- respondents, are low income.4 2 A jurisdiction refers to the remit of the responding authority. For example, the Eastern Caribbean Central Bank is considered a single jurisdiction although it covers eight economies. The other multi-economy jurisdiction included in the survey is the Central African Economic and Monetary Community. Members of the European Union, including those in the Euro system, responded separately to the survey. 3 Two jurisdictions span several economies: The Central African Economic and Monetary Community covers Cameroon, Central African Republic, Chad, Equa- torial Guinea, Gabon, and the Republic of Congo, and the Eastern Caribbean Central Bank covers Anguilla, Antigua and Barbuda, Dominica, Grenada, Mont- serrat, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines. For more information on how the World Bank Group defines and classifies economies, see “How Does the World Bank Classify Countries?,” https://datahelpdesk.worldbank.org/knowledgebase/articles/378834-how-does-the-world-bank-classify- countries. 4 The official World Bank Group composition of jurisdictions by region and income can be found at “World Bank Country and Lending Groups,” https://data- helpdesk.worldbank.org/knowledgebase/articles/906519. 6   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report Table 1.1: Composition of 2022 FICP Survey Respondents The 2022 survey data was collected in the first half of 2022 via an NUMBER OF PERCENTAGE online platform. Data are self-reported and have not been inde- RESPONDING OF ALL pendently verified in full by the World Bank Group. Efforts were, JURISDICTIONS JURISDICTIONS however, made to engage with responding jurisdictions to clarify Regional East Asia & Pacific 12 10% responses and ensure the completeness and consistency of submis- Breakdown sions. As was the case for the 2017 data, the data collected in the Europe & Central Asia 41 35% 2022 cycle will be publicly available from June 2023 on a World Latin America & Caribbean 26 22% Bank Group website dedicated to this survey. That website link is Middle East & North Africa 13 11% https://www.worldbank.org/en/topic/financialinclusion/brief/ficp- North America 2 2% survey. South Asia 5 4% Sub-Saharan Africa 19 16% Income- High income 42 36% Level Breakdown Upper-middle income 38 33% Lower-middle income 31 27% Low income 5 4% 2 FINANCIAL SECTOR LEGAL, REGULATORY, AND SUPERVISORY FRAMEWORKS 2.1 FINANCIAL SECTOR LANDSCAPE KEY HIGHLIGHTS Financial sector landscape: Currently, most jurisdictions have Having a diverse and competitive financial system with various a diverse ecosystem of non-bank financial institutions, with types of financial institutions can help to advance financial inclusion. consumer credit providers being the most prevalent category. Financial inclusion can help reduce poverty and inequality by aiding Despite their ubiquity, in many jurisdictions, consumer credit people to invest in the future, smooth their consumption, and man- providers remain unregulated, which poses consumer protec- age financial risks (Demirgüç-Kunt, Klapper, and Singer 2017). In tion risks. Financial cooperatives and non-bank e-money issu- light of this, the World Bank Group considers financial inclusion a ers are the third and fourth most common institutional key enabler to boost shared prosperity.5 categories. Financial cooperatives exist in 100 percent of low-income jurisdictions, and non-bank e-money issuers are most prevalent in emerging markets and developing econo- For purposes of the survey, responding regulators were asked to mies. As it relates to the diversity of financial institutions over- segment financial service providers (FSPs) regulated within their all, the Middle East and North Africa and Sub-Saharan Africa jurisdictions into six institutional categories: (i) commercial banks, (ii) Regions have the least and most institutional diversity, respec- other banks, (iii) financial cooperatives, (iv) other deposit-taking tively. institutions (ODTIs), (v) consumer credit providers (CCPs), and (vi) Permissible activities: Various payment services, the issu- non-bank e-money issuers (NBEMIs). These categories are defined ance of e-money, and the ability to contract or act as agents in table 2.1. For the purposes of this survey, respondents were are the most commonly permitted activities across all institu- requested to provide data only for institutions that provide standard tional categories. Conversely, the issuance of pensions and retail banking products such as loans, deposits, and payment ser- insurance is the most restricted across the board. vices, thus excluding insurance companies, mutual funds, invest- Consultations around financial sector regulation: Consulta- ment banks, and private equity funds. tion with industry on regulatory and supervisory frameworks is nearly uniform across all jurisdictions (91 percent), though sig- nificantly fewer jurisdictions consult with the public or con- sumers directly. The frequency and the channels for the consultations in the rule-making process vary significantly, but overall, more advanced jurisdictions have prioritized a consul- tative approach more than less advanced jurisdictions. 5 World Bank, “Financial Inclusion Overview,” https://www.worldbank.org/en/topic/financialinclusion/overview. 8   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report Table 2.1: FSP Institutional Categories and Definitions FSP INSTITUTIONAL CATEGORY DEFINITION Commercial Bank A bank is an institution licensed for taking deposits from the general public and subject to supervision in the meaning of the Basel Core Principles for Effective Banking Supervision. A commercial bank is a bank that is (a) not subject by law or regulation to (i) a specified maximum size of loan or savings product or (ii) any limitation on the type of client that may be served and (b) not tasked by law or regulation with serving any particular industry. Other Bank A bank other than a commercial bank. In a given country, this term may include rural banks, agricultural banks, digital banks, and postal banks, among other types of non-commercial banks. It does not include cooperative banks or mutual banks, which are categorized as financial cooperatives for the purposes of this survey. Financial Cooperative A member-owned and member-controlled FSP governed by the “one member, one vote” rule. Financial cooperatives often take deposits or similar repayable funds from, and make loans only to, members, although some also serve non-members. The term includes credit unions, caisses, cajas, cooperative banks, and savings and credit cooperatives. ODTI An institution authorized to collect deposits or savings that does not fit the definition of a bank or financial cooperative. ODTIs include deposit-taking microfinance institutions, savings and loan associations, and other non-bank deposit-taking institutions. CCP An entity that does not take deposits and provides retail credit to consumers (secured or unsecured, including via digital means). CCPs include, for example, payday lenders, finance companies, microcre- dit companies, app-based lenders, money lenders, and digital credit provided via e-wallets, among other CCPs. NBEMI An issuer of e-money that is not a bank. The relevant questions in the survey request respondents to indicate whether the non-bank entity is authorized to act as an issuer of e-money. (Note that this does not include e-money distributors.) Table 2.2: Financial Sector Landscape, 2022 Percentage of responding jurisdictions with legal/regulatory framework for institutional category, by income and regional group UPPER- LOWER- HIGH MIDDLE MIDDLE LOW INSTITUTIONAL CATEGORY ALL INCOME INCOME INCOME INCOME EAP ECA LAC MENA NA SAR SSA Commercial bank 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Other bank 62% 55% 66% 65% 80% 75% 44% 58% 62% 100% 80% 89% Financial cooperative 71% 69% 76% 65% 100% 67% 73% 88% 8% 100% 60% 89% ODTI 52% 29% 53% 71% 100% 58% 22% 81% 23% 100% 80% 79% CCP 79% 86% 74% 77% 80% 83% 88% 58% 92% 50% 80% 79% NBEMI or distributor 69% 76% 63% 71% 80% 75% 73% 62% 54% 50% 100% 74% No. of responding jurisdictions 118 42 38 31 5 12 41 26 13 2 5 19 Note: Percentages represent the percentage of jurisdictions under each category that indicated they had a certain type of institution. Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa. Financial Sector Legal, Regulatory, and Supervisory Frameworks   9 Figure 2.1: Financial Sector Landscape, 2017 vs. 2022 Among the non-bank institutions, the most common category is 2017 2022 that of CCPs. These credit providers are present in 79 percent of 100% 100% participating jurisdictions. This category was referred to as micro- credit institutions in the 2017 survey but has been updated to reflect a broader composition of CCPs,6 including payday lenders, finance companies, microcredit companies, app-based lenders, 79% money lenders, and digital credit provided via e-wallets, among 71% other CCPs. Currently, the highest prevalence of CCPs is in the Mid- 69% 65% dle East and North Africa (92 percent of responding jurisdictions 62% 59% from the region). 57% 56% 52% 52% The number of these types of institutions and, in particular, dig- ital credit providers has risen sharply in recent years, posing both an opportunity and a threat for consumers and requiring authorities to become more vigilant as to their operations and impact. In light of the consumer protection and financial stability implications of this expansion in credit activities, the 2022 survey, for the first time, delves into responsible lending in section 4.9. Particularly considering this growth of CCPs, it is notable that Commercial Other Financial ODTIs CCPs NBEMIs many jurisdictions do not supervise or regulate them (figure 2.2). banks banks cooperatives Specifically, 35 jurisdictions (30 percent) have no oversight over Note: Figure is based on 124 jurisdictions in 2017 and 118 jurisdictions in 2022. money lenders, 24 jurisdictions (21 percent) have none over payday lenders, 23 jurisdictions (20 percent) have none over digital lenders, In addition to traditional banking institutions, many jurisdictions 14 jurisdictions (12 percent) have none over digital credit provided report having a diverse ecosystem of non-bank financial institutions. via e-wallets, and 13 jurisdictions (11 percent) have none over Broadly speaking, non-bank institutions can be a useful supplement finance companies. South Asia is least likely to regulate and super- to banks in providing financial services to individuals and firms. vise CCPs, followed by Latin America and the Caribbean, then Non-banks may be focused on tailoring their services to particular Sub-Saharan Africa. groups or specializing in a particular sector, including reaching unserved or underserved and vulnerable populations, such as women, youth, and rural dwellers, among others. 6 Whereas micro-credit institutions (MCIs) in 2017 were defined as “financial institutions that do not take deposits and provide microcredit targeting low-income customers,” CCPs are defined as “entities that do not take deposits and provide retail credit to consumers (secured or unsecured) including via digital means.” CCPs are thus broader in their definition and will include, but not be limited to, MCIs. 10   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report Figure 2.2: Extent of Supervision and Regulation of CCPs Financial cooperatives exist and are regulated in 71 percent of Percentage of reporting jurisdictions not supervising or regulating CCPs all jurisdictions and 100 percent of low income jurisdictions. Money lenders The fourth most common institutional category in 2022 is that of 30% NBEMIs, which are a key driver of digital financial services (DFS) in Payday lenders many jurisdictions. These institutions play an important role in pro- viding an array of financial services—particularly payments, trans- 21% fers, and savings—to those who are excluded from the formal Digital lenders financial system. In 2022, 69 percent of respondents report NBEMIs 20% as one of the institutional categories regulated in their jurisdictions. By comparison, in 2017, only 59 percent of reporting jurisdictions Microcredit companies had NBEMIs (figure 2.3). It is likely that this trend will continue in the 17% coming years, and, as such, jurisdictions without this category may need to prepare for this trajectory. Digital credit provided via e-wallets 12% Finance companies 11% Note: Figure is based on 117 respondents in 2022. Figure 2.3: Issuance of E-Money by Non-Bank Financial Institutions Percentage of responding jurisdictions that have a legal/regulatory framework for NBEMIs, by income and regional group 2017 2022 100% 80% 82% 76% 75% 73% 74% 69% 71% 70% 64% 63% 64% 62% 59% 59% 54% 53% 54% 44% 43% 33% All High Upper-Middle Lower-Middle Low EAP ECA LAC MENA SAR SSA Income Income Income Income Note: Percentages in 2017 are based on 124 jurisdictions (all), 39 high income, 37 upper-middle income, 34 lower-middle income, 11 low income, 17 Europe and Central Asia (ECA), 11 East Asia and Pacific (EAP), 18 Latin America and Caribbean (LAC), 9 Middle East and North Africa (MENA), 7 South Asia (SAR), and 23 Sub-Saharan Africa (SSA). Percentages in 2022 are based on 118 jurisdictions (all), 42 high income, 38 upper-middle income, 41 lower-middle income, 5 low income, 41 ECA, 12 EAP, 26 LAC, 13 MENA, 5 SAR, and 19 SSA. By region, NBEMIs play a much greater role in emerging mar- category between 2017 and 2022 (Bangladesh, Pakistan, and the kets and developing economies. Specifically, South Asia and East Maldives) were in this region.7 Asia and the Pacific are the regions with the highest proportion of their responding jurisdictions indicating they have and are regulat- Furthermore, with the exception of the East Asia and Pacific ing NBEMIs (100 and 75 percent of responding jurisdictions, region, the percentage of jurisdictions in each region with a regula- respectively.) In 2017, three of seven responding jurisdictions in tory framework for NBEMIs increased in 2022. Also, with the excep- South Asia reported having NBEMIs within their jurisdictions, while tion of Sub-Saharan Africa, the absolute number of jurisdictions by five of five did so in 2022. Indeed, all the countries that added this region and income group also increased.8 7 Afghanistan, which had reported having NBEMIs in 2017, did not respond to the 2022 version of the survey. 8 The percentage increase during the period represents a reduction in absolute number of jurisdictions because of a lower response rate for that region. Financial Sector Legal, Regulatory, and Supervisory Frameworks   11 Table 2.3: Number of Providers across Institutional Categories COMMERCIAL OTHER FINANCIAL BANKS BANKS COOPERATIVES ODTIS CCPS NBEMIS 2017 2022 2017 2022 2017 2022 2017 2022 2017 2022 2017 2022 Median number of providers 23 22 2 3 85 51 11 16 42 53 4 5 Median no. providers, as a percentage of com- 100% 100% 7% 14% 370% 232% 48% 73% 183% 241% 17% 23% mercial bank providers Table 2.3 highlights the relative changes in the median number As detailed in table 2.4, over 90 percent of commercial banks in of financial institutions per type and as a function of the number of the 114 jurisdictions responding to this question are allowed to commercial banks. Between 2017 and 2022, the most notable undertake a variety of activities, including (1) providing checking or change was with the financial cooperatives, which contracted as current accounts, (2) transferring domestic and international remit- compared to banks. This contrasts with CCPs, which expanded rel- tances, (3) receiving international remittances, and (4) issuing pay- ative to commercial banks. The median number of CCPs per juris- ment cards (whether these be credit, debit, and other non-prepaid diction rose from 42 to 53, and the median number of CCPs as a cards). In addition, between 80 and 90 percent of commercial banks percentage of commercial banks increased from 183 to 241 per- in the 114 responding jurisdictions were free to undertake the fol- cent. This increase should be taken with a pinch of salt, because the lowing additional activities: (1) contracting retail agents as third- 2022 categorization of CCPs is broader than the categorization of party delivery channels, (2) acting as an agent of an FSP, and (3) microcredit institutions in 2022, but this significant increase in CCPs issuing e-money (including prepaid cards with an e-money func- as a percentage of commercial banks (which have remained steady) tion). The two activities that were permitted with less frequency speaks to the proliferation of providers in this category. The median were distributing insurance, with only 75 percent of responding number of providers and presence relative to commercial banks for jurisdictions allowing commercial banks to undertake this function, NBEMIs, other banks, and ODTIs also increased since 2017, though and distributing pension products, which 68 percent of responding at a more modest rate. This suggests that financial markets in gen- jurisdictions allowed commercial banks to do. eral are diversifying by provider type. By definition, the issuance of e-money is allowed for NBEMIs. As it relates to the diversity of financial institution types overall, Indeed, the fact that non-banks have been allowed to issue e-money the Middle East and North Africa is the region with the least institu- has been a significant catalyst for the growth of DFS in many mar- tional diversity; the average number of institution types per jurisdic- kets (Staschen and Meagher 2018). Ghana is a good example of a tion is 2.89. This contrasts with Sub-Saharan Africa, which has the country in which the participation of non-banks in the issuance of highest institutional diversity, with an average number of institution e-money served as the key to the explosion of mobile money. Sixty types of 4.52. Of course, some jurisdictions, including the Republic percent of Ghanaian adults now have a mobile money account, of Korea, Mexico, Rwanda, and the United States, among others, while only 39 percent have a financial institution account (Demirgüç- possess all institution types. Jurisdictions with only two institutional Kunt et al. 2022). In Ghana, Kenya, and several other countries, the categories—the least reported by any jurisdiction—include Belarus, impact of DFS on the rise in financial inclusion cannot be over- Uzbekistan, and the West Bank and Gaza. stated. All 114 responding jurisdictions allow commercial banks to issue 2.2 PERMISSIBLE ACTIVITIES e-money. Thirty-nine jurisdictions allow other banks, 34 jurisdictions allow financial cooperatives, and only 21 jurisdictions allow ODTIs Regulatory authorities should ideally take a proportionate to issue e-money. Section 3.8 delves further into the regulatory approach to the regulation and supervision of the varied types of approaches to e-money and the types of institutions that are active. financial institutions so as to strike the right balance between safe- guarding the financial system and letting financial services flourish. As it relates to agents, commercial banks and NBEMIs enjoy This means having a clear and measured position on which activities more leeway than other institution types. Eighty-nine percent of are permissible for each category of provider. responding jurisdictions permit commercial banks or NBEMIs to contract retail agents as a third-party delivery channel. Similarly, commercial banks and NBEMIs are more likely to be allowed to act as an agent for an FSP; 98 and 63 jurisdictions, respectively, indicate this is permissible. For all other financial institutions, fewer jurisdic- tions allow the use of agents, and CCPs are the most restricted. 12   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report Table 2.4: Permissible Activities Across Institution Types Number (percentage) of responding jurisdictions that permit FSPs to perform the following activities COMMERCIAL OTHER FINANCIAL BANKS BANKS COOPERATIVES ODTIS CCPS NBEMIS Provide checking or current accounts 114 (100%) 46 (71%) 43 (56%) 24 (41%) N/A N/A Contract with retail agents as third-party delivery channels 100 (89%) 47 (73%) 50 (65%) 34 (58%) 49 (54%) 72 (89%) Act as an agent of an FSP 98 (87%) 48 (73%) 50 (65%) 36 (60%) 53 (59%) 63 (78%) Transfer domestic remittances 114 (100%) 54 (82%) 53 (68%) 31 (52%) 25 (28%) 70 (89%) Transfer international remittances 113 (99%) 49 (75%) 41 (53%) 23 (39%) 18 (20%) 53 (67%) Receive international remittances 107 (100%) 46 (77%) 39 (55%) 26 (49%) 16 (20%) 55 (72%) Issue payment cards 114 (100%) 47 (73%) 45 (58%) 31 (53%) 21 (23%) 47 (59%) Issue e-money 97 (85%) 39 (60%) 34 (45%) 21 (35%) 24 (27%) 66 (83%) Distribute insurance 85 (75%) 36 (57%) 44 (57%) 22 (37%) 37 (41%) 30 (38%) Distribute pension products 76 (68%) 28 (46%) 35 (46%) 12 (20%) 15 (17%) 23 (29%) Distribute consumer credit products N/A N/A N/A N/A N/A 31 (41%) Distribute savings products N/A N/A N/A N/A N/A 23 (31%) No. of responding jurisdictions 114 66 78 60 90 81 Note: The survey asked respondents to note whether each institutional category was permitted to perform each activity, selecting from “Yes,” “Yes, but restricted,” and “No.” For the purposes of this analysis, “Yes, but restricted” is considered an affirmative response. 2.3 CONSULTATIVE PROCESSES FOR DEVELOPING terly consultation with industry about regulations that are relevant FINANCIAL SERVICE REGULATION to FSPs. These industry consultations are typically held with industry associations. Developing an effective and well-calibrated regulatory frame- work requires both public and private sector engagement to Fewer jurisdictions (57 percent of respondents) indicate that achieve a balanced, optimal result. Particularly in the dynamic and they have a formal process of consultation with consumers, and complex areas of DFS and fintech, authorities can significantly aug- when this does take place, it is almost always on an ad hoc basis.11 ment their ability to regulate these spaces successfully if they work The United Arab Emirates is the only country in this sample set that in consultation with both industry and consumers. The World Bank has consultations as frequently as monthly. Consultations with con- Group’s 2017 edition of Good Practices for Financial Consumer Pro- sumers are orchestrated primarily through public engagements tection (hereafter referred to as the 2017 Good Practices) states that and, to a lesser extent, through industry associations. the formulation of regulations should involve consultations with a range of relevant parties. The survey reveals that the frequency and the channels for con- sultations in the rule-making process vary significantly, but overall, Recognizing this as best practice, 91 percent of respondents what is clear is that more advanced economies have prioritized a have a formal process to consult with the industry when developing consultative approach more than less advanced ones. For both con- regulatory frameworks that govern FSPs and their activities, while sultations with consumers and industry, high-income regions are 75 percent consult directly with the public. Whereas an institution- most likely to have these formalized, though even in these cases, alized and regular process would be ideal, 89 percent of these con- fewer than half of jurisdictions report having such consultations in sultations occur on an ad hoc basis. Tanzania, the Eastern Caribbean place. Central Bank,9 and the Central African Economic and Monetary Community,10 however, are jurisdictions that do have a formal quar- 9 Members of the Eastern Caribbean Central Bank are Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines. Members of the Central African Economic and Monetary Community are Cameroon, the Central African Republic, Chad, Equatorial Guinea, Gabon, and the 10 Republic of Congo. 11 For a CGAP cross-country study on how regulators are bridging the regulator–consumer gap via customer advisory panels, see Brix Newbury and Duflos (2022). 3 SELECTED CATALYSTS FOR FINANCIAL INCLUSION KEY HIGHLIGHTS Financial Inclusion Strategies and Policies Policy makers are deploying various strategies to drive inclusion. E-money: Eighty-eight jurisdictions have incorporated the con- National financial inclusion strategies are used most commonly. cept of e-money into law, and lower-middle-income countries are Sixty-three jurisdictions have one either in place or under devel- ahead of the curve in codifying e-money in the law. In terms of opment. Along with the acceleration on fintech, digital finance e-money issuance, 74 jurisdictions permit non-banks to do so on and fintech strategies have also grown in popularity; 56 jurisdic- their own, while 14 jurisdictions require them to do so only in tions have them in place or in development. Not all strategies or collaboration with a bank. Between 2017 and 2022, there has policies have a gender lens, action plans, or monitoring and eval- been a notable increase in the number of jurisdictions restricting uation frameworks; the absence of these makes for less effective how FSPs use customer e-money funds. instruments overall. Fintech innovations: Digital credit is one of the most widely used The most commonly used policy measure to promote financial fintech innovations globally, second only to payments. Fifty-five inclusion is requiring or encouraging FSPs to adopt industry stan- jurisdictions report having active digital credit providers. The sec- dards for social performance or customer protection. The next ond, third, and fourth most common types of fintech innovations most commonly used measure is requiring deposit-taking institu- are crypto-assets (issuance, exchange, and custody), crowdfund- tions to offer a basic account product, followed by utilizing inno- ing, and peer-to-peer lending. Consumer risks related to fintech vation offices, regulatory sandboxes, or other innovative need significant levels of regulator vigilance, as evidenced by the initiatives. recent collapse of cryptocurrency exchanges. When opening a basic account, approximately 45 percent of Credit-reporting systems: Commercial banks continue to have responding jurisdictions allow the use of simplified customer due the most expansive access to credit registries and credit bureaus, diligence, while 91 percent allow some form of remote account followed by CCPs. Overall, with the data showing only modest opening. The data shows that many authorities recognize the increases in access to credit bureaus and registries despite the need for this flexibility given low-risk scenarios. positive impact on access to finance, this area represents rela- tively low-hanging fruit where policy makers can stimulate greater Other Drivers of Financial Inclusion inclusion. Agents: For commercial banks and NBEMIs, most jurisdictions Financial inclusion data collection: Seventy jurisdictions conduct allow agents to accept account opening and loan applications, financial inclusion surveys of households or individuals, and 38 verify customer identity, and provide cash-in/cash-out services. collect supply-side gender-disaggregated data. Geospatial data Other institutional categories tend to enjoy more restricted use (such as the location of customers and financial access points) is of agents. While more flexibility with agents would have its ben- the least collected, meaning that the significant benefit from this efits, it must be applied with consideration for growing agent-re- type of data is not being realized. lated fraud risks. 14   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report This section details the various strategies, policies, programs, Table 3.1 details the prevalence of different types of strategies for and mechanisms that have been put in place by authorities to both 2017 and 2022. For three of four of the different types of strat- advance financial inclusion. Apart from financial inclusion, digital, egies where a comparison is possible between the two cycles of the fintech, and other relevant strategies and policies, respondents survey, it is clear that jurisdictions continue to find value in the were also asked about requirements and practices around several development and implementation of these strategies. potential catalysts for inclusion, including (1) the type of data col- lected by regulators to assess and improve the level of inclusion; (2) Overall, NFISs are the most prevalent tool used. Sixty-three juris- the provision of basic transactional accounts that often serve as the dictions either have the strategy in place or are in the process of first rung on a ladder toward consumers having access to a broad developing one. Between 2017 and 2022, 10 jurisdictions went suite of financial services; (3) the presence of simplified customer from having an NFIS in development to having one in place. An due diligence (CDD) measures that balance rapid and easy account NFIS can provide an effective instrument to chart a clear and coor- opening with measures to limit money laundering and terrorist dinated path toward improving financial inclusion. An NFIS enables financing; (4) the role of remote account opening and electronic stakeholders jointly to define financial inclusion objectives, identify know your customer (e-KYC), both of which have been particularly obstacles and opportunities relevant to the achievement of those relevant in the context of the global COVID-19 pandemic; (5) finan- objectives, and outline a prioritized set of actions to pursue in a cial service distribution channels and, in particular, how agents and coordinated manner. third parties have contributed to the increase in the reach of finan- cial services to previously underserved areas and populations; (6) In terms of the geographic prevalence of NFIS, a clear pattern the evolution of e-money, particularly for payments, and how regu- emerges. Specifically, in Sub-Saharan Africa, South Asia, and Latin latory frameworks have responded; (7) the rise of fintech, including America and the Caribbean, 70 percent of the jurisdictions in each some negative externalities that policymakers should be mindful of; region either have or are developing an NFIS. Of the three remain- and, finally, (8) developments in credit reporting systems.12 ing regions that do not meet this 70 percent threshold (the Middle East and North Africa, Europe and Central Asia, and North Amer- ica), two (Europe and Central Asia and North America) comprise 3.1 FINANCIAL INCLUSION AND DIGITAL INCLUSION mostly higher-income economies. This highlights that NFISs are less STRATEGIES prevalent in more affluent jurisdictions. Indeed, 100 percent of responding low-income jurisdictions and 94 percent of responding The growing awareness of the benefits of financial inclusion for lower-middle-income jurisdictions report having an NFIS either in national development has meant that inclusion has become an place or under development. increasingly common and high-profile policy objective. Policy mak- ers have deployed a variety of strategies and other instruments to Recently, the development of fintech and its penetration in a achieve their inclusion goals, and the survey captures the types and wide spectrum of financial services have picked up speed. A variety quantities of strategies that are prevalent and preferred by national of fintech solutions are being offered. They can be clustered into authorities. These strategies include stand-alone national financial three broad groups: (a) financial services, with businesses that offer inclusion strategies (NFISs) or other financial sector or development internet-based applications; (b) financing via platforms that match strategies where financial inclusion is covered as one component. investors and lenders, such as crowdfunding or peer-to-peer lend- Table 3.1: Types of Financial Inclusion Strategies and Instruments Number of jurisdictions with financial inclusion strategies in place or in development, 2017 and 2022. 2017 2022 IN PLACE IN DEVELOPMENT TOTAL IN PLACE IN DEVELOPMENT TOTAL National Financial Inclusion Strategies 34 29 63 44 19 63 National Financial Sector Strategy with a Financial Inclusion 34 11 45 43 5 48 Component National Development Strategy with a Financial Inclusion 32 7 39 36 6 42 Component National Microfinance Strategy 25 8 33 18 7 25 Digital Development Strategy with a Financial Inclusion N/A N/A N/A 28 18 46 Component DFS or Fintech Strategy N/A N/A N/A 34 22 56 Note: This data is based on 124 jurisdictions in 2017 and 112 in 2022. 12 This topic is being analyzed in such depth for the first time in the FICP survey because of the catalysts’ role in facilitating access to finance. Selected Catalysts for Financial Inclusion   15 ing; and (c) payments. Fintech13 offers wide-ranging opportunities Financial sector strategies with a financial inclusion component for reducing costs and frictions, enhancing efficiency and competi- and digital development strategies are the third and fourth most tion, narrowing information asymmetry, and broadening access to a common tools; 56 and 48 jurisdictions, respectively, either have wider set of financial services—especially for the excluded and them in place or are developing them. underserved. Looking only at the “Set of 95” jurisdictions (see Appendix B), Against this background, it is no surprise that 56 jurisdictions are the number of jurisdictions that have or are developing a financial either developing or already have in place a DFS or fintech strategy; inclusion component in their national development strategy has this is nearly as many jurisdictions that either have or are developing increased from 28 to 34, while the number without such a strategy an NFIS (63 jurisdictions). With 90 percent of jurisdictions in East reduced from 68 to 59. In summary, the data highlights that policy Asia and Pacific and 83 percent in the Middle East and North Africa, makers are increasingly favoring having strategies in place to drive these two regions are most likely to have a DFS or fintech strategy. inclusion, whether those strategies be stand-alone like NFIS or Rwanda, which is aggressively pursuing a digital transformation baked into broader development plans. with significant support from the public sector, is the only low-in- come jurisdiction with a fintech strategy currently in development, Lastly, the type of strategy that declined the most in prevalence but 27 lower-middle income and 34 upper-middle income countries between 2017 and 2022 is the national microfinance strategy. In have strategies at various levels of completion. 2017, 27 jurisdictions had such a strategy either in place or under development, but by 2022, only 21 jurisdictions are in the same position, indicating a 26 percent decrease.14 Figure 3.1: Digital Strategies to Promote Financial Inclusion Number of jurisdictions reporting strategies in place or in development, by region and income level Digital development strategy Digital financial services or fintech strategy: with financial inclusion component: in place in development in place in development 15 10 5 00 0 0 0 EAP ECA LAC MENA SAR SSA High Low Lower-middle Upper-middle income income income income Note: Both North America and South Asia have no DFS or fintech strategies, and North America has no digital development strategies. The three multi-economy respondents (Central Bank of West African States, Bank of Central African States, and Eastern Caribbean Central Bank) are not included in income group classifications. Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, SAR = South Asia, SSA = Sub-Saharan Africa. 13 Various definitions of fintech exist. The survey uses the broad definition of fintech from the International Monetary Fund and World Bank Group to describe advances in technology that have the potential to transform the provision of financial services, spurring the development of new business models, applications, processes, and products. Examples include e-money, peer-to-peer lending, credit scoring and decision-making, robo-advisory services, and distributed ledger technology. In the 2022 cycle, for this question alone, three jurisdictions from the “Set of 95” (Azerbaijan, Denmark, and the Central African Economic and Monetary 14 Community) did not respond to this question; thus, the number of responding jurisdictions in 2022 is 92. 16   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report Twenty-one jurisdictions have (whether already in place or under latory or supervisory conditions that may prevent the provision of development) the combination of a DFS/fintech strategy, an NFIS, appropriate products and services to underserved consumers (Fath- and a digital development strategy with a financial inclusion com- allah and Pearce 2013). ponent. Figure 3.2: Public and Private Sector Involvement in the Development of Various Strategies BOX 3.1 Percentage of jurisdictions reporting both public and private sector Digital Strategies and Financial Inclusion involvement in strategies National microfinance strategy An analysis of Findex data against that of this survey reveals that, in jurisdictions with a digital development strategy with 93% a financial inclusion component, a DFS strategy, or a fintech National financial inclusion strategy strategy, on average, 41 percent of responding individuals 90% reported that they have made a digital payment in the past year or used the internet or their phone to send/receive National development strategy with a financial inclusion component money from a financial account, as opposed to 31 percent of 88% individuals in jurisdictions without such strategies. National financial capability, literacy, or education strategy One notable example of a jurisdiction that has been very pro- 83% active with its policy action to support digitization in the finan- Digital development strategy with a financial inclusion component cial sector is Ghana. In 2020, Ghana launched a DFS policy to 81% improve governance of the DFS ecosystem, support the development of an enabling DFS regulatory environment, Digital financial services or fintech strategy and build the capacity of authorities to supervise DFS, among 77% other objectives. The policy details public and private sector National financial sector strategy with a financial inclusion component actions to achieve these goals within a five-year window. 74% Implementation of the strategy already includes the launch of a consolidated government payment portal through which Note: Figure is based on responses from a varying number of jurisdictions for more than 150 government agencies, including the passport each option. The maximum number of jurisdictions that gave responses was 60. office and tax authority, can receive digital payments. Source: Buruku (2020). The percentage of jurisdictions that report that policy develop- ment involved the private sector ranges from 74 percent for national financial sector strategies with a financial inclusion component to 90 According to the World Bank’s toolkit Developing and Opera- percent for NFISs (figure 3.2). tionalizing a National Financial Inclusion Strategy, one of the key success factors for NFIS development and operationalization is For most types of financial inclusion strategies, and most notably early and sustained engagement of relevant stakeholders—includ- for NFIS, DFS, or fintech strategies, central banks tend to be the ing the private sector—to create broad buy-in and align efforts leading entity in development and implementation (figure 3.3). The across financial and non-financial policy areas, such as ministries of ministry of finance is the second most likely leading institution and education and social affairs and consumer protection entities (WBG is particularly likely to lead on microfinance, DFS, or fintech strate- 2018). This engagement of public and private sector stakeholders gies. Some of these strategies are led by a combination of stake- should extend from design to implementation and finally to moni- holders (24 percent of jurisdictions that have or are developing an toring and evaluation (M&E) of the relevant strategy. Engaging with NFIS). Whichever entity takes the lead, the most critical success the private sector is particularly useful for gathering a variety of dif- factor is the level of commitment and consistency of the leadership, ferent viewpoints and understanding bottlenecks to financial inclu- as well as the extent to which they are empowered to move the sion from a provider’s perspective. In addition, private sector players process forward. provide unique insights into the cost drivers and constraining regu- Selected Catalysts for Financial Inclusion   17 Figure 3.3: Lead Entity in the Development of Various Financial Strategies, 2022 Percentage of responding jurisdictions indicating a particular entity leading on strategy development Central Bank Ministry of Finance or other Ministry Jointly led by multiple stakeholders Other financial sector regulatory authority Other 46% 46% 45% 41% 40% 34% 31% 31% 28% 28% 26% 25% 24% 24% 24% 23% 19% 20% 17% 17% 15% 14% 9% 9% 10% 10% 7% 8% 8% 6% 5% 2% 2% 3% 0% National financial National financial sector National development National National financial Digital development Digital financial inclusion strategy strategy with a financial strategy with a financial microfinance capability, literacy, or strategy with a financial services or inclusion component inclusion component strategy education strategy inclusion component fintech strategy Note: Figure is based on responses from a varying number of jurisdictions for each option. The maximum number of jurisdictions that gave responses was 54. Regarding the components of strategies, action plans and an strategies without clearly articulated actions or a formal framework M&E framework are the most common across all strategy types. to assess progress against those plans. This makes it more challeng- More than two-thirds of jurisdictions have these in place (figure 3.4). ing to evaluate the success of those strategies and/or to correct However, this highlights that close to a third of jurisdictions have course as needed. Figure 3.4: Selected Provisions Contained in Financial Strategies Percentage of reporting jurisdictions reporting each of the provisions in their strategies Strategy contains an action plan and M&E Strategy contains specific, numeric targets Strategy contains specific gender numeric targets 92% 91% 82% 78% 76% 76% 75% 55% 43% 47% 42% 42% 31% 33% 33% 26% 29% 25% 22% 15% 15% National financial National financial sector Digital development National financial National development Digital financial National inclusion strategy strategy with a financial strategy with a financial capability, literacy, or strategy with a financial services or microfinance inclusion component inclusion component education strategy inclusion component fintech strategy strategy Note: Figure is based on responses from a varying number of jurisdictions for each option. The maximum number of jurisdictions that gave responses was 64. Fewer jurisdictions have specific quantitative targets across their action plans and M&E frameworks, the lack of targets can also various strategies, despite the fact that targets allow a data-driven potentially limit the success of those strategies. approach to be applied and help focus energy on the most impact- ful goals and galvanize action to achieve scale in financial inclusion Given the continued gaps in financial inclusion by gender (figure 3.4). Among the countries with an NFIS, only 55 percent of (Demirgüç-Kunt et al. 2022), it is also a missed opportunity not to jurisdictions have quantitative targets. Digital strategies are even have gender-specific targets. The strategy type that is most likely to less likely to include quantitative targets; less than one-third of juris- have gender targets is an NFIS, but even within jurisdictions with an dictions report they include quantitative targets. As with the lack of NFIS in place, only 43 percent include gender targets. 18   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report Table 3.2 details key information on NFISs in the full 2022 survey and geography that recently launched an NFIS. sample and highlights selected jurisdictions across income levels Table 3.2: Elements of NFISs, for All Responding Jurisdictions and in Selected Jurisdictions LEAD ENTITY STRATEGY CONTAINS Involvement Ministry Specific of Public Other Financial- of Finance Jointly Led Specific Gender, Term of NFIS and Private Central Sector Regula- or Other by Multiple Action Plan Numeric Numeric (Years) Sectors Bank tory Authority Ministry Stakeholders Other and M&E Targets Targets 5.4 years All (average) 90% 46% 2% 24% 24% 2% 92% 55% 43% Argentina 2020–23 ✔ ✔ Bangladesh 2021–26 ✔ ✔ ✔ ✔ ✔ Belize 2019–22 ✔ ✔ ✔ ✔ ✔ Colombia 2020–25 ✔ ✔ ✔ Guatemala 2019–23 ✔ ✔ ✔ Indonesia 2020–24 ✔ ✔ ✔ ✔ ✔ India 2019–24 ✔ ✔ ✔ Ireland 2019–25 ✔ ✔ ✔ ✔ ✔ Cambodia 2019–25 ✔ ✔ ✔ ✔ Sri Lanka 2019–24 ✔ ✔ ✔ Morocco 2019–30 ✔ ✔ ✔ ✔ ✔ Mexico 2020–24 ✔ ✔ ✔ ✔ ✔ North Macedonia 2021–25 ✔ ✔ Peru 2019–30 ✔ ✔ ✔ ✔ ✔ El Salvador 2021–24 ✔ ✔ ✔ Uzbekistan 2021–23 ✔ ✔ ✔ ✔ Vietnam 2020–30 ✔ ✔ ✔ Note: The value “All” reflects 44 jurisdictions that reported having or having had an NFIS in place at the time of the survey but excludes the 19 jurisdictions with a strategy in development. 3.2 POLICIES AND PROGRAMS TO PROMOTE FINAN- to expand access points, stipulating that governments make pay- CIAL INCLUSION AND DIGITAL FINANCIAL INCLUSION ments digitally, and requiring FSPs to provide certain types of basic accounts. This section captures the use of these types of policies In addition to the strategies highlighted above, national author- and highlights the significant variation in the tools that financial sec- ities also use an array of policies and programs to further financial tor policy makers deploy to advance financial inclusion. inclusion. Common policies include fiscal incentives, inducements Selected Catalysts for Financial Inclusion   19 Table 3.3: Additional Policy Approaches to Advance Finan- As detailed in table 3.3, in 2022, of the 10 common policies and cial Inclusion programs presented as options, requiring or encouraging FSPs to Number (percentage) of responding jurisdictions that report policy adopt industry standards on social performance or customer pro- approach, 2017 vs. 202215 tection is the most applied policy measure (reported by 59 percent 2022 2017 of responding jurisdictions). Mandating deposit-taking institutions FINANCIAL INCLUSION POLICY NFIS to offer a basic account product and use of innovation offices, reg- APPROACHES ALL VS. ALL ulatory sandboxes, or other innovative initiatives are the second Requirements, exceptions, tax incentives, or 28 36% 30 and third most employed policy measures, respectively, prevalent in subsidies to promote opening of branches or (24%) vs. (24%) 57 percent and 55 percent of responding jurisdictions. (See section outlets in underserved (for example, poor or 24% 3.4 for more analysis of survey responses on basic accounts.) The rural) areas other measures, while not uncommon, are less prevalent. In 2022, Requirements, exceptions, tax incentives, or 18 30% N/A only nine jurisdictions have none of these measures in place, indi- subsidies to promote expansion of agent (16%) vs. cating that, broadly speaking, jurisdictions both know of and are networks in underserved areas 16% willing to deploy a variety of measures to stimulate inclusion. Requirements, exceptions, tax incentives, or 38 48% N/A subsidies to promote reach of retail payment (33%) vs. While digitization of large government payment streams was the infrastructure and merchant acceptance 33% infrastructure most frequently employed policy measure relevant to financial inclusion in the 2017 survey (83 jurisdictions, or 67 percent of Priority lending: mandatory lending require- 43 48% 47 ments targeting those with limited access to (37%) vs. (38%) respondents, undertook such initiatives), in 2022 only 52 jurisdic- financial services, such as the poor, small and 37% tions (45 percent) have this type of initiative in place.17 This decrease medium-sized enterprises, the agricultural could partly be due to the fact that jurisdictions have completed the sector, women, and so on implementation of such initiatives in 2022. That said, for other juris- Tax incentive savings schemes (such as tax 36 34% 30 dictions, this highlights a missed opportunity to increase access to incentives for retirement, education, or (31%) vs. (24%) financial services. Indeed, the Global Findex Database 2021 high- medical savings) 31% lights that in developing economies, 865 million individuals opened Deposit-taking institutions are required to 66 64% 67 their first account at a financial institution for the purpose of receiv- offer a basic account product16 (57%) vs. 57% (54%) ing money from the government. Furthermore, Findex notes that Digitization of large government payment 52 66% 83 85 million unbanked adults are still receiving government payments streams, including payments to persons, (45%) vs. (67%) in cash. If a digital option were developed for such individuals, tens businesses, and governments and per- 45% son-to-government and business-to-govern- of millions of unbanked people could potentially become banked. ment payments Requiring or encouraging FSPs to adopt 68 75% N/A The fifth most common policy approach employed is the require- industry standards on social performance or (59%) vs. ment to submit financial data on metrics of relevance to financial customer protection 59% inclusion, such as sex-disaggregated data on credit and deposit Innovation office, regulatory sandbox, or 64 59% N/A products or distribution of agent points by region. (Section 3.3 other innovation policies or initiatives (55%) vs. delves further into the subject of data collection and diagnostic 55% infrastructure.) Such requirements exist in 45 jurisdictions (39 per- Requirement to submit financial data on 45 64% N/A cent of those participating), are more common among high-income metrics of relevance to financial inclusion, (39%) vs. economies, and are most prevalent in Latin America and the Carib- such as sex-disaggregated data on credit and 39% bean region. deposit products or distribution of agent points by region, and so forth In 43 jurisdictions (37 percent), authorities have introduced man- None 9 2% vs. 14 (8%) 8% (11%) datory lending requirements targeting the underserved, such as small and medium-sized enterprises or the agricultural sector, which Note: This table is based on 116 respondents in 2022 and 124 respondents in 2017. The 2022 NFIS column represents the 44 jurisdictions currently with an NFIS perennially face constrained access to finance. These jurisdictions in place, which is being compared to all 116 responding jurisdictions in 2022. are mostly in lower-middle income areas and in the South Asia and “N/A” (not applicable) in 2017 represents a lack of data for this option because it was not presented in the 2017 survey. Latin America and the Caribbean regions. 15 This analysis is based on the complete sample of 124 jurisdictions in 2017 and 116 jurisdictions in 2022 and is not limited only to the “Set of 95” jurisdictions that participated in both cycles. 16 Transaction accounts (including e-money/prepaid accounts) are held with banks or other authorized and/or regulated payment service providers. The accounts can be used to make and receive payments and to store value. 17 Based on full samples of respondents in 2017 (124) and 2022 (116), not the “Set of 95” overlapping jurisdictions in both surveys. 20   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report BOX 3.2 Leveraging Geospatial Data for Financial Inclusion Geospatial data includes locational information for each data revealed that roughly 50.5 percent of the population lives beyond observation. While several types of geospatial data are relevant an accessible distance (five kilometers) from a bank branch. to financial inclusion, mapping financial access points (FAPs) is of Armed with this data, the authorities sought to improve financial particular interest when considering access to finance. A FAP can connectivity through strategic expansion of access points as part be a bank branch, an ATM, a mobile-money agent, a credit union of the implementation of their national financial inclusion strat- branch, a point-of-sale terminal, a branch of a microfinance insti- egy. Finally, in Ethiopia, though the GPS data available was not as tution, or any other touchpoint offered by an FSP. granular as had been the case in Pakistan, it still allowed for an analysis of where FAPs should be concentrated going forward. Policymakers can leverage geospatial technology to boost access to FAPs and financial inclusion in several ways: (i) enhancing evi- Finally, beyond the value of geospatial data to regulators, it also dence-based policy making, (ii) facilitating supervision of the has the potential to benefit FSPs in areas such as profitability, financial sector, (iii) monitoring and evaluating progress of finan- operations, and customer satisfaction. Geospatial analysis can cial inclusion, and (iv) creating a public good to support the finan- help optimize an FSP’s service network, including identifying cial sector. growth areas in which to open new branches and low-demand areas where branches could be shut down. Liquidity manage- Several countries have leveraged this type of data to further ment can be improved by predicting liquidity issues spatially as inclusion. For example, in the Philippines, the Bangko Sentral ng well as identifying relevant distributional partners in the field. It is Pilipinas conducted a mapping exercise of FAPs that allowed the also possible to better predict deposits, withdrawals, and bank to identify several areas with no formal FAPs. This allowed demand for other services when the spatial element is included for these gaps to be targeted by waiving processing fees for in modeling. It can also help to improve customer service by opening branches in unbanked areas. Similarly, in Nigeria, geo- identifying any spatial patterns in customer feedback, especially spatial data allowed the Central Bank of Nigeria to set FAP tar- complaints. gets for each deposit-taking bank. With support from the World Bank, Pakistan undertook a detailed geospatial analysis that Source: Haq and Gradstein (2020). Finally, 18 jurisdictions use incentives, exceptions, subsidies, and question about financial inclusion policies and instruments. This other inducements to stimulate FSPs to expand the reach of their analysis reveals that policy levers are more prevalent in countries agents and outlets into underserved areas (for example, rural and/ with an NFIS than in the full sample of jurisdictions, with the differ- or agricultural areas) to target underserved segments (such as ences often in double digits. The most notable difference relates to women and the poor). Such interventions tend to have implications government payment digitization: 45 percent of 116 responding for government revenue generation and budget utilization, which jurisdictions promote or mandate this policy, while 66 percent of may explain the low number of jurisdictions that have such policies jurisdictions with an NFIS do so. Whether an NFIS acts as a catalyst in place. for the use of other policy approaches or the presence of those approaches stimulates the introduction of an NFIS is not clear, but Two countries that have been successfully using incentives to the relationship between the two is certainly often complementary. expand rural access are Colombia and India. Colombia provided direct and temporary subsidies to private banks, establishing new agents directly or through agent network managers in priority rural 3.3 DATA COLLECTION areas. As a result, Colombia’s cash-in/cash-out network coverage is estimated to be nearly universal. Exclusively through public banks, Effective policies to promote financial inclusion must be guided India also provided direct incentives for cash-in/cash-out agents to by data. Jurisdictions can leverage international financial sector operate in more rural areas. These two examples demonstrate how databases such as the International Monetary Fund’s Financial this policy approach can be very impactful in driving the frontier of Access Survey and the World Bank’s Global Findex Database and access at the last mile (Hernandez et al. 2020). Enterprise Surveys to assess the state of financial inclusion from the supply and the demand side, respectively. In addition, authorities Jurisdictions with NFISs consistently deploy a broader range of should conduct their own data-collection exercises to measure instruments to improve access. Table 3.3 maps the relationship aspects that are specifically relevant to their local conditions. Con- between the presence of an NFIS and prevalence of the aforemen- sidering the role that data plays in identifying and addressing the tioned policies/instruments. Column 3 contrasts the prevalence of challenges to increasing financial inclusion, respondents were asked the financial-inclusion policies in the 44 jurisdictions that have an to detail the various measures they have undertaken in the previous NFIS in place against the total sample of 116 respondents to this three years to collect relevant information. (See table 3.4.)18 Additional aspects of data collection and diagnostic infrastructure that are not covered in this survey are addressed in the World Bank Group’s Global Payment 18 Systems Survey. Selected Catalysts for Financial Inclusion   21 Table 3.4: Data Collection Measures, 2022 Number (percentage) jurisdictions reporting types of data collected, by income level and region UPPER- LOWER- TYPE OF DATA HIGH MIDDLE MIDDLE LOW COLLECTION CONDUCTED ALL INCOME INCOME INCOME INCOME EAP ECA LAC MENA NA SAR SSA Survey of households or individu- 72 24 21 22 5 10 23 13 9 2 2 13 als including questions on financial (64%) (59%) (58%) (73%) (100%) (91%) (61%) (52%) (69%) (100%) (40%) (68%) inclusion Survey of firms including questions on 43 13 14 14 3 5 13 14 4 1 0 6 financial inclusion/access to finance (38%) (32%) (38%) (47%) (50%) (46%) (33%) (56%) (31%) (50%) (0%) (33%) Measure financial health or well-being 43 17 15 9 2 5 17 8 3 2 0 8 of consumers (41%) (44%) (43%) (32%) (50%) (50%) (47%) (32%) (25%) (100%) (0%) (50%) Collection of supervisory (supply-side) 38 17 15 9 2 5 4 9 7 0 2 10 sex-disaggregated data measuring (36%) (44%) (43%) (32%) (50%) (46%) (11%) (38%) (62%) (0%) (40%) (63%) female-owned accounts Collection of supervisory (supply-side) 32 11 11 10 0 4 6 7 6 1 2 6 data measuring unique accounts (30%) (28%) (32%) (35%) (0%) (40%) (17%) (28%) (46%) (50%) (40%) (35%) Geospatial analysis for inclusion 31 6 11 11 3 6 3 9 5 1 1 6 purposes (30%) (15%) (36%) (38%) (75%) (60%) (9%) (38%) (42%) (50%) (20%) (38%) None 29 14 9 6 0 1 13 7 4 0 2 2 (25%) (34%) (24%) (20%) (0%) (9%) (33%) (28%) (31%) (0%) (40%) (11%) No. of responding jurisdictions 113 41 36 30 5 11 38 25 13 2 5 19 Note: Percentages in each region and income group represent the percentage of respondents under each category with a particular data-collection measure in place. Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa. Surveys of households or individuals including questions on 3.4 ACCESS TO BASIC ACCOUNTS financial inclusion are the most common data-collection effort, cur- rently being undertaken in 72 jurisdictions (64 percent). Despite Basic accounts are free or low-cost current accounts with continued gender gaps in financial inclusion and the necessity of restricted features. The limitations often include the lack of func- granular data to track and address such gaps, only 38 jurisdictions tionality beyond depositing and withdrawing funds—that is, no (36 percent) collect supply-side gender-disaggregated data, such checkbook or overdraft facilities are provided, or no cross-border as the gender of customers by financial product. Collecting geospa- transactions are allowed. For authorities that want to stimulate tial data (such as the location of customers and financial access account ownership among the unserved and underserved, encour- points)19 also remains a less common practice; less than one-third of aging FSPs to provide these accounts (whether through mandates the respondents undertake this. These statistics highlight gaps in or other inducements) can be an effective approach. data collection that may be leading to limited data infrastructure to support evidence-driven policymaking that advances financial Among the 94 respondents, 45 jurisdictions (48 percent) report inclusion. requiring all deposit-taking institutions to offer a basic account (fig- ure 3.5), while 15 jurisdictions (16 percent) report that only selected deposit-taking institutions are required to offer basic accounts. These results suggest that large opportunities still exist for basic accounts to receive more support from regulators to increase their availability to all those that would benefit from them. Geospatial technology can help policy makers to pinpoint gaps in access points that are impeding financial inclusion. For further information, see Ul Haq and 19 Gradstein (2020). 22   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report Figure 3.5: Requirement to Offer Basic Accounts Percentage of responding jurisdictions requiring financial institutions to offer basic accounts, by income level and regional group. All deposit-taking institutions are required Selected deposit-taking institutions are required Other to offer a basic account to offer a basic account 36% 37% 41% 30% 50% 50% 41% 43% 25% 25% 14% 21% 8% 25% 16% 14% 11% 26% 0% 19% 14% 10% 48% 49% 48% 44% 50% 40% 41% 43% 67% 50% 64% All High Upper-Middle Lower-Middle Low EAP ECA LAC MENA SAR SSA Income Income Income Income Note: Figure based on responses from 94 jurisdictions in 2022. Percentages by income group and region are proportions of the total possible responses within that group/region, rather than a proportion of the global total (“All”). Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, SAR = South Asia, SSA = Sub-Saharan Africa. As it relates to the types of customers that are eligible for basic Money Laundering and Terrorist Financing Measures and Financial accounts, in 60 jurisdictions (65 percent), anyone, regardless of Inclusion, there are circumstances in which the risk of money laun- income group or participation in government programs, is eligible dering or terrorist financing may be lower. In such circumstances, to open a basic account. However, in 20 jurisdictions (22 percent), and provided there has been an adequate analysis of the risk by the basic accounts are available only to those who meet specific crite- country or by the financial institution, it could be reasonable for a ria, such as being low-income individuals, pensioners, or welfare country to allow its financial institutions to apply simplified CDD recipients. These restrictions, though perhaps well intended, may measures as a means of increasing financial inclusion. be excluding customers who do not fit neatly into these categories but would still have benefited from a basic account. An additional Fifty-two jurisdictions (45 percent) allow for the use of simplified 12 jurisdictions (13 percent) indicate that “other” eligibility require- CDD when opening a basic account.20 In the case of basic accounts, ments are in place. The most common “other” criteria indicated (for given the relatively low risk they pose for money laundering, it is example, in Belgium, the Dominican Republic, and France) is that therefore ideal that simplified CDD should be allowed for account the person does not own another account. opening. While it is encouraging that these 52 jurisdictions allow the use of simplified CDD for basic account opening, the fact that The survey also asks jurisdictions about the features of the basic an additional 30 jurisdictions mandate offering a basic account accounts in their domain (table 3.5). One of those questions is without allowing the use of simplified CDD highlights a gap that around the use of simplified CDD for basic account opening. deserves attention. According to the Financial Action Task Force’s Guidance on Anti- 20 Simplified CDD is the lowest level of due diligence that can be completed on a customer. This is considered appropriate where there is little opportunity or risk that services or customer(s) may become involved in money laundering or terrorist financing. Selected Catalysts for Financial Inclusion   23 Table 3.5: Basic Account Features, 2022 Number (percentage) of responding jurisdictions, by income and region UPPER LOWER- HIGH -MIDDLE MIDDLE LOW BASIC ACCOUNT FEATURES ALL INCOME INCOME INCOME INCOME EAP ECA LAC MENA NA SAR SSA Are providers allowed to use simplified CDD 52 12 21 16 3 5 11 15 6 1 3 11 measures when opening basic account? (45%) (29%) (55%) (52%) (60%) (42%) (28%) (60%) (46%) (50%) (60%) (58%) Do the basic accounts set transaction limits for 32 7 13 11 2 2 3 15 4 1 2 6 low-risk scenarios? (28%) (17%) (34%) (35%) (40%) (17%) (8%) (60%) (31%) (50%) (40%) (32%) Are basic accounts required to have no mini- 44 13 14 16 1 7 6 14 6 1 3 7 mum opening balance? (38%) (32%) (37%) (52%) (20%) (58%) (15%) (56%) (46%) (50%) (60%) (37%) Does the basic account have restrictions on 39 18 13 8 1 4 16 7 4 1 2 6 fees for particular transactions (for example, (34%) (44%) (34%) (26%) (20%) (33%) (40%) (28%) (31%) (50%) (40%) (32%) providing a minimum number of transactions for free)? Are there requirements on how basic accounts 17 7 4 5 1 2 5 1 2 1 2 4 are marketed for maximum visibility to (15%) (17%) (11%) (16%) (20%) (17%) (13%) (4%) (15%) (50%) (40%) (21%) unserved/underserved segments? No. of responding jurisdictions 116 41 38 31 5 12 40 25 13 2 5 19 Note: Percentages in each region and income group represent the proportion of respondents from each regional or income group with particular account features in place. Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa. In 44 jurisdictions (38 percent), basic accounts are required to jurisdictions). It is interesting that 40 jurisdictions require basic have no minimum opening balance. In 39 jurisdictions (34 percent), accounts to allow customers to use an ATM or a debit card, whether there are restrictions on fees for certain basic transactions. Encour- physical or tokenized. This functionality facilitates customers using aging a customer with even the smallest amount of funds to open their cards for more complex financial transactions, such as mer- an account and not charging them fees for their basic transactions chant payments. Within reason, it is always a good outcome if users can encourage underserved customers to open an account. Some of financial services can have access to a broader number of prod- jurisdictions go one step further in making these accounts known to ucts, since this will increase their usage and the value that users gain and attractive for underserved individuals by issuing guidelines to from having financial access. FSPs on how basic accounts should be marketed to these segments for maximum visibility. Indeed, 15 percent of jurisdictions, including Thirty-six jurisdictions (78 percent) require basic accounts to be Malaysia, Nigeria, Pakistan, and the West Bank and Gaza, among accessible via internet/mobile banking. Of this cohort, two-thirds of others, have such marketing requirements in place. Broadly speak- jurisdictions require that a choice of interface (whether internet, ing, Latin America and the Caribbean and South Asia are the two USSD, or app) for digital/non-face-to-face access to the bank regions where these types of features to make basic accounts more account be provided at no extra cost to the consumer.21 Finally, nine accessible are most prevalent. jurisdictions require free offline alternatives/capabilities in the event of downtime. This last requirement is particularly useful in areas with The 2022 survey also captures information on the most common low or unstable network connectivity. The survey does not evaluate basic account features being offered. Forty-nine jurisdictions (86 the extent to which providers comply with this requirement, only percent of respondents) mandate certain features for basic accounts. the extent to which the requirement is in place. Authorities that These features and the percentage of jurisdictions that require each introduce this requirement may also want to consider how compli- feature are detailed in box 3.3. The least mandated features are ance could be verified, whether at the licensing stage or as part of checkbooks (nine jurisdictions) and cash withdrawals at agents (24 ongoing supervision. 21 Unstructured supplementary service data (USSD) is a communications service controlled by MNOs 24   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report BOX 3.3 Basic Account Features The survey presented a sample of 10 features that are desirable for a basic account. Thirty-one jurisdictions have at least seven of these features. These countries are Angola, Argentina, Armenia, Austria, Bangladesh, Belize, Bulgaria, Cambodia, Costa Rica, Finland, France, Ghana, Greece, Jordan, Kuwait, Malaysia, Malta, Mexico, Nicaragua, Nigeria, Pakistan, Poland, Saudi Arabia, Serbia, Spain, Surinam, Eswatini, Tanzania, United Arab Emirates, United Kingdom, and Uruguay. Based on the highlighted countries listed below, debit cards (whether physical or tokenized) and checkbooks are perhaps the most elusive features even in a jurisdiction in which a rather robust basic account exists. NO. JURISDICTIONS FEATURES WITH REQUIREMENT PAKISTAN MEXICO FRANCE NIGERIA JORDAN Cash withdrawal at agents 24 Y Y Y Y N Cash withdrawal at ATMs 44 Y Y Y Y Y Cash withdrawal at branches 42 Y Y Y Y Y Balance inquiries at ATMs and branches 38 Y Y Y Y Y Account statements 40 Y Y Y Y Y Direct debit 38 Y Y Y Y Y Electronic fund transfer 42 Y Y Y Y Y Checkbook 9 Y N N N N Debit card—tokenized or physical 40 Y Y N Y Y Internet/mobile banking 36 Y Y Y Y Y 3.5 SIMPLIFIED CUSTOMER DUE DILIGENCE Regulators often face challenges in balancing policies on anti- specifying the documentation required to open a transaction money laundering and combating the financing of terrorism with account and an e-money account, respectively. For all other types placing the least burden and costs on outreach to the poor and of financial institutions, there are significantly fewer jurisdictions unbanked. If account opening procedures are too onerous and with such laws in place. One exception is for e-money issuers (EMIs) alternative account opening protocols (such as account opening via or distributors. In this case, 70 percent of jurisdictions have laws or agents or non-face-to-face onboarding) are not allowed, it may regulations defining the document requirements for opening an serve as an obstacle in advancing financial access. In light of this, e-money account with an EMI. many jurisdictions have begun introducing or expanding simplified CDD measures. Indeed, as mentioned previously, exempting cer- The documents required for opening the lowest-risk transaction tain anti-money-laundering and counter-terrorist-financing controls or e-money account vary by jurisdiction and also by the type of is one of the recommendations put forward by the Financial Action financial institution at which the account is opened (figure 3.6). Spe- Task Force’s 2017 supplemental guide on CDD, once exemptions cifically, if one was to compare the list of information required by a are proven appropriate given low risk (FATF 2017). commercial bank versus an NBEMI, for every type of information, commercial banks have a greater percentage of jurisdictions that Given the relevance of transaction or e-money accounts to the require this information. As an example, whereas for commercial least served segments, the survey focuses on what is required to banks proof of address and proof of employment are required in 74 open them. As it relates to commercial banks, 87 jurisdictions (92 percent and 44 percent of jurisdictions, respectively, for NBEMIs, percent) and 64 jurisdictions (68 percent) have laws or regulations the same is only true for 61 percent and 23 percent of jurisdictions. Selected Catalysts for Financial Inclusion   25 Figure 3.6: Document Requirements for Account Opening Percentage of responding jurisdictions indicating document requirements, by financial institution type. Commercial banks Other banks Financial cooperatives Other deposit-taking Consumer Non-bank e-money institutions credit providers issuer or distributor 98% XX% 77% 74% 69% 72% 67% 61% 55% 58% 56% 51% 51% 44% 46% 44% 42% 44% 38% 35% 35% 33% 34% 28% 27% 23% 25% 24% 23% 19% 20% Proof of identity Proof of address Proof of income Proof of nationality or Proof of employment legal status in the country Note: Figure is based on 102 responses in total in 2022, although this varies by institution type. Satisfying these requirements can be a challenge for many, par- Specifically, as it relates to account opening, of the 70 jurisdic- ticularly those living in low-income economies and for members of tions that answered this question, 67 percent do allow some vulnerable populations. According to the World Bank’s 2018 Identi- exemptions on documentation requirements, while 57 percent and fication for Development (ID4D) Global Dataset, close to one billion 41 percent allow for delayed authentication and acceptance of non- people worldwide do not have official proof of identity. In addition, standard ID in lower-risk cases, respectively. Around a quarter of the Global Findex Database 2021 highlights that 32 percent and 13 jurisdictions allow use of existing mobile registration details to open percent of adults in low income and lower-middle income countries, a new mobile money account at the same mobile network operator respectively, do not have a financial account because they lack the (MNO). For example, as a temporary measure during the COVID-19 necessary documentation. Providing proof of nationality, address, pandemic, in the West African Economic and Monetary Union, EMIs income, and employment can be prohibitive for many hundreds of were authorized to activate mobile money accounts on the basis of millions more, with the poor, women, and those in remote areas data from MNOs, subject to collecting, by any means, the agree- among the most likely to struggle. About two billion workers, or ment of the customer and performing non-face-to-face CDD. This over 60 percent of the world’s adult labor force, operate in the infor- exemption was for a period of three months, after which the cus- mal sector at least part time (IMF 2021). As such, securing docu- tomer would have to be identified according to the standard regu- mentation to prove income and employment, as a precursor to latory requirements (BCEAO 2020). This highlights a recognition by opening a basic transaction account, may be a non-starter for many. some regulators of the need for some flexibility, as conditions require, for known low-risk scenarios. Doing away with all documentary requirements for the sake of maximizing financial inclusion is, of course, not an option. However, the application of a risk-based approach for identifying and 3.6 REMOTE ACCOUNT OPENING AND E-KYC onboarding clients is preferable, in line with Financial Action Task Force’s requirements, and could help minimize documentary hur- Beyond emergency situations such as the COVID-19 pandemic, dles for the poorest and most vulnerable populations. For example, 91 jurisdictions allow some form of remote account opening (figure a third of responding jurisdictions (92 that responded on commer- 3.7). Of these, 77 jurisdictions (71 percent) allow people to self-en- cial banks and 80 on NBEMIs) allow commercial banks and EMIs to roll using mobile or web-based apps/devices, and 37 jurisdictions apply simplified CDD for proven low-risk clients. About half of allow agents to enroll new customers using mobile apps. In addi- responding jurisdictions allow these same two types of financial tion, 22 jurisdictions allow for non-face-to-face account opening institutions to use a tier-based approach to CDD with pre-estab- with other means. These include India, which allows a video-based lished categories that have lighter requirements for certain lower customer-identification process, and Serbia, which allows video risk products, services, or channels. Finally, 72 percent and 59 per- identification and the use of qualified electronic signatures, albeit cent of jurisdictions allow commercial banks and EMIs, respectively, with certain caveats. The regions with the most jurisdictions allow- simplified ongoing transaction monitoring where risks are assessed ing various types of non-face-to-face account opening are located as lower. in Europe and Central Asia and Latin America and the Caribbean regions. 26   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report Figure 3.7: Remote Account Opening, 2022 The previous section on simplified CDD details the pathways in Percentage of responding jurisdictions that report having remote which non-face-to-face CDD can take place. The information sub- account opening mitted by consumers, however, must be authenticated by the FSP Yes, can self-enroll using mobile or web-based apps/devices in order for the account to be opened remotely. In 48 jurisdictions, 71% an FSP can directly verify an applicant’s identity by accessing a gov- ernment database. However, there are only five jurisdictions in Yes, agents can enroll using mobile apps which verification can be completed against data stored digitally on 34% the ID (that is, using a QR code or chip featured on the ID creden- tial). This highlights a missed opportunity. Yes, other 20% Both in government identity databases and on data stored on the ID issued by the competent authority, the type of data that can No be digitally authenticated tends to be name, gender, date of birth, 15% nationality, and validity of ID documents. In some very limited num- Note: Figure is based on responses from 108 jurisdictions. ber of jurisdictions, FSPs can also authenticate addresses. Both in terms of the pathways for verification (whether a government data- Figure 3.8: Pathways of Remote CDD, 2022 base or directly on an ID) and the types of data that can be authen- Percentage of responding jurisdictions that report remote CDD ticated, the survey results underscore that there is significant room processes for growth. Person submits scans of required docs 76% Of the 95 jurisdictions (see Appendix B) that answered this ques- tion, 59 (62 percent) indicated that FSPs can verify biometric data ID info is checked against a government database or data stored on an identity credential (such as fingerprints, face, or iris) to confirm the identity of a cus- tomer. About half of these jurisdictions could do this verification 73% against a government database (for example, a national ID system), Peope can use digital ID credentials (eIDs) while the other half indicated a mixture of verification against data 34% stored digitally on the ID credential and other means. This includes Bahrain, which allows what they term “video solutions with a live- Other ness test,” and Croatia, which allows video identification through 21% payment service providers. Note: Figure is based on responses from 91 jurisdictions. Finally, with 58 jurisdictions responding, 29 indicate that FSPs must pay a fee for digital identity verification. Charging fees for Survey respondents also provided information on how remote identity verification services can be an important revenue source for CDD is facilitated (figure 3.8). The most common approach, which identity providers. According to the World Bank Group’s ID4D Ini- is used in 69 jurisdictions (76 percent), allows for remote account tiative, additional revenue flow can help identity providers invest in opening after a person scans and submits their required docu- modernizing their systems and reduce dependence on government ments. Sixty-six jurisdictions (73 percent) have identity information budgets. At the same time, there is also a risk that such fees can cross-checked against a government database or against data place a burden on third parties by driving up their operating costs stored on an identity credential. Finally, 31 jurisdictions (34 percent) and may create financial barriers to people when accessing services have the facility to use digital ID, and another 19 jurisdictions (21 if these extra costs are passed on to end users. Verification fees percent) have other pathways. For example, Spain and Portugal should therefore be set with great care, balancing the potential allow the use of video conferencing. benefits of earning greater revenues with the potential risks of exclusion (ID4D 2019). As financial services have increasingly moved to digital forms, the CDD of individuals looking to open such accounts has also Beyond account opening, 45 jurisdictions have a secure digital become more digital. Because of this trend, combined with lock- ID solution/system in place that enables individuals to authenticate downs caused by the COVID-19 pandemic, authorities are increas- themselves remotely (without in-person presence) to access trans- ingly allowing FSPs to make onboarding a partially or fully actions or services online. These jurisdictions are overwhelmingly in non-face-to-face process. This is possible through e-KYC, which the Europe and Central Asia region, with Latin America and the allows for both in-person and non-face-to-face verification and Caribbean a distant second. Authentication for electronic environ- authentication in customer onboarding and even allows customers ments may be facilitated through different credentials, including to access more complex services, such as loan or investment prod- chip-enabled ID cards (in combination with a card reader), mobile ucts. e-ID, a combination of username and PIN/password, and so forth. Selected Catalysts for Financial Inclusion   27 Examples include Estonia’s e-ID, Singapore’s SingPass, the NemID 3.7 USE OF AGENTS AND OTHER THIRD-PARTY DISTRI- in Denmark, or the BankID in Sweden. BUTION CHANNELS In all jurisdictions with digital ID systems, a single provider is just Particularly for traditionally unserved and underserved popula- as likely as multiple providers. That said, any entity serving as a tions, such as rural dwellers, the poor, and women, expanding the provider is twice as likely to be a government agency than a pri- agent network to bring financial access points closer to their users vate-sector entity. In Europe and Central Asia specifically, the oppo- is a critical objective for both the public and the private sector. It is site is true: the providers are more likely to be private entities than also the case that agent networks tend to be a more cost-effective government agencies. This likely speaks to the extent to which the channel than traditional branch networks and thus can contribute to private sector in countries in Europe and Central Asia has seen the the delivery of financial services at the last mile at lower cost for business case for expanding and participating in the digital ID eco- FSPs. Despite this, the use of agents is not uniformly allowed for all system. financial institution types or in all jurisdictions. Table 3.6: Use of Agents by Institutional Category, 2022 Percentage of reporting jurisdictions allowing agents to undertake each activity COMMERCIAL OTHER FINANCIAL BANKS BANKS COOPs ODTIs CCPs NBEMIs Identify and/or verify the identity of the customer 68% 32% 36% 24% 34% 53% Receive/submit to the institution a transaction or 65% 29% 36% 24% 10% 48% e-money account application Open a customer account following the institution’s 48% 21% 26% 22% 12% 42% policies Receive/submit to the institution a loan application 68% 30% 39% 29% 31% 12% Analyze and approve a loan following the institution’s 28% 12% 20% 13% 15% 5% policies and limits Receive deposits 57% 28% 27% 30% 4% 24% Disburse loans 49% 23% 28% 23% 18% 10% Cash-in/cash-out 61% 29% 28% 27% 15% 57% Note: The number of responding jurisdictions varies for each option and institutional type. The highest number of responses for any given question or institution type is 115. Table 3.6 highlights the various types of transactions that agents jurisdictions that allow agents to collect application materials. can undertake for each FSP category. As it relates to the very begin- Agents tend to be even more restricted when it comes to loan dis- ning of a customer journey—that is, receiving/submitting applica- bursement. Even for agents of commercial banks, only 49 percent tion documents and verifying identity—about two-thirds of 115 of jurisdictions allow those agents to disburse loans. responding jurisdictions allow commercial banks to use agent net- works to conduct this activity on their behalf. In about half of 108 Two-thirds of jurisdictions allow agents of commercial banks or jurisdictions, NBEMIs are allowed to use agents for this same pur- NBEMIs to receive deposits or cash in/cash out on behalf of those pose. For the other types of FSPs, fewer than a third of jurisdictions institutions. However, fewer than a third of responding jurisdictions allow agents to be contracted for this transaction. And while the allow agents of financial cooperatives, other banks, ODTIs, or CCPs agents are able to collect documents and verify identity, a smaller to receive deposits or cash in/cash out on behalf of those institu- number of jurisdictions allow agents actually to open the account. tions. For example, for all FSP types except ODTIs, there is a minimum 10 percentage point difference in the percentage of jurisdictions that The use of agents does introduce some risks for both FSPs and allow identity verification by agents versus those that allow the consumers. Agents can commit fraud or use abusive practices. One agent to open the account on the FSP’s behalf. type of fraud commonly committed by agents is to split transactions to increase their commissions and fees or avoid reporting require- Regarding credit transactions, far more jurisdictions permit ments. Agents can also access and use agent records for fraudulent agents to collect applications on behalf of the FSP than allow the purposes or charge unauthorized fees. All these fraudulent activities analysis and approval of the loan itself. In the case of commercial take advantage of the low levels of financial literacy of consumers banks, 78 jurisdictions (68 percent) allow agents to collect applica- and, in particular, any inadequacy in their digital literacy. Consider- tions, while for all other types of FSPs, the number of jurisdictions ing this, a regulatory framework is needed to minimize such risks to that allow the use of agents for credit decisions is about half that of consumers (table 3.7). 28   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report Table 3.7: Rules Regulating the Relationship between FSPs, Agents, and Consumers, 2022 Percentage of jurisdictions reporting rules in place, by institutional category COMMERCIAL OTHER FINANCIAL BANKS BANKS COOPs ODTIs CCPs NBEMIs Rules establishing that FSPs are liable for the 79% 42% 38% 28% 29% 58% actions of their agents FSPs are required to have minimum standards 77% 40% 36% 31% 28% 60% for vetting their agents to establish their fit and suitability FSPs are required to have and maintain minimum 73% 38% 30% 30% 26% 55% competence and training requirements for agents FSPs are obligated to monitor their agents 76% 37% 35% 27% 24% 57% FSPs are required to have measures in place to 70% 33% 32% 25% 26% 50% prevent agent fraud FSPs are required to have contractual agreements 79% 44% 40% 31% 29% 58% with their agents FSPs are required to obtain regulatory approvals for 32% 19% 16% 8% 12% 21% each new agent location Explicit prohibition of agent-exclusivity agreements 24% 12% 13% 9% 4% 19% Note: The number of responding jurisdictions varies for each option and institutional type. The highest number of responses for any given question or institution type is 115. In 79 percent of responding jurisdictions, rules are in place Some jurisdictions require that FSPs obtain regulatory approval establishing that commercial banks must have contractual agree- for each new agent location, which can be taxing on FSPs and limit ments with their agents and that the provider is liable for the actions the growth rate of the agent network. It is, therefore, encouraging of their agents. Only 58 percent of jurisdictions place this liability on that, when compared with the other requirements discussed above, NBEMIs, and fewer jurisdictions still hold other banks (42 percent), significantly fewer jurisdictions have such requirements in place. financial cooperatives (38 percent), ODTIs (28 percent), and CCPs These jurisdictions will want to assess the value of this approach in (29 percent) legally responsible for the conduct of their agents. light of other regulations ensuring that FSPs manage their agent networks to maximize the safe and efficient expansion of financial About three-quarters of commercial banks and over half of NBE- services. MIs are required (1) to have minimum standards for vetting their agents to establish their suitability; (2) to have and maintain mini- mum competence and training requirements for agents; (3) to mon- 3.8 E-MONEY itor their agents; and (4) to have measures in place to prevent agent fraud. For all these requirements, between a third and two-fifths of E-money refers to money stored in a designated electronic jurisdictions have similar rules for the other types of FSPs. account that can be accessed through mobile phones, chip cards, prepaid cards, or a hard drive in a computer. It can be used for mak- Such aspects as e-KYC, agent non-dedication, and agent ing payments and transfers to entities and persons other than the interoperability and non-exclusivity all have a stimulating effect on EMI (This multipurpose use differentiates it from other payment the expansion of agent networks. Recognizing the chilling effect instruments, such as store cards). Eighty-eight jurisdictions (77 per- agent-exclusivity agreements have on agents, some regulators cent of 114 responding jurisdictions) have the concept of e-money have explicitly prohibited them. Indeed, multiple jurisdictions have incorporated into law (table 3.8). outlawed agent-exclusivity agreements across various institutional types (table 3.7). Selected Catalysts for Financial Inclusion   29 Table 3.8: E-Money Regulatory Landscape Number (percentage) of jurisdictions with particular EMI parameters, by income level and region UPPER- LOWER- ASPECTS OF THE HIGH MIDDLE MIDDLE LOW E-MONEY LANDSCAPE ALL INCOME INCOME INCOME INCOME EAP ECA LAC MENA NA SAR SSA The concept of e-money incorpo- 88 33 23 27 4 9 36 13 7 1 5 16 rated into law (77%) (83%) (62%) (90%) (80%) (75%) (92%) (52%) (58%) (50%) (83%) (89%) Non-bank institutions are allowed 74 33 19 16 4 8 31 14 6 1 3 9 to issue e-money (65%) (83%) (51%) (53%) (80%) (67%) (79%) (56%) (50%) (50%) (60%) (50%) Non-banks can issue e-money only 14 0 7 6 0 2 0 4 0 0 2 6 in partnership with a bank (12%) (0%) (19%) (20%) (0%) (17%) (0%) (16%) (0%) (0%) (20%) (33%) Total responses 113 40 37 30 5 12 39 25 12 2 5 18 Note: Percentages under income and regional groups represent the proportion of jurisdictions within each income and region group that indicate they had certain EMI parameters in place. Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa. Fewer countries in Latin America and the Caribbean and the with previous cycles. Middle East and North Africa have e-money codified in law than high income countries. However, this should not be taken to mean Regarding the issuance of e-money, 74 jurisdictions (65 percent that e-money becomes less pervasive the less affluent a jurisdiction of 113 respondents) allow non-banks to issue e-money on their is. In fact, it could be argued that the opposite is true. What this own, including over 60 percent of jurisdictions in South Asia and highlights is a lag in the legal frameworks among these jurisdictions East Asia and Pacific regions. Fourteen jurisdictions (12 percent of as compared to other regions. Because these questions are new to respondents) allow non-banks to issue e-money only if they do so in the survey, there, unfortunately, can be no time series comparison partnership with a bank (table 3.9). Table 3.9: Type of E-Money Issuers Number (percentage) of jurisdictions indicating their EMI type, by income level and region UPPER- LOWER- HIGH MIDDLE MIDDLE LOW TYPE OF ISSUER ALL INCOME INCOME INCOME INCOME EAP ECA LAC MENA NA SAR SSA MNO 24 6 9 8 1 5 7 4 0 0 4 4 (30%) (25%) (38%) (33%) (4%) (21%) (29%) (17%) (0%) (0%) (17%) (17%) MNO, only through separate legal 32 6 9 13 4 4 6 7 4 0 2 8 entity/subsidiary (45%) (19%) (11%) (39%) (11%) (14%) (19%) (22%) (14%) (0%) (6%) (25%) Specialized payment service providers 57 21 18 16 2 6 21 12 6 1 3 8 (non-MNO) (73%) (37%) (32%) (28%) (4%) (11%) (37%) (21%) (11%) (2%) (5%) (14%) Internet platforms (such as e-commerce 19 10 6 3 0 5 7 2 1 1 1 2 platforms) (25%) (52%) (32%) (16%) (0%) (26%) (37%) (11%) (5%) (5%) (5%) (11%) Subsidiary of a deposit-taking institution 25 9 9 7 0 5 7 6 3 0 1 3 (33%) (36%) (36%) (28%) (0%) (20%) (28%) (24%) (12%) (0%) (4%) (12%) Other 13 6 4 3 0 2 8 1 1 0 1 0 (18%) (46%) (31%) (23%) (0%) (15%) (62%) (8%) (8%) (0%) (8%) (0%) Note: Number of jurisdictions varies by option, ranging from 73 to 81. Percentages under income and regional groups represent the proportion of jurisdictions from the category “All” that said they had certain types of EMIs. Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa. As it relates to their structure, in 57 jurisdictions (73 percent of of the type of institutions that tend to be NBEMIs. An example in respondents), EMIs are specialized payment service providers. The the “Other” category is a post office in Tunisia. next most common structure for an EMI—in 45 percent of jurisdic- tions—is MNOs that have devolved their e-money business into a In addition to prescribing what type of institutions are allowed to separate legal entity or subsidiary. In 33 percent of the jurisdictions, issue e-money, authorities also mandate what steps FSPs must take subsidiaries of deposit-taking institutions are EMIs, while in 30 per- to protect customers’ e-money funds. A key prudential requirement cent and 25 percent of jurisdictions, respectively, the issuers are typically imposed by regulators on FSPs is to maintain a minimum MNOs and internet platforms (for example, e-commerce platforms). liquidity ratio to ensure that they can meet customers’ demand for Thirteen jurisdictions (18 percent) selected “Other” as a description reimbursement. In the case of NBEMIs, most regulators require 30   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report them to hold liquid funds equal to 100 percent of the e-money float 12 jurisdictions (11 percent) reported requiring funds be maintained in such assets. Indeed, in the survey, 66 jurisdictions (58 percent of at more than one FSP (table 3.10). This requirement is a useful mea- respondents) indicate that 100 percent of customers’ funds must be sure to mitigate the negative effects on NBEMIs of an FSP holding kept in an account at a single prudentially regulated FSP. Another the float. Table 3.10: Legal and Regulatory Requirements on Separation of Customer E-Money Funds, 2022 Number (percentage) of responding jurisdictions with requirements, by income level and region UPPER LOWER- LEGAL OR REGULATORY HIGH -MIDDLE MIDDLE LOW REQUIREMENT ALL INCOME INCOME INCOME INCOME EAP ECA LAC MENA NA SAR SSA Yes, 100 percent of customers’ funds must be 66 26 35 11 0 4 27 14 7 0 4 10 kept in an account at a prudentially regulated (58%) (63%) (97%) (37%) (0%) (36%) (69%) (54%) (58%) (0%) (80%) (53%) FSP Yes, 100 percent of the customers’ funds 12 1 4 5 2 2 0 2 1 0 1 6 must be kept in accounts at more than one (11%) (2%) (11%) (17%) (40%) (18%) (0%) (8%) (8%) (0%) (20%) (32%) prudentially regulated FSPs Yes, a fraction of the money that corresponds 6 4 1 1 0 2 3 0 1 0 0 0 to the e-money issued must be kept in one or (5%) (10%) (3%) (3%) (0%) (18%) (8%) (0%) (8%) (0%) (0%) (0%) more prudentially regulated FSPs No 11 5 3 2 1 1 4 4 1 1 0 0 (10%) (12%) (8%) (7%) (20%) (9%) (10%) (15%) (8%) (50%) (0%) (0%) Not applicable 19 6 10 3 0 2 5 6 2 1 0 3 (17%) (14%) (28%) (10%) (0%) (18%) (18%) (23%) (17%) (50%) (0%) (16%) No. of responding jurisdictions 114 41 36 30 5 11 39 26 12 2 5 19 Note: Percentages under income and regional groups represent the percentage of jurisdictions from each income or regional group that indicated they had certain legal and regulatory requirements in place. Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa. The types of accounts used for the safeguarding of customer type of account required. Some examples of these types of varied funds vary across jurisdictions (table 3.11). The largest contingent of mechanisms include a requirement to have a bank guarantee in jurisdictions, which accounts for 32 jurisdictions (34 percent of Malaysia, government bonds in Indonesia, and insurance coverage respondents), require that funds be kept in a trust account. Another in Korea as means of safeguarding funds. 28 jurisdictions (30 percent) answered “Other” when detailing the Table 3.11: Types of Accounts Used for Safeguarding E-Money Funds, 2022 Number (percentage) of responding jurisdictions using specific types of accounts, by income level and region UPPER LOWER- HIGH -MIDDLE MIDDLE LOW ACCOUNT TYPE ALL INCOME INCOME INCOME INCOME EAP ECA LAC MENA NA SAR SSA Trust accounts 32 (34%) 6 (18%) 10 (33%) 12 (44%) 100 (13%) 5 (50%) 4 (12%) 7 (33%) 1 (11%) 0 (0%) 3 (60%) 12 (75%) Escrow account 13 (14%) 5 (15%) 4 (13%) 4 (15%) 0 (0%) 0 (0%) 5 (15%) 3 (14%) 3 (33%) 0 (0%) 1 (20%) 6 (8%) Fiduciary account 6 (6%) 2 (6%) 2 (7%) 1 (4%) 25(17%) 0 (0%) 2 (6%) 1 (5%) 1 (11%) 0 (0%) 0 (0%) 2 (13%) Regular account 13 (14%) 5 (15%) 4 (13%) 4 (15%) 0 (0%) 2 (20%) 7 (21%) 3 (14%) 1 (11%) 0 (0%) 0 (0%) 0 (0%) Account at the central 9 (10%) 3 (9%) 4 (13%) 2 (7%) 0 (0%) 1 (10%) 4 (12%) 4 (19%) 0(0%) 0 (0%) 0 (0%) 0 (0%) bank Other 28 (30%) 12 (36%) 8 (27%) 8 (30%) 0 (0%) 6 (60%) 15 (45%) 3 (14%) 3 (33%) 0 (0%) 1 (20%) 0 (0%) Regulations do not 16 (17%) 9 (27%) 4 (13%) 3 (11%) 0 (0%) 2 (20%) 6 (18%) 4 (19%) 1 (11%) 0 (0%) 0 (0%) 3 (19%) specify No. of responding 94 33 30 27 4 10 33 21 9 0 5 16 jurisdictions Note: Percentages under income and regional groups represent the percentage of jurisdictions from each income and regional group that said they used certain types of accounts. Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa. Selected Catalysts for Financial Inclusion   31 The distinction between e-money funds and deposits is relevant BOX 3.4 for how NBEMIs can use customer funds and whether customers holding e-money funds can receive interest or shared profits on Consumer Risks in Fintech these funds. E-money funds, unlike traditional deposits, are gener- Authorities responsible for FCP are increasingly facing the ally not meant to facilitate intermediation. Therefore, the lending of challenge of addressing old and new manifestations of fintech e-money funds may constitute fund misuse. In 2017, in 59 respond- risks but often lack the technical expertise or tools to do so. ing jurisdictions (86 percent), NBEMIs were prohibited by law from These risks include those arising not only from the underlying using customer e-money funds for purposes other than redeeming technology enabling fintech but also from new business mod- els, product features, and provider types. A World Bank policy e-money and executing fund transfers. By 2022, this number had research paper, Consumer Risks in Fintech: New Manifesta- risen to 73 jurisdictions (70 percent). This restriction is widely tions of Consumer Risks and Emerging Regulatory applied, with all the geographic regions having this requirement in Approaches, seeks to address this need directly, by identify- at least two-thirds of responding jurisdictions. ing new manifestations of consumer risks posed by fintech and providing a range of emerging policy approaches that can be used to address them. 3.9 FINTECH INNOVATIONS Highlights of identified risks and approaches include the fol- lowing: In a world where access to financial services and high-speed Fintech operator fraud or misconduct: This requires estab- broadband internet is not universal or particularly affordable, fin- lishing competence requirements for these market players, as tech can democratize financial access for both individuals and small well as mandatory licensing/registration and vetting. and medium-sized enterprises. Fintech has the potential to lower Platform/technology unreliability or vulnerability: This costs while increasing speed and accessibility, allowing for more exposes consumers to higher risks of loss and other harm and tailored financial services that can scale (Appaya 2021). However, requires outsourcing specific risk management, operational the growing use of fintech also presents new risks and new manifes- reliability, and competence requirements for operators. tations of existing risks to consumers. (See box 3.4.) Recognizing Inadequate consumer disclosure and transparency in a the growing role that fintech is playing in fostering access, the 2022 digital context: This requires adapting disclosure formats for survey added specific questions to explore the types of innovative digital channels and ensuring that the order and flow of infor- products that are being offered in various markets (figure 3.9) and mation and user interfaces are increasingly recognized as nec- the most common regulatory protocols around those products (fig- essary to address these issues. ure 3.10). Payment system innovations, which are covered in other Increased risk of product unsuitability: This requires solu- World Bank surveys, are not covered under this survey. (See box tions such as limiting individual investments or other expo- 3.5.) sures for less knowledgeable consumers, and product suitability and product design obligations for fintech opera- tors. BOX 3.5 Conflicted fintech business models leading to conduct World Bank Global Payment that is not in consumers’ interests: This requires approaches such as conflict-mitigation obligations and a range of restric- Systems Survey tions targeting specific conflict types. While the role of fintech as a facilitator for payments is not Algorithmic decision-making leading to potentially unfair covered in depth in this report, the World Bank’s Global Pay- outcomes: Because some algorithms may lead to unfair, dis- ment Systems Survey is a key resource on the topic. The sur- criminatory, or biased outcomes, this risk requires both the vey asks national and regional central banks and monetary application of antidiscrimination rules to algorithmic scoring authorities about the status of payment systems, combining and appropriate procedures, controls, and safeguards during quantitative and qualitative measures of payment system development, testing, and deployment of algorithms. development and covers all aspects of national payment sys- tems—from infrastructure and the legal and regulatory envi- Regulators contemplating any of these measures will need to ronment to technological and business model innovations, take a step-by-step approach tailored to their country context, international remittances, and oversight framework. considering not only risk-mitigation concerns but also possi- ble implications for financial sector development and innova- tion. 32   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report Globally, one of the more widespread fintech innovations—after Mazer 2018). This tension notwithstanding, 55 jurisdictions (63 per- payments—is digital credit, which facilitates lending through mobile cent of respondents) indicate they have digital credit providers applications22 or online platforms via the internet. Digital credit is, active within their borders. Among this group of jurisdictions, 74 however, a double-edged sword. (See box 3.6.) On the one hand, it percent require digital credit providers to get a license or some facilitates access to credit for the poor, women, and small and medi- other form of authorization, 85 percent are subject to FCP regula- um-sized enterprises that would otherwise be less likely to obtain tions, 91 percent are subject to rules on data protection, and 70 credit from traditional financial institutions. On the other hand, it percent are required to share data with credit bureaus/registries, has led to over-indebtedness and predatory lending, which have which could have a positive impact in stimulating more access to jeopardized the gains it stimulates (Izaguirre, Kaffenberger, and finance. Figure 3.9: Fintech Product Innovations for Financial Inclusion, 2022 Percentage of responding jurisdictions reporting having each fintech innovation Crypto assets Peer-to-peer lending All 100% 100% EAP High Income ECA 80% 80% Upper-Middle Income LAC Lower- Middle Income 60% 60% MENA Low Income SSA 40% 40% 20% 20% 0% 0% Digital credit Crowdfunding Investment products with robo advisors 100% 100% 100% 80% 80% 80% 60% 60% 60% 40% 40% 40% 20% 20% 20% 0% 0% 0% Note: Figure based on 95 responses. Percentages are a share of responses within the region/income group, rather than of the global total. Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, SSA = Sub-Saharan Africa. Figure 3.10: Most Common Regulatory Protocols around Fintech Products, 2022 Percentage of responding jurisdictions reporting regulatory protocols in place License or other form 94% 92% 93% of authorization/registration/ 86% 91% 85% 83% 80% non-objection letter 81% 83% 74% 65% 68% 70% Subject to 63% financial consumer protection regulations 48% 35% Subject to any rules 25% on data protection 10% 12% Requirement to share data with credit bureaus or credit registry Crypto assets Peer-to-peer lending Digital credit Crowdfunding Investment products with robo advisors Note: Figure based on 46 responses for crypto-assets, 31 for peer-to-peer lending, 47 for digital credit, 42 for crowdfunding, and 29 for investment products. 22 A software application that is designed to run on a mobile device, such as a phone or a tablet. Selected Catalysts for Financial Inclusion   33 financial services at scale, could reduce the number of underbanked BOX 3.6 and unbanked (Moy and Carlson 2021). This is, however, yet to materialize. National authorities and, in particular, those in low- Digital Credit: A Double-Edged Sword er-middle- and low-income jurisdictions appear committed to mov- In Kenya, where DFS have had high adoption rates and digital ing cautiously as it relates to this asset class. This makes sense credit was introduced early to massive uptake, the outcome considering the complexity of such products, which, when coupled has been problematic. One nationally representative study with low to moderate levels of financial (read “digital”) capability, found that about 50 percent of digital credit borrowers had make such products risky. Furthermore, in 2022 several prominent repaid those loans late and that about 12 percent had defaulted altogether. Another study found that about half of centralized crypto-asset exchanges filed for bankruptcy, causing a defaulters on digital loans had an outstanding balance of less sizable contraction of the crypto-asset market globally and serving than $10. Kenyans were being blacklisted in droves for very as a red flag for many policy makers (Knauth 2022). small loan amounts, and the COVID-19 pandemic only served to exacerbate this problem. Another fintech innovation that has been gathering momentum In response to what appeared to be a runaway train of nega- is crowdfunding. Fifty jurisdictions indicate that these products are tive externalities, in 2021 the Kenyan parliament approved a offered in their markets. Crowdfunding is an internet-enabled way bill that requires all digital lenders to submit product pricing for businesses or other organizations to raise money in the form of to the Central Bank of Kenya for approval before launch. The either donations or investments from multiple individuals. This type bill sought to lower predatory interest rates. Furthermore, of product was initially hailed as having significant potential, partic- nonperforming loans were capped at twice the amount of the ularly in markets where access to credit from the traditional financial initial loan defaulted, thus prohibiting lenders from perpetu- ally increasing the amount to be paid back through late-pay- sector was constrained. Indeed, a 2015 World Bank report on this ment fees. Kenya’s example highlights the role of authorities subject posited that “developing countries that manage this [new and the level of vigilance they need to employ in the face of funding mechanism] successfully may be able to leapfrog the devel- innovation in a market made up of mostly vulnerable people oped world, in both a regulatory and economic sense, by creating with low levels of financial (and particularly digital) literacy. frameworks for early-stage finance that facilitate entrepreneurship, Note: Nonperforming loans are those loans for which the outstanding the fostering of innovative technology enterprises and the emer- balances have not been paid for more than 90 days. Sources: Totolo gence of new competitive industries” (InfoDev/World Bank Group (2018), MSC (2019). 2015). Crypto assets (issuance, exchange, and custody), crowdfunding, The truth, unfortunately, is that in 2022 developing countries and peer-to-peer lending are three types of fintech innovations that have not been able to harness this potential fully. Of the 50 jurisdic- have gained momentum in equal measure. In 2022, for each of tions that have crowdfunding, 71 percent are high-income econo- these three product categories, slightly over half of responding mies, while 62 percent and 32 percent are in upper-middle- and jurisdictions indicate they are available domestically. lower-middle-income economies, respectively. Countries such as Ghana, Kenya, Mauritius, Nigeria, and South Africa, though having According to the Bank for International Settlements, crypto-as- status as emerging markets and developing economies, are all sets are private digital assets that depend primarily on cryptogra- nonetheless still middle-income countries. As for whether rules dic- phy and distributed ledger or similar technology. They use tate the crowdfunding products in their market, over 80 percent of cryptography, peer-to-peer networks, and distributed ledger tech- jurisdictions indicated having some form of licensing or authoriza- nology such as blockchain to create, verify, and secure transactions. tion requirement in place. Similarly, 92 percent and 85 percent of They are highly concentrated in high- and upper-middle-income jurisdictions reported having rules on data protection and FCP reg- countries, with an estimated market capitalization of $2.8 trillion as ulations in place, respectively, for these products. However, when it of November 2021 (Feyen, Kawashima, and Mittal 2022). Thirty comes to data sharing with credit bureaus or registries, only nine (25 jurisdictions (65 percent) with this product require some form of percent of responding jurisdictions) have this requirement in place. authorization for them to be active. If sharing this information indeed also enables crowdfunding plat- forms to access the data in these registries, this can help narrow the Of the 46 jurisdictions responding about crypto-assets, 37 juris- information gap between banks and more established lenders that dictions (86 percent) subject these products to rules on data shar- are using those registries and bureaus to facilitate access to finance ing, 20 jurisdictions (48 percent) require that they adhere to (Havrylchyk 2018). consumer protection guidelines, and four jurisdictions (10 percent) require that they share data with credit bureaus/registries. It has Fewer regulators reported that their jurisdictions had peer-to- been posited by some national authorities and private players that peer lending and investment products with robo-advisers,23 and, crypto-assets, through simple to set up and low-cost automated Robo-advisers are automated investment services aimed at ordinary investors. They tend to be very low cost and often have no minimum balance require- 23 ments. 34   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report again, these are more prevalent in high-income than low-income Given these developments, the survey asks authorities to indi- jurisdictions. Perhaps unsurprisingly given the high risk associated cate if they have adopted data sharing models—specifically, open with all the innovative products mentioned, the investment prod- API standards, open banking/open finance, and digital lockers (fig- ucts have the highest proportion of jurisdictions that require autho- ure 3.11).24 According to the Bank for International Settlements’ rization or a license prior to operation (83 percent of jurisdictions). definition, open banking/open finance is the sharing and leverag- ing of customer-permissioned data by banks with third-party devel- North America, with only two jurisdictions responding, has all of opers and firms to build applications and services. Within an open the fintech innovations discussed above. Conversely, neither of the banking/open finance regime, banks and other financial institutions two South Asian economies that responded to this question have (data holders) exchange consumer data with other FSPs or third- any of these innovations. Particularly in the fintech era, the expand- party providers such as fintechs (both known as “data recipients”), ing volume and richness of data trails resulting from increased digi- following applicable laws and regulations on consumer consent tization—paired with growing data analytics capabilities—present (Staschen and Plaitakis 2020). This responsible exchange of cus- an opportunity to advance financial inclusion (Vidal and Plaitakis tomer transaction data allows fintech and other types of FSPs to 2022). This is because alternative data sources, such as social offer products and promote financial behaviors that alleviate some media, phone records, utility payment history, and customized test of the pain points experienced by low-income customers—and to scores (Alibhai et al. 2019)—which were previously unavailable as do so more efficiently and cheaply than banks. an input into an FSP’s credit scoring models—are now abundant because of data sharing models. Figure 3.11: Adoption of Data-Sharing Models, 2022 Percentage of responding jurisdictions reporting data-sharing models, by geographic region All EAP ECA LAC MENA SAR SSA 50% 50% 50% 35% 32% 33% 33% 31% 25% 26% 23% 19% 20% 20% 17% 15% 12% 10% 11% 8% 0% Open Banking Digital Locker Open API Standards Note: Figure based on the following number of responses: All 117, East Asia and Pacific (EAP) 12, Europe and Central Asia (ECA) 40, Latin America and the Caribbean (LAC) 26, Middle East and North Africa (MENA) 13, South Asia (SAR) 5, and Sub-Saharan Africa (SSA) 19. In light of these benefits, it is encouraging to note that 41 juris- developments with the aim of guiding authorities on how to opti- dictions (35 percent of 117 respondents) have currently adopted mize these trends to improve access, usage, and quality of financial open API standards. The survey also shows that 37 jurisdictions (32 services. percent) have adopted open banking/open finance practices. Unfortunately, the jurisdictions that are exploring these models also Finally, respondents were asked to provide details on the inno- skew more toward higher-income than lower-income economies, so vation-related activities they undertake as part of their oversight the promise of these models drastically increasing access is yet to function in this area. Table 3.12 details the four main activities and materialize.25 Also, only 14 jurisdictions (concentrated in East Asia their prevalence. The most common activity, which is reported by and Pacific and South Asia) have digital lockers.26 These allow for 54 jurisdictions, is updating existing regulations to address new the secure storage of verified and otherwise important documents. developments and innovation, indicating a lag between the intro- This survey will be tracking and reporting on these data sharing duction of innovations and their appropriate reflection within the regulatory framework. 24 An open API, also called public API, is an application programming interface made publicly available to software developers. A digital locker is a secure online storage service for files or digital media. Open APIs might be adopted for other reasons, such as financial supervision or back-office access to shared infrastructure, not necessarily for open banking/ 25 open finance. 26 The survey instrument defines a digital locker as a platform to facilitate the digital issuance and verification of documents to enable individuals and entities to share online trusted information and documents remotely (that is, whereby individuals can upload, request, store, and share digitally certified information such as IDs or tax returns). Selected Catalysts for Financial Inclusion   35 Table 3.12: Innovation Related Activities Undertaken by Authorities Number (percentage) of jurisdictions reporting activities THEMATIC AREA ACTIVITIES JURISDICTIONS Innovation office, regulatory Industry and market assessments analyzing the impact of innovation and digital 44 (43%) sandbox, or other innovation transformation on financial inclusion Updating of existing regulation to address new developments and innovation 54 (53%) Collaborative structures with fintech focused on financial inclusion 40 (39%) Protocols to test and learn 26 (25%) Note: Figure based on 102 responses in 2022. The next two most prevalent activities relate to assessments of banks or bank supervision agencies. In contrast, credit bureaus tend the impact of innovation on financial inclusion and the develop- to be privately owned and operated (World Bank 2015). ment of collaborative structures with fintech to drive financial inclu- sion, with 44 and 40 jurisdictions undertaking these activities, Table 3.13 details the various access and reporting requirements respectively. Lastly, a quarter of the responding jurisdictions, cur- to registries and bureaus by types of financial institutions. Commer- rently have protocols to test and learn in place. While the number cial banks have the most expansive access to these repositories of of jurisdictions undertaking these types of initiatives is relatively all FSP types, with 84 and 73 jurisdictions allowing them to access small compared to other traditional activities, their presence speaks credit bureau and credit registry data, respectively. Commercial to a rising awareness among authorities of the need to supervise banks, however, bear the greatest burden among FSP types, as it with an eye to the future, rather than the status quo. relates to the requirement to check information for all or some loans as well as having mandatory reporting on both positive and nega- tive data. 3.10 CREDIT REPORTING SYSTEMS Notably, for all financial institution types, the number of jurisdic- According to the World Bank’s International Committee on tions mandating the reporting of loans in arrears or default is higher Credit Reporting, credit reporting systems reduce informational than those mandating those in compliance. Negative reports can asymmetries between lenders and borrowers. As it relates to finan- have a system-wide negative impact. Countries such as Kenya and cial inclusion, credit reporting can be a valuable tool for improving Tanzania have witnessed a steep rise in defaults and the blacklisting lenders’ ability to extend credit responsibly to unserved and under- of vulnerable digital borrowers highlights even more the need for served consumers. Credit reporting systems also allow lenders to FCP initiatives to limit the negative externalities that may arise from price risks more accurately, which can result in more favorable terms the combination of financial access and low financial capability and conditions for the borrower. With regards to FCP, credit report- (Rhyne 2019). ing data can be used to help reduce over-indebtedness by enabling lenders to match the loan product to the needs and repayment capacity of borrowers. One constraint to realizing all the inclusion and consumer pro- tection benefits of credit reporting systems, however, is the cover- age of these systems in terms of entities reporting to them or utilizing their services. Per the International Committee on Credit Reporting, a credit reporting system that relies heavily on commer- cial banks, for example, would have limited benefit for low-income consumers who tend to have less access to commercial banks. Credit registries are generally developed to support the state’s role as a supervisor of loan-dispensing financial institutions, though not all types of financial institutions may be included in those regis- tries. Where these registries exist, loans above a certain amount must, by law, be registered in the national credit registry. One of the main differences in comparison with credit bureaus—the other main type of credit reporting service provider—is that credit registries tend to be public entities. They are usually managed by central 4 FINANCIAL CONSUMER PROTECTION KEY HIGHLIGHTS FCP legislation: The fact that over 97 percent of responding However, the use of thematic evaluations, mystery shopping, and jurisdictions have some form of a legal framework for FCP in consumer primary research is less widespread. The most com- place is evidence of an almost universal recognition of the need mon form of enforcement activity, which is undertaken by 97 for these protections. Indeed, between 2017 and 2022, the num- jurisdictions, is the issuance of warnings or reprimands to provid- ber of jurisdictions with stand-alone FCP laws or regulations has ers. Only around 75 percent of responding jurisdictions use moral increased by 13 percent. suasion, demand that advertisers stop using deceptive tactics in their advertising, or demand that FSPs alter their goods, services, FCP regulations: Currently, consumer protection clauses embed- or operational procedures, as necessary. ded within financial-sector regulations are the most common type of FCP regulation. This structure exists in 94 jurisdictions (83 Prohibition of unfair business practices: Many jurisdictions percent of respondents). Also, 78 jurisdictions (69 percent) have indicate that they have various general restrictions or prohibitions stand-alone regulations by FCP topic, which is encouraging but on unfair business practices. Ninety-eight jurisdictions prohibit does leave room for improvement. the use, in a consumer agreement, of any term or condition that is unfair, excessively unbalanced, or abusive, while 90 jurisdic- Institutional arrangements for FCP supervision: The institu- tions limit any term or condition that excludes or restricts the lia- tional arrangements for FCP vary significantly, though two mod- bility of the FSP. els stand out as most popular: Thirty-nine jurisdictions have an integrated sectoral financial sector agency model, and 24 have Consumer complaint handling: One hundred and seven juris- the integrated single agency model. diction report having laws or regulations setting standards on internal dispute resolution mechanisms, an increase from 92 juris- Of the 100 responding jurisdictions, 54 have an FCP unit that is dictions in 2017. There is currently a relatively high number of separate from and on an equal hierarchical footing with the pru- economies (102) that require FSPs to have a process in place for dential supervision unit. However, in 27 jurisdictions, the FCP addressing consumer complaints. In cases where financial con- team is embedded within the prudential supervision team, which sumers are unable to resolve their complaints with a provider is not ideal for the comprehensive implementation of the FCP through an internal dispute resolution mechanism, 81 jurisdic- team’s mandate. tions have established an alternative dispute resolution mecha- FCP supervisory and enforcement activities: Around 75 per- nism. cent of responding jurisdictions engage in specific supervision activities, such as data collection and analysis of complaints, off- and on-site inspections, rule drafting, and market monitoring. Financial Consumer Protection   37 Table 3.13: Access to and Usage of Credit Bureaus and Credit Registries Number (percentage) of responding jurisdictions reporting access to and usage of credit data COM. OTHER FNCL BANKS BANKS COOPS ODTIS CCPS NBEMIS Has access to credit bureau data 84 (78%) 49 (79%) 50 (81%) 41 (85%) 62 (81%) 27 (82%) Has access to credit registry data 73 (68%) 40 (65%) 37 (60%) 31 (65%) 48 (62%) 19 (58%) Required to check credit bureau/registry information 81 (75%) 42 (68%) 35 (56%) 37 (77%) 47 (61%) 16 (48%) for all loans Required to check credit bureau/registry information 62 (57%) 34 (55%) 33 (53%) 28 (58%) 40 (52%) 11 (33%) for some types of loans Mandatory reporting to a credit bureau/registry of negative 84 (78%) 50 (81%) 43 (69%) 38 (79%) 58 (75%) 17 (52%) loan information Mandatory reporting to a credit bureau/registry of positive 76 (70%) 44 (71%) 39 (63%) 32 (67%) 55 (71%) 15 (45%) loan information No. of responding jurisdictions 108 62 62 48 77 33 Figure 3.12: Access to Credit Bureaus and Credit Registries, 2017 vs. 2022 Number of jurisdictions reporting access to credit registries and bureaus, by institution type: (set of 95 overlapping jurisdictions) 70 75 Has access to a credit bureau   Has access to a credit registry  61 55 52 42 40 39 37 35 35 33 33 27 29 29 22 24 25 20 15 16 12 10 2017 ‘22 2017 ‘22 2017 ‘22 2017 ‘22 2017 ‘22 2017 ‘22 2017 ‘22 2017 ‘22 2017 ‘22 2017 ‘22 2017 ‘22 2017 ‘22 Commercial Other Financial ODTIs CCPs NBEMIs Commercial Other Financial ODTIs CCPs NBEMIs Banks Banks Coops Banks Banks Coops In reviewing the change in jurisdictions with access to credit cycles. But even this change is minimal, with a reduction from 35 to bureaus, a modest increase in the number of jurisdictions with 33. As it relates to access to credit registries, the patterns of access access by commercial banks, other banks, financial cooperatives, are the same as those of credit bureaus. Overall, with the data and NBEMIs can be observed between 2017 and 2022. CCPs also showing only modest increases in access to credit bureaus and reg- appear to have a significant increase in access to credit bureaus istries despite the benefit, this is an area of relatively low-hanging (from 27 to 52 jurisdictions), but this change must be viewed with fruit where policy makers can stimulate increased access to credit. caution given the expansion of the category, which included only microcredit companies in 2017 but includes several other types of consumer credit companies in 2022. It is therefore not clear if this increase is actual or just a function of the change in category defini- tion. ODTIs are the only financial institution type to have a decrease in jurisdictions with access to credit bureaus between the two 38   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report 4.1 INTRODUCTION 4.2 LAWS AND REGULATIONS FCP encompasses the laws, regulations, other measures, and It is critical to have in place a clear and comprehensive legal and institutional arrangements generally designed to ensure fair and regulatory framework that establishes minimum standards to pro- responsible treatment of financial consumers in their purchase and tect consumers of retail financial products and services. Such a use of financial products and services and their dealings with FSPs.27 framework can take a variety of forms. While some jurisdictions rely A strong consumer protection regime is key to ensuring that on the application of general consumer protection laws to financial expanded access to financial services benefits consumers, enabling products and services, others include provisions specific to financial them to make well-informed decisions on how best to use financial services within broader consumer protection laws. Such a frame- services, building trust in the formal financial sector and contribut- work may also be implemented through stand-alone FCP law(s). ing to healthy and competitive financial markets. Ensuring effective Importantly, a single jurisdiction may be found to take several of FCP is also vital given the vulnerability of segments of the popula- these approaches (that is, having both a general consumer protec- tion that remain unserved and underserved. Box 4.1 lists good prac- tion law applying to financial products and services and some more tices and resources to assist authorities in building an effective FCP specific laws). This should be kept in mind when considering the approach. survey findings below. In the survey, respondents were asked to indicate what types of BOX 4.1 legal frameworks exist in their jurisdiction for FCP (table 4.1). The Good Practices and Resources to Help most prevalent framework is having a general consumer protection Authorities Build an Effective FCP Approach law without explicit reference to financial services; 74 jurisdictions (65 percent of respondents) have this framework in place. Examples The World Bank Group’s 2017 edition of Good Practices for of this category include Guyana’s Consumer Affairs Act of 2011, Financial Consumer Protection is a comprehensive resource Mexico’s Federal Consumer Protection Law of 1992, and Bangla- on international FCP good practices. More recently, the World desh’s Consumer Rights Protection Act of 2009. (However, Mexico Bank has released several publications on FCP that provide additional guidance as well as updates on developments that also has a range of FCP-specific legislation in place.) In addition, 55 have occurred since the publication of the 2017 Good Prac- jurisdictions (48 percent) have a general consumer protection law tices. These publications include the following: with explicit reference to financial services. If a country is relying only on general consumer protection laws for FCP, a common draw- • Consumer Risks in Fintech: New Manifestations of Consumer Risks and Emerging Regulatory Approaches back is that—even in cases where such laws include some explicit references to financial services—these laws are often not specific, • Complaints Handling within Financial Service Providers: clear, or comprehensive enough to provide effective protection for Principles, Practices, and Regulatory Approaches financial consumers and also may not allow for the development of • Product Design and Distribution: Emerging Regulatory detailed regulations by financial regulatory authorities. Approaches for Retail Banking Products • Key Facts Statement Testing: Options, Methodologies, and Tools • The Next Wave of Suptech Innovation: Suptech Solutions for Market Conduct Supervision • Market Monitoring Toolkit for Financial Consumer Protection • Rethinking Consumer Protection: A Responsible Digital Finance Ecosystem 27 OECD (Organisation for Economic Co-operation and Development), “Financial Consumer Protection,” https://www.oecd.org/finance/financialconsumerpro- tection.htm. Financial Consumer Protection   39 Table 4.1: Approaches to FCP Legal Frameworks Number (percentage) of responding jurisdictions with each legal framework approach for FCP, by regional group LEGAL FRAMEWORK APPROACH ALL EAP ECA LAC MENA NA SAR SSA General consumer protection law without explicit 74 (65%) 8 (11%) 30 (41%) 12 (16%) 6 (8%) 1 (1%) 5 (7%) 12 (16%) reference to financial services General consumer protection law with explicit 55 (48%) 7 (13%) 25 (46%) 13 (24%) 4 (7%) 1 (2%) 1 (2%) 4 (7%) reference to financial services Stand-alone FCP law or regulation 63 (56%) 8 (13%) 22 (35%) 9 (14%) 11 (17%) 2 (3%) 1 (2%) 10 (16%) General competition law with specific reference 48 (42%) 5 (10%) 15 (31%) 15 (31%) 6 (13%) 0 (0%) 2 (4%) 5 (10%) to FCP Other 39 (35%) 5 (13%) 15 (38%) 10 (26%) 2 (5%) 1 (3%) 2 (5%) 4 (10%) No FCP legal framework 3 (3%) 0 (0%) 0 (0%) 2 (67%) 0 (0%) 0 (0%) 0 (0%) 1 (33%) No. of responding jurisdictions 113 12 40 25 13 2 5 16 Note: Percentages represent the proportion of responding jurisdictions within each region that indicate they have a particular legal framework in place. “Other” included such approaches as civil codes and industry standards. Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa. Sixty-three jurisdictions (56 percent) indicate they have a stand- 2022. This points to a strong and positive trend of jurisdictions alone FCP law or regulation. Just over a third of these jurisdictions adopting laws and regulations to protect financial consumers. In are in the Europe and Central Asia Region and include Austria, Fin- both 2017 and 2022, jurisdictions in Europe and Central Asia make land, and Sweden. Of the 63 jurisdictions, only two (Rwanda and up the majority of those with stand-alone FCP laws/regulations. In Tanzania) are low income, while 16 (including the Arab Republic of 2022, 59 jurisdictions, representing 53 percent and 59 percent of Egypt, Indonesia, Nigeria, and Tunisia) are lower-middle income. Of reporting high-, upper-middle- and lower-middle-income jurisdic- the jurisdictions with a general consumer protection law that explic- tions, respectively, have these laws or regulations in place. Where itly refers to financial services, significantly fewer were from low-in- there is a lag, however, is in low-income jurisdictions, where only 40 come jurisdictions (20 percent) than from lower-middle-income percent of those responding indicate they have a stand-alone FCP jurisdictions (43 percent). The gap only widens when compared to law or regulation in place. more affluent regions. Among regions that went from not having stand-alone FCP laws/ Furthermore, 48 jurisdictions (42 percent) have a general com- regulations in 2017 to having them in 2022, countries in the Sub-Sa- petition law with specific reference to FCP. Three jurisdictions haran Africa and Middle East and North Africa Regions feature the (Belize, Haiti, and the Seychelles) indicated at the time of data col- most. In 2017, only three respondents in Sub-Saharan Africa had a lection that they had no legal framework for FCP, but Seychelles has stand-alone law/regulation, compared to 10 in 2022. And while very recently passed an act relevant to this subject, and Belize’s none of the respondents in the Middle East and North Africa had a consumer protection law is currently being drafted. stand-alone law/regulation in 2017, 11 did so in 2022. In the Latin America and the Caribbean and Europe and Central Asia Regions, The most notable change between 2017 and 2022 in terms of Argentina and Moldova are among the jurisdictions that went from FCP legal frameworks has been a 13 percentage point increase in not having a stand-alone law in 2017 to having such in 2022. stand-alone FCP laws or regulations (including regulations on stand- alone FCP topics). In terms of the number of jurisdictions when Figure 4.1 highlights the legal framework approaches between comparing the “Set of 95” countries that participated across both 2017 and 2022, focusing only on the “Set of 95” countries that cycles (see appendix B), the numbers were 59 in 2017 and 71 in participated in both survey cycles. (See Appendix B.) 40   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report Figure 4.1: FCP Legal Frameworks, 2017 vs. 2022 Percentage of responding jurisdictions reporting legal frameworks: (set of 95 overlapping jurisdictions) 2017 2022 0% 20% 40% 60% 80% 100% Standalone financial consumer protection law or regulation (including standalone regulations on specific financial consumer protection topics) General consumer protection law with explicit references to financial services General consumer protection law without explicit reference to financial services General competition law with specific reference to financial consumer protection Consumer protection provisions within other financial sector laws (e.g. banking law) No legal framework exists for financial consumer protection Other Note: The option “General competition law with specific reference to financial consumer protection” was not presented to respondents in 2017. The option “Consumer protection provisions within the financial sector legal framework” was not presented to respondents in 2022. Beyond the legal framework governing FCP in their jurisdictions, eral relevant regulations promulgated, these responses are not 113 respondents also indicate their types of regulatory regimes mutually exclusive. (table 4.2). Again, because jurisdictions can legitimately have sev- Table 4.2: FCP Regulation Types Number (percentage) of responding jurisdictions that report regulation types, by regional group REGULATION TYPE ALL EAP ECA LAC MENA NA SAR SSA Consumer protection provisions within regulations 94 (82%) 10 (83%) 34 (85%) 18 (71%) 11 (85%) 2 (100%) 4 (80%) 15 (88%) pertaining to the financial sector Stand-alone regulation by FCP topic 78 (69%) 10 (83%) 26 (65%) 14 (58%) 13 (100%) 1 (50%) 3 (60%) 11 (65%) Other consumer protection provisions by product type 72 (64%) 9 (75%) 29 (73%) 15 (63%) 7 (54%) 1 (50%) 4 (80%) 7 (41%) within the financial sector legal framework Other 14 (12%) 0 (0%) 6 (15%) 5 (17%) 2 (15%) 0 (0%) 0 (0%) 1 (6%) No regulation exists pertaining to FCP 4 (4%) 0 (0%) 0 (0%) 5 (17%) 0 (0%) 0 (0%) 0 (0%) 0 (0%) No. of responding jurisdictions 113 12 40 24 13 2 5 17 Note: Percentages represent the proportion of responding jurisdictions within each region that indicate they have a particular regulation type in place. Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa. The most common type of regulation in 2022 is consumer pro- other consumer protection provisions by product type within the tection provisions within regulations pertaining to the financial sec- financial-sector legal framework. Finally, four jurisdictions, all of tor. These types of regulations are in place in 94 jurisdictions (83 which are in Latin America and the Caribbean, have no regulations percent). Also, 78 jurisdictions (69 percent) have stand-alone regu- existing for FCP. lations by FCP topic. Seventy-two jurisdictions (64 percent) have Financial Consumer Protection   41 Figure 4.2: FCP Regulation Types, 2017 vs. 2022 Percentage of jurisdictions that report particular regulation types: (set of 95 overlapping jurisdictions) 2017 2022 0% 20% 40% 60% 80% 100% CP provisions within the regulations pertaining to the financial sector Stand-alone FCP regulations Other CP provision by product type within financial sector legal framework No FCP Regulations Other Note: The options “Other CP provision by product type within fncl sector legal framework” (for example, banking law or insurance law) and “No FCP Regulations” were introduced in the 2022 iteration of the survey. BOX 4.2 Moving to More Comprehensive FCP Regulatory Frameworks As highlighted in international guidance on FCP, including the regard to transparency and disclosure, fair treatment and busi- 2017 Good Practices and the recently revised G20/OECD High- ness conduct, and powers of the financial regulators in Rwanda Level Principles on Financial Consumer Protection (2022), it is with regard to supervising FCP. important for jurisdictions to implement an FCP regulatory frame- Similarly, while the Philippines already had in place some sec- work that comprehensively covers all types of financial products tor-specific FCP requirements, in 2021 it passed the new Finan- and services, with appropriate ongoing flexibility for changes in cial Products and Services Consumer Protection Act (Republic financial sectors. Such a framework should establish appropriate Act No. 11765) to provide an overarching legal framework for requirements and standards to address issues affecting financial FCP. The law specifies a range of principles-based requirements, consumers, ranging from the need for transparency and informa- to be further expanded through regulations by individual finan- tion to ensuring fair provider conduct and promoting practices cial sector authorities. It also sets out the powers and roles of that support beneficial consumer outcomes. It should also pro- those authorities with regard to supervision and enforcement as vide a clear basis for relevant regulators to be able to supervise well as the resolution of consumer complaints. such matters. In some jurisdictions, more comprehensive requirements have While some jurisdictions have had relatively comprehensive FCP been introduced through regulatory instruments developed by regulatory frameworks in place for a long time, this has been financial sector authorities. For example, the National Bank of missing in many jurisdictions, as reflected in previous survey Ethiopia issued a financial consumer protection directive in 2020 results. That said, there have clearly been improvements in at (Directive No. FCP/01/2020) that introduced several general least some jurisdictions since the 2017 survey. A range of jurisdic- principles-based obligations on FSPs (on transparency, fair treat- tions have been making significant efforts to address gaps in their ment, product suitability, personal data protection, and com- FCP legal and regulatory frameworks. Approaches to implement- plaints handling), supported by some more specific rules. Other ing more comprehensive FCP frameworks have ranged from the countries have strengthened existing FCP regulatory frameworks passage of new FCP legislation by parliaments to the issuance of to address key gaps and cover new topics. For example, in Indo- regulatory instruments by financial sector authorities. nesia, financial sector authorities recently undertook updates of In 2021, the Republic of Rwanda passed Law No. 017/2021 Relat- older FCP regulatory frameworks for financial service institutions ing to Financial Service Consumer Protection, which (together and payment service providers, replacing them with new, more with regulations issued under it) was intended to address the lack comprehensive regulations (OJK Regulation No. 6/POJK.07/2022 of any comprehensive FCP regulatory framework in the country. on Consumer and Community Protection in the Financial Ser- The law is applicable to all regulated FSPs, including, among oth- vices Sector and BI Regulation No. 22/PBI/2020 on Consumer ers, providers of deposit, payment, credit, and insurance prod- Protection). ucts. The law addresses a range of FCP issues, including with 42   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report Figure 4.2 maps regulation types reported across the 2017 and There is no single institutional model that has been shown to be 2022 cycles within the “Set of 95” jurisdictions (Appendix B). The most appropriate for all jurisdictions. In fact, several different insti- most notable change is the 12 percentage point increase (from 55 tutional models can be found. The main models are the following: to 67 percent) in the number of jurisdictions with stand-alone FCP • Integrated single agency model: FCP-supervision responsi- regulations. This mirrors the increase (discussed above) in jurisdic- bilities fall under a single agency that is responsible for all tions with laws specific to FCP. The jurisdictions that indicated in aspects of supervision (for example, prudential and FCP) of all 2017 they did not have such stand-alone regulations but said they FSPs operating within the jurisdiction. do in 2022 include Korea, Lebanon, and Nigeria. It should be noted that the option to indicate that a jurisdiction has other consumer • Integrated multiple agency model (sectoral): FCP-supervi- protection provisions by product type within a financial sector legal sion responsibilities fall under multiple agencies that hold framework was introduced only in the 2022 survey. That said, it is responsibility for all aspects of supervision (for example, pru- notable that the current survey highlights that 72 jurisdictions have dential and FCP) of FSPs operating within specific financial sec- such regulations in place. One such example is Armenia, which has tors (banking, insurance, securities, and so on). rules pertaining to FCP stipulated in its payments and insurance • Dedicated market-conduct agency model: FCP-supervision laws. Box 4.2 discusses the international good practice related to responsibilities fall under a single agency dedicated to FCP FCP frameworks. supervision. • General consumer protection agency model that covers 4.3 INSTITUTIONAL ARRANGEMENTS FCP: FCP-supervision responsibilities fall under an agency or agencies responsible for broader consumer protection super- Another key aspect of an FCP framework in a jurisdiction is its vision within the jurisdiction, including nonfinancial activities. institutional arrangements—that is, which authority or authorities Appendix C further explains this categorization. are responsible for regulation and supervision. As noted in the 2017 Good Practices, the authority (or authorities) in charge of imple- As evident in table 4.3, institutional arrangements for FCP vary menting the FCP legal framework should have an explicit and clear significantly. Of the 76 jurisdictions that responded to this question legal mandate for consumer protection. Principle 2 of the G20/ about the model they employ, 39 jurisdictions (51 percent) have the OECD High-Level Principles similarly states that there should be integrated sectoral financial sector agency model for one or more oversight bodies explicitly responsible for FCP, with the necessary of the authorities that have a mandate to oversee FCP. The next authority to fulfill their mandates. These institutions are most effec- most popular model is the integrated single agency model, which is tive when they have clear and objectively defined responsibilities in 24 jurisdictions (32 percent). Five jurisdictions (seven percent) and appropriate governance; operational independence; account- have the general consumer protection agency model in place, and ability for their activities; adequate powers, resources, and capabil- only three jurisdictions (four percent) have a dedicated market-con- ities; defined and transparent enforcement frameworks; and clear duct authority model. Five jurisdictions chose “Other” in response and consistent regulatory processes. to this question. One was the United States, where multiple state governments have agencies with responsibilities in the FCP area. Table 4.3: Institutional Arrangement Models for FCP Percentage of responding jurisdictions that report institutional arrangement model for FCP INSTITUTIONAL ARRANGEMENT ALL EAP ECA LAC MENA NA SAR SSA Integrated single agency model 24 (32%) 4 (40%) 10 (42%) 4 (27%) 2 (33%) 0 (0%) 0 (0%) 4 (24%) Integrated sectoral multiple agency model 39 (51%) 5 (50%) 9 (38%) 7 (47%) 3 (50%) 0 (0%) 3 (100%) 12 (71%) Dedicated market conduct authority model 3 (4%) 1 (10%) 1 (4%) 0 (0%) 0 (0%) 1 (100%) 0 (0%) 0 (0%) General consumer protection agency model 5 (7%) 0 (0%) 2 (8%) 3 (20%) 0 (0%) 0 (0%) 0 (0%) 0 (0%) Other 5 (7%) 0 (0%) 2 (8%) 1 (7%) 1 (17%) 0 (0%) 0 (0%) 1 (6%) No. of responding jurisdictions 76 10 24 15 6 1 3 17 Note: Percentages by region indicate the percentage of jurisdictions in each region that indicated having a given institutional model. Totals for each region may equal more than 100 percent because certain jurisdictions reported having more than one model. Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa. Figure 4.3 highlights changes in responses on institutional models between the two cycles are modest. A more in-depth dis- arrangements between 2017 and 2022. Specifically, though the cussion of the benefits, drawbacks, and other considerations for integrated sectoral financial sector agency model is the most prev- various institutional arrangements can be found in the 2017 Good alent model in both cycles, six percent more jurisdictions have this Practices.28 model in place in 2022 than in 2017. Overall, changes to all other 28 See Chapter 1, A2, “Institutional Arrangements and Mandates.” Financial Consumer Protection   43 Figure 4.3: Institutional Arrangement Models for FCP, 2017 In institutions that house both prudential and FCP supervision, vs. 2022 the FCP team’s hierarchical relationship with the prudential supervi- Percentage of jurisdictions reporting each institutional arrangement sion team is also relevant. Of the 100 responding jurisdictions, 54 report that the FCP unit is separate from the prudential supervision Integrated Sectoral Financial Sector Agency Model 2017 45% 2022 team and on an equal hierarchical footing. This structure is primarily 51% the case in high-, upper-middle-, and lower-middle-income jurisdic- Integrated Single Agency Model tions, which are two to three times more likely than low-income 30% jurisdictions to have this separate and equal structure for teams 32% overseeing prudential and supervision functions. International General Consumer Protection Agency Model good practice requires that prudential and market conduct supervi- 8% sion functions (the latter covering FCP) be kept within separate 7% departments even if they are with the same regulator. (See box 4.3.) Dedicated Market Conduct Authority Model But 27 jurisdictions report that the FCP team is embedded within 3% the prudential supervision team. Finally, in seven responding juris- 4% dictions, the FCP unit is separate from the prudential team, but on Other a lower hierarchical level. These jurisdictions are concentrated more 9% in low-income countries than in any of the wealthier regions. 7% Note: Figure based on 124 responses in 2017 and 117 responses in 2022. Table 4.4: FCP Unit Relationship with the Prudential Function Percentage of jurisdictions with FCP and prudential functions overseen by the same institution LOWER HIGH UPPER MIDDLE LOWER ALL INCOME MIDDLE INCOME INCOME EAP ECA LAC MENA NA SAR SSA The unit(s) or team(s) are embedded within 27% 25% 28% 31% 20% 20% 22% 33% 42% 0% 0% 29% prudential supervision functions The unit(s) or team(s) are separate from prudential 54% 56% 50% 62% 20% 70% 63% 25% 58% 50% 100% 59% supervision functions and on equal hierarchical level The unit(s) or team(s) are separate from 7% 8% 6% 4% 20% 0% 6% 13% 0% 50% 0% 6% prudential supervision functions and on a lower hierarchical level Not applicable 12% 11% 16% 4% 40% 10% 9% 29% 0% 0% 0% 6% No. of responding jurisdictions 100 36 32 26 5 10 32 24 12 2 3 17 Note: Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa. 44   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report BOX 4.3 Establishing and Strengthening Market Conduct Supervision Units The survey points to increased focus on market conduct supervi- Superintendencia de Bancos in the Dominican Republic, on the sion since 2017. While progress is indeed being made, much still other hand, has a dedicated supervision unit at par with the pru- remains to be done. Best practice stresses the importance of dential unit. separating prudential and market conduct supervision functions. Despite these differences in hierarchy, both authorities focus on In emerging markets and developing economies in particular, complaints handling and FCP supervision processes, and both the integrated single agency model (see section 4.3) is often are strengthening their FCP supervisory capacity. This under- preferred over dedicated agency models. This is likely due to scores an issue that is commonly observed in FCP supervision: budgetary constraints. The internal twin-peaks model divides the combination of complaints handling activities with market the functions of prudential and market conduct supervision conduct supervision, and how this can drain valuable supervisory while housing them within a single agency. It allows for teams to resources. Indeed, the World Bank’s ongoing technical assis- focus on distinct functions, leading to more effective regulation, tance reveals that supervisory staff in several countries are better accountability, better visibility on specific risks, and unable to focus on supervisory activities while being overloaded improved outcomes for consumers and financial institutions. with handling customer complaints. However, awareness of the need to allocate resources appropriately is growing, and the This model usually takes time to materialize, involving political World Bank continues to provide technical assistance to facili- and institutional decisions that affect all supervisory functions. tate this. About 10 years ago, the Central Bank of Brazil created a dedi- cated FCP supervision unit that was separate from its prudential Sources: De Mesquita Gomes et al. (2022); IMF (2011); Banco Central do Bra- sil (Central Bank of Brazil), Regimento Interno do Banco Central do Brasil, unit, but both report to the same deputy governor. The model https://www.bcb.gov.br/content/acessoinformacao/acesso_informacao_ evolved in 2019, when the FCP-supervision unit was reassigned docs/RegimentoInterno.pdf; Superintendencia de Bancos, República to a different deputy governor, one who was also responsible for Dominicana (Bank Superintendent of the Dominican Republic), Estructura complaints handling and financial inclusion. The central bank’s Orgánica de la Institución, https://sb.gob.do/sobre-nosotros/organigrama/, and Reglamento de Protección al Usuario de los Productos y Servicios model was subsequently adopted by the country’s insurance Financieros, aprobado por la Junta Monetaria, Primera Resolución del 05 de regulator. febrero de 2015 y su modificación, https://www.sb.gob.do/media/0nkbgbai/ reglamento-de-proteccion-al-usuario-de-los-productos-y-servicios-finan- Other countries are following similar approaches. The National cieros.pdf; National Bank of Rwanda, “Organisation,” https://www.bnr.rw/ Bank of Rwanda has formalized its dedicated FCP supervision about/organisation/, Law No. 017/2021 of 03/03/2021, and “Laws and unit. This notwithstanding, the FCP supervision unit still sits at a Regulations,” https://www.bnr.rw/laws-and-regulations/financial-consum- different hierarchical level than its prudential counterpart. The er-protection/laws-and-regulations/; and World Bank staff inputs. . 4.4 INDUSTRY SELF-REGULATION It is, however, important to note that—even if the content of the obligations in measures such as industry codes of conduct is com- The 2022 survey introduces questions about codes of conduct prehensive—many industry self-regulatory arrangements are volun- to capture both the regulatory and self-regulatory approaches that tary, and the strength of their enforcement arrangements varies, so various jurisdictions have in place for FCP (table 4.5). Industry it can often fall to the institutions that are covered by these arrange- self-regulation can play a role in improving FCP in a jurisdiction (for ments to police themselves and each other. Social pressure may example, in addressing FCP gaps that may exist until they are play some part in terms of compliance, but it is also unlikely to be addressed by regulation, or even raising industry standards above sufficient to ensure it. Therefore, such arrangements are usually not minimums established by regulation). a fully effective substitute for an FCP legal and regulatory frame- work. Table 4.5: Code of Conduct on Social Performance and FCP Number (percentage) of responding jurisdictions, by regional group CODE OF CONDUCT REQUIREMENTS ALL EAP ECA LAC MENA NA SAR SSA Providers are required or encouraged to adopt a social 74 (70%) 9 (75%) 23 (64%) 16 (67%) 7 (54%) 1 (100%) 5 (100%) 13 (72%) performance or FCP code of conduct A code of conduct exists 60 (56%) 8 (67%) 23 (64%) 12 (50%) 6 (46%) 1 (100%) 2 (40%) 8 (44%) No. of responding jurisdictions 107 12 36 24 13 1 5 18 Note: Percentages by region indicate the percentage of jurisdictions in each region that have a certain code of conduct requirement. Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa. Financial Consumer Protection   45 Of the 107 jurisdictions answering the question, 74 (70 percent) vices. The code, which is still in place, is non-statutory; according to report that providers are either required or encouraged to adopt a the Central Bank of Seychelles, it was adopted on a voluntary basis social performance or FCP code of conduct. These jurisdictions are and issued by the Seychelles Bankers Association. mostly in Europe and Central Asia, but Latin America and the Carib- bean and Sub-Saharan Africa also have good representation. Also, of the five South Asia jurisdictions that responded to this question, 4.5 LICENSING all indicated that providers are either required or encouraged to adopt relevant codes. As explained in the 2017 Good Practices, a licensing regime can be an important and useful aspect of an FCP framework. Where When asked specifically if a code exists, 60 jurisdictions (56 per- FSPs are required to be licensed by an authority, it is good practice cent) said yes. These jurisdictions are again concentrated in Europe for the authority to have the power to establish minimum entry cri- and Central Asia. Many such codes are focused on activities under- teria, including (1) that the applicant’s beneficial owners, board taken by commercial banks, but others are both more specific and members, senior management, and people in control functions broader. For example, Poland’s code, titled Good Practices in demonstrate integrity and competence and (2) that the appropriate Advertising Consumer Credit, targets both commercial banks and governance and internal controls are in place, including specific CCPs. The Dutch Banking Association in the Netherlands, similarly, controls to mitigate consumer protection risks. has a code of conduct for lending to small businesses. Belgium has one on complaints handling. Korea has one on disclosure, and Tan- Of the 102 jurisdictions that responded to the question, 68 juris- zania has one on the conduct of bank staff. dictions (67 percent) require that FCP-related criteria be analyzed as part of the licensing process (figure 4.4). This requirement is most On both the adoption of social performance/FCP codes of con- prevalent in East Asia and Pacific, where 90 percent of respondents duct and whether a code exists at all, middle income jurisdictions from that Region indicate this requirement is in place. Across the are at least half as likely to have these in place as higher, lower, and whole sample of responding jurisdictions, however, it is clear that lower-middle income jurisdictions. there is room for improvement in terms of FCP-related checks for the licensing stage. As mentioned above, the Seychelles only recently unveiled an FCP law. Prior to that, the Seychelles Code of Banking Practice cov- Of the 102 jurisdictions, 60 require confirming the competence ered commercial banks, other banks, and financial cooperatives. and integrity of key members of leadership in FSPs at the licensing The code comprises a set of promises outlining how the relevant stage. Sixty-two jurisdictions indicate that as part of their licensing financial institutions should conduct themselves in their dealings process, they require providers to demonstrate they have the with customers, as well as specific requirements for banking ser- appropriate governance and internal controls to mitigate FCP risks. Finally, 17 jurisdictions have other FCP requirements at licensing. These include requiring sound business plans and viable organiza- tional structures that can facilitate compliance with FCP regulations. Figure 4.4: FCP Criteria as Licensing Requirement Percentage of jurisdictions with specific FCP criteria for licensing Minimum criteria for FCP Applicant's beneficial owners, Appropriate governance and Other FCP are analyzed as part of licensing boardmembers, senior management internal controls to mitigate FCP risks requirements demonstrate integrity and competence 100% 100% 100% 95% 94% 88% 91% 90% 89% 90% 88% 90% 90% 91% 83% 82% 73% 67% 64% 61% 50% 45% 31% 25% 25% 20% 11% 10% 0% 0% 0% 0% All EAP ECA LAC MENA NA SAR SSA Note: The variable “Minimum criteria for FCP are analyzed as part of licensing” is based on 102 responses. Other variables are based on 68 responses. The value for “All” is the global figure across geographic regions for a particular licensing requirement. The regional values for each variable, however, indicate the percentage of jurisdictions in each region with that requirement in place. Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa. 46   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report The survey also asked whether jurisdictions with specific FCP in the development, implementation, and ongoing adjustment of licensing criteria have implemented such licensing by provider or regulation. As noted in the 2017 Good Practices, supervisory and product type. Of the 63 responding jurisdictions, 38 jurisdictions regulatory authorities, therefore, need to deploy an appropriate (60 percent) have such licensing criteria by provider type. Of these range of supervisory tools and techniques—for example, market 38, the vast majority (92 percent) have commercial banks as the monitoring, off- and on-site inspections, thematic reviews, and so applicable provider type. Beyond commercial banks, significantly on (WBG 2017). The survey sought to assess the range of supervi- fewer jurisdictions have FCP-licensing requirements by other pro- sory and regulatory activities undertaken by authorities. vider types. ODTIs are the least likely in any jurisdiction to have FCP licensing requirements that speak directly to their institutional type. Table 4.6 details the various supervision and regulation activities undertaken in the 102 responding jurisdictions in which an institu- tion has a mandate for FCP. Certain supervision activities, such as 4.6 SUPERVISORY AND ENFORCEMENT ACTIVITIES those related to the collection and analysis of complaints data, off- and on-site inspections, the development of regulation, and market Effective supervision and enforcement of FCP legal and regula- monitoring, are undertaken by over three-quarters of responding tory measures and the monitoring of the financial sector and finan- jurisdictions. Thematic reviews, mystery shopping, and primary cial consumer experiences are essential to ensure that the FCP research with consumers, however, are implemented in fewer juris- frameworks have their intended positive impact, as well as to assist dictions. Table 4.6: Supervisory and Regulatory Activities Undertaken by Authorities Number (percentage) of responding jurisdictions reporting supervision and regulation activities THEMATIC AREA ACTIVITIES JURISDICTIONS Supervision Market monitoring, based on specific quantitative and qualitative indicators 76 (75%) Market monitoring of providers’ advertisements, sales materials, websites, social media, and so on 74 (73%) Mystery/incognito shopping 50 (49%) Consumer interviews, surveys and focus groups, and other consumer-related research 45 (44%) On-site inspections 79 (77%) Off-site inspections 82 (80%) Thematic reviews 68 (67%) Enforcement 74 (73%) Collection and analysis of consumer complaints data from FSPs, intermediaries, and consumers 85 (83%) Regulation Regulation 85 (83%) Figure 4.5 details the prevalence in 2013, 2017, and 2022 of COVID-19 pandemic was probably a contributing factor, given that various activities for jurisdictions in which an institution has a man- most on-site activities would have been heavily affected in this date for FCP. Some options were not presented in certain cycles; in period. those cases, the data in this chart is absent. Some activities are notable for showing a significant increase in The most commonly undertaken supervisory activity for both the number of jurisdictions reporting them between the two cycles. years is drafting and providing inputs into relevant regulation (88 of The largest jump is in mystery shopping: the jurisdictions reporting 114 respondents in 2017 and 85 of 102 in 2022, indicating a higher it went from 11 in 2013 to 33 in 2017 and now to 50 in 2022. The- share in 2022). An equally prevalent activity in 2022 is collecting and matic reviews also grew in prevalence, increasing from 56 to 68 analyzing consumer complaints data from FSPs, intermediaries, and jurisdictions in the most recent two cycles. Finally, consumer inter- consumers; 85 jurisdictions report they undertake this. Again, this views, surveys and focus groups, and other consumer-related number is an increase from 2017, when 74 jurisdictions reported research rose from 15 jurisdictions in 2013 to 32 in 2017 and finally this activity. to 45 jurisdictions in 2022. While this represents a nearly 50 percent increase in the number of jurisdictions undertaking this research Off-site inspections are undertaken in 82 jurisdictions. This num- from one cycle to the next, there is still significant room for growth ber has generally stagnated between 2017 and 2022, despite hav- in this area. ing risen steeply from 47 jurisdictions in 2013. Similarly, there was only a small change in on-site inspection numbers, reducing from 81 in 2017 to 79 in 2022, despite having risen from 53 in 2013. The reason for the slight drop in on-site inspections is unclear, but the Financial Consumer Protection   47 Figure 4.5: Supervisory and Regulatory Activities Undertaken by Authorities, 2013 vs. 2017 vs. 2022 Number of responding jurisdictions reporting supervision and regulation activities Collection and analysis of consumer complaints data from Market monitoring, based financial service providers, on specific quantitative intermediaries and consumers Regulation Off-site inspections On-site inspections and qualitative indicators 85 88 85 82 82 81 79 76 74 47 53 2013 ‘17 ‘22 2013 ‘17 ‘22 2013 ‘17 ‘22 2013 ‘17 ‘22 2013 ‘17 ‘22 Market monitoring of providers’ Consumer interviews, surveys advertisements, sales materials, and focus groups and other websites, social media, etc. Enforcement Thematic reviews Mystery/Incognito shopping consumer-related research 74 74 68 56 50 44 15 45 11 33 32 2013 ‘17 ‘22 2013 ‘17 ‘22 2013 ‘17 ‘22 2013 ‘17 ‘22 2013 ‘17 ‘22 Note: Number of responses vary by variable. Figure based on up to 88 responses in 2017 and up to 85 responses in 2022. Variables without a response indicate that this option was not included in the survey that year. Finally, market monitoring also increased from the 65 jurisdic- mands to providers. This is undertaken by 97 jurisdictions (86 per- tions reporting that they undertook this activity in 2017. The range cent of respondents). In addition, of the other enforcement of answers that could be provided by respondents in relation to measures that jurisdictions were asked about (table 4.7), at least market monitoring was expanded in the 2022 survey. Specifically, three-quarters of the responding jurisdictions apply moral suasion, 76 jurisdictions report undertaking market monitoring based on require providers to address or suspend misleading advertisements, specific quantitative and qualitative indicators, and 74 jurisdictions and require FSPs to modify products, services, or business pro- report market monitoring of providers’ advertisements, sales mate- cesses. rials, websites, social media, and so on. In either case, these mar- ket-monitoring activities are undertaken in many more jurisdictions The data suggests, however, that authorities are relatively hesi- in 2022 than was indicated in 2017. Marketing practices via remote tant to undertake more punitive enforcement actions. For example, channels, including the sending of unsolicited offers, coupled with only 44 percent of responding jurisdictions would suspend, dismiss, the speed with which transactions can be completed, have increased or replace a provider’s management or staff in the face of an infrac- the need for such monitoring. In addition, the 2022 survey results tion. Also, only 36 percent of jurisdictions require providers to com- seem to indicate that authorities are at least increasing their use of pensate affected consumers for other losses or harm. Interestingly, a range of market monitoring tools—even if they may not use such low-income jurisdictions are second only to high-income jurisdic- tools for market-level supervisory activities.29 tions in meting out many of the more serious sanctions. When com- pared to both high- and low-income countries, upper-middle- and Enforcement of FCP laws and regulations is also a critical ele- lower-middle-income jurisdictions prefer less severe enforcement ment of a comprehensive and effective approach to FCP. According actions, such as reprimands, moral suasion, and requiring the to the 2022 survey, the enforcement measure undertaken by a removal of misleading content. majority of responding jurisdictions is issuing warnings or repri- 29 For more on the use of a range of market monitoring tools, see Izaguirre et al. (2022b). 48   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report Table 4.7: Prevalence of FCP Enforcement Activities Number (percentage) of jurisdictions reporting enforcement activities FCP ENFORCEMENT JURISDICTIONS Issue warnings/reprimands to providers 97 (86%) Impose fines and penalties on providers 87 (77%) Require providers to modify or correct misleading advertisements 81 (77%) Apply moral suasion to influence and pressure providers into adhering to regulatory requirements 77 (75%) Require providers to modify products and services or business processes 76 (75%) Require providers to suspend or withdraw misleading advertisements 84 (74%) Require providers to suspend or withdraw products and services 71 (69%) Require providers to refund fees and charges 76 (67%) Communicate regulatory breaches to other competent authorities 68 (66%) Impose conditions or restrictions on a provider undertaking a regulated activity 64 (65%) Revoke or recommend revoking a provider’s license to operate their business (or to operate a certain type of the business) 69 (61%) Issue public notices of violations by providers 64 (57%) Issue sanctions against senior management of a provider 58 (51%) Suspend, dismiss, or replace a provider’s management or staff 44 (44%) Require providers to compensate affected consumers for other loss or harm 37 (36%) Other 10 (14%) When looking at enforcement actions over time, the prevalence ber of national authorities over time, including issuing warnings, of actions for FCP increased significantly between 2013 and 2017 revoking licenses to operate, issuing public notices about FSP vio- but far less steeply between 2017 and 2022 (figure 4.6). Many lations, requiring the correction or removal of misleading advertis- enforcement activities are being undertaken by an increasing num- ing, and requiring FSPs to refund fees and fines. Figure 4.6: Comparison of FCP Enforcement Activities, 2013 vs. 2017 vs. 2022 Number of jurisdictions reporting enforcement activities Issue warnings/ Communicate regulatory Suspend/dismiss/replace FSP Issue sanctions against senior Revoke or recommend to reprimands to FSPs breaches to other authorities management/staff management of FSPs revoke FSP's license to operate 61 63 50 45 44 44 40 40 36 24 2013 '17 '22 2013 '17 '22 2013 '17 '22 2013 '17 '22 2013 '17 '22 Impose conditions/ Issue public notices of Impose fines and restrictions on FSPs undertaking Require FSPs to modify products, Require FSPs to modify/ correct violations by FSPs penalties on providers regulated activity services or business processes misleading advertisements 66 60 54 41 44 41 41 50 35 2013 '17 '22 2013 '17 '22 2013 '17 '22 2013 '17 '22 2013 '17 '22 Require FSPs to suspend/withdraw Require FSPs to compensate Require FSPs misleading advertisements consumers for loss/harm to refund fees/charges Apply moral suasion Other 56 55 47 51 37 44 36 6 23 2013 '17 '22 2013 '17 '22 2013 '17 '22 2013 '17 '22 2013 '17 '22 Note: Variables without a response indicate that this option was not included in the survey that year. Financial Consumer Protection   49 Financial sector authorities around the world are experiencing a The survey asked authorities to speak to the types of innovative profound shift to data-driven supervision enabled by robust tech- data gathering or analytics (if any) currently performed for market nology and data solutions. Supervisory technology, or suptech, conduct supervisory purposes. One example of such an innovation refers to the use of technology to facilitate and enhance supervisory is web scraping of provider websites, social media,30 or news arti- processes. The World Bank’s technical note on suptech solutions for cles. Another example is natural language processing to analyze market conduct supervision discusses some common suptech complaints data, documents submitted by providers, or other types approaches for market conduct supervision across 18 jurisdictions of data. Web scraping and natural language processing are being (WBG 2021c). In implementing suptech, financial authorities are applied in 16 jurisdictions by commercial banks, but the number of often driven by two different motivations: (1) increasing operational jurisdictions falls by about half for other FSP types. efficiency and (2) improving hypothesis-driven supervision. Table 4.8: Complaints Data Collection and Storage by FSPs, 2022 Number (percentage) of jurisdictions reporting data collection and storage measures, by institution type COM. OTHER FINANCIAL BANKS BANKS COOPs ODTIs CCPs NBEMIs Manual data collection 13 (15%) 6 (13%) 7 (14%) 4 (13%) 11 (18%) 6 (11%) Spreadsheet data collection via email 29 (33%) 17 (35%) 15 (30%) 8 (25%) 19 (31%) 16 (29%) Data collection through web portal 41 (47%) 22 (46%) 22 (44%) 15 (47%) 27 (44%) 26 (46%) Data collection through APIs 4 (5%) 3 (6%) 2 (4%) 1 (3%) 3 (5%) 1 (2%) Data pull from servers of FSPs 3 (3%) 2 (2%) 0 (0%) 3 (3%) 0 (0%) 0 (0%) Other data collection means 11 (13%) 5 (10%) 10 (20%) 6 (19%) 9 (15%) 11 (20%) Data stored in electronic database 78 (92%) 42 (46%) 37 (65%) 29 (60%) 49 (77%) 39 (67%) Innovation: Web scraping 16 (34%) 8 (33%) 8 (32%) 7 (32%) 9 (26%) 8 (31%) Innovation: Natural language processing 17 (36%) 9 (37%) 7 (28%) 7 (32%) 12 (35%) 7 (27%) Innovation: Other 22 (47%) 7 (30%) 13 (52%) 11 (50%) 17 (50%) 14 (54%) Implemented a strategy to accelerate the use of data-driven 40 (48%) 14 (25%) 12 (21%) 11 (23%) 20 (32%) 16 (28%) supervision Note: Results based on responses from a range of 47–87 jurisdictions. This table refers to data collection and storage by individual FSPs, rather than industry-wide complaints data obtained from the alternative dispute-resolution entity. Finally, authorities in 84 jurisdictions have implemented some products and providers. Transparency and the availability of appro- form of strategy to accelerate the use of data-driven supervision. priate information is important at all stages of the customer–pro- Examples of such strategies include the Suptech Data Strategy in vider relationship, from product shopping to point of sale to the United Arab Emirates, the 2018 Digitalization Strategy in Ger- contracting to when a consumer is using and ultimately closing a many, and the Australian Securities and Investments Commission’s financial product. Data Strategy (2021–26). Just as is the case with other strategies, such as national financial inclusion, financial capability, and fintech Disclosure rules need to ensure that key information for a partic- strategies, the survey will aim—to the extent possible—to keep ular product or service is conveyed to consumers at each stage, in a track of data collection outcomes for countries with such strategies format and manner that facilitates comprehension and enables in place. informed decision-making. With the much-expanded digitization in the provision of financial products and services, and a range of dif- ferent or new digital and fintech offerings, some consumer risks 4.7 DISCLOSURE AND TRANSPARENCY related to disclosure and transparency can be heightened or changed, and some new risks may arise. It is therefore important for Disclosure and transparency requirements are important com- FCP frameworks to be appropriately adaptable to address such ponents of an effective FCP framework. Information provided developments (WBG 2021b). clearly and transparently to consumers can help increase consumer comprehension, allowing consumers to understand and choose appropriate products that fit their needs. Transparency also assists in increasing market competition by allowing the comparison of 30 For a tool on social media monitoring as part of market conduct supervision, see Izaguirre et al. (2022c). 50   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report Disclosure Requirements at Each Product Acquisition Stage vices. Authorities were asked in the survey whether they require FSPs to provide information to customers (1) at the pre-contractual/ As noted above, it is important that key information is appropri- shopping stage, (2) at the contractual stage, and (3) upon request ately available to consumers at each stage of their dealings with (figure 4.7). FSPs and their acquisition and use of a financial products or ser- Figure 4.7: Disclosure Requirements by Stage of Customer Relationships Percentage of responding jurisdictions with requirements to provide specific types of information at stage Pre-contractual/Shopping stage At contractual stage Upon request 100% 100% 100% 100% 97% 81% 80% 82% 82% 78% 77% 75% 76% 72% 73% 71% 67% 67% 58% 60% 60% 56% 48% 50% All EAP ECA LAC MENA NA SAR SSA Note: Percentages by region represent the proportion of jurisdictions in each region with disclosure requirements in place. Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa. At the pre-contractual/shopping stage, 84 jurisdictions (78 per- guage. This means that the information must be relayed in clear cent) require by law that FSPs provide customers with specific infor- and simple language that can be readily understood by any con- mation about the product(s) they are considering. At the contractual sumer, including ensuring that it is in a language and jargon with stage, 82 jurisdictions (77 percent) require that information be which they are familiar. The 2017 Good Practices also emphasizes shared with customers. While this shows that the majority of juris- the need to use clear, objective, and simple language. Of course, dictions do mandate appropriate disclosure at various stages of the this is particularly important in light of the complexity of financial customer journey, over a fifth of jurisdictions do not have such products and services and the generally lower level of financial requirements in place. In addition, particularly at the shopping capability associated with unserved and underserved groups. stage, there is a notable difference in the prevalence of this require- ment from one region to the next. Other general requirements that the survey asked about were also in place in a significant number of jurisdictions. These include Jurisdictions that indicate they require disclosure at the shop- the following: local language requirements (77 jurisdictions); any ping/pre-contractual stage were asked to provide more information form requirements, such as durable media31 and/or oral communi- about their requirements that applied generally, as well as to credit cation (84 jurisdictions); requirements to inform consumers about products, deposit products, and digital disclosures. For require- their rights to recourse and the processes they can follow to obtain ments of general application, the most common—which is in place redress (83 jurisdictions); and the collection and use of customer in 99 jurisdictions (92 percent of the 108 respondents)—is that dis- data requirements (77 jurisdictions). Please refer to table 4.9. closures at the shopping or pre-contractual stage be in plain lan- 31 The United Kingdom’s Financial Conduct Authority defines a durable medium as “any instrument which enables the recipient to store information addressed personally to him in a way accessible for future reference for a period of time adequate for the purposes of the information and which allows the unchanged reproduction of the information stored.” Financial Consumer Protection   51 Table 4.9: Disclosure Requirements at the Shopping or Pre-Contractual Stage Percentage and number of responding jurisdictions with disclosure requirements in place PCT. OF NUMBER OF JURISDICTIONS JURISDICTIONS General Plain language requirement 92% 99 Local language requirement 73% 77 Any form requirements—for example, durable media or oral communication 77% 84 Recourse rights and processes 77% 83 Collection and use of customer data 72% 77 Deposit Products Minimum balance requirements 66% 71 Account opening fee 68% 74 Account maintenance fee 76% 83 Account closure fees 65% 71 Deposit insurance coverage availability 69% 72 Credit Products Effective interest rate 83% 90 Fees and penalties 88% 97 Computation method (average balance, interest) 77% 82 Required insurance 75% 80 Specific warnings (for example, related to over indebtedness or late repayment) 79% 84 Digital Disclosure Information provided in user-friendly format that is easy to navigate via mobile phone or internet browser 49% 50 Key information provided, with ability to click through for more detailed information 41% 42 Full details of contracts easily accessible on ongoing basis 45% 47 For mobile transactions, key info on pricing provided early in transaction process and prior to completion 50% 52 of transaction Easy access to offline sources for additional information 44% 45 Note: The relationship between the percentage and number of jurisdictions varies because the number of respondents varied for each question. The highest number of respondents for any question was 110. About two-thirds of responding jurisdictions have disclosure in 82 jurisdictions, FSPs must share their computation method for requirements at the shopping and pre-contractual stage for deposit figures such as average balance or interest. Finally, 80 jurisdictions products, and over three-quarters have requirements for credit mandate that information be shared about required insurance on products. For deposit products, 71 jurisdictions require the disclo- credit products. Again, these data highlight a gap in disclosure sure of minimum balances. Eighty-three jurisdictions require the requirements that policy makers should prioritize addressing. account maintenance fee to be disclosed, while only 74 and 71 jurisdictions require the sharing of account opening and closure The much more prevalent digital disclosure of information about fees, respectively. financial products and services can pose challenges to consumer access to, and comprehension of, relevant information (WBG In relation to credit products, the survey asked about require- 2021b). Indeed, as per table 5.9, only about half of the 104 respond- ments that focus on key aspects of credit product costs and risks ing jurisdictions require that digital disclosures be in a user-friendly that financial consumers often find more difficult to understand but format that is easy to navigate via a mobile phone or internet are crucial to decision-making about and the use of credit products. browser. Also, only 41 percent of respondents require that users be Ninety jurisdictions (83 percent) require that FSPs disclose the effec- able to click through for more information, and 45 percent mandate tive interest rate calculated using a standard formula. Ninety-seven that details of the contracts remain accessible on an ongoing basis jurisdictions (88 percent) require disclosure of penalties and fees. throughout the transaction. Finally, only half of the respondents Eighty-four jurisdictions require that FSPs share specific warnings require that pricing be revealed early and be confirmed prior to (for example, related to over-indebtedness or late repayment). And completion of a mobile transaction. With the growth of DFS and 52   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report internet banking, financial transactions are increasingly taking place vices. These statements can be even more useful when all providers on devices such as phones and computers. This thereby necessi- are required to use a standardized format. In addition, statements tates that the share of jurisdictions with digital disclosure require- that have been consumer-tested can increase the likelihood of con- ments keep pace with these developments. sumer comprehension and allow for comparison across providers. A. Standardized Disclosure Documents Eighty-seven jurisdictions (79 percent of respondents) have requirements for standardized documents in relation to credit prod- While it is important for all terms and conditions of financial ucts for at least some of their institutions. Similarly, 76 jurisdictions products and services to be documented, consumers can find it (70 percent of respondents) have such requirements for deposit difficult to navigate these, given their length and technical terminol- products for at least some of their institutions. In 22 jurisdictions, ogy. It is often also difficult to identify the most important or rele- authorities undertake consumer testing of such standardized for- vant information in those disclosures. Documents such as key facts mats, while in eight jurisdictions, FSPs are required to do this testing statements, summary sheets, or disclosure statements can assist directly. Overall, the majority of jurisdictions (59) have no testing consumers by highlighting and summarizing key information, such requirement in place. as costs, key risks, and terms relating to financial products and ser- Table 4.10: Requirements for FSPs to Provide Information to Consumers in a Document with a Standardized Format Number (percentage) of jurisdictions with requirement in place, by institution type COMMERCIAL OTHER FINANCIAL BANKS BANKS COOPERATIVES ODTIs CCPs NBEMIs Credit products 87 (79%) 49 (51%) 44 (45%) 31 (38%) 59 (61%) 28 (33%) Deposit products 76 (70%) 41 (44%) 35 (37%) 24 (30%) 26 (28%) 21 (24%) Note: Table is based on credit/deposit responses per institution type as follows: 108/109 for commercial banks, 96/93 for other banks, 98/95 for financial cooperatives, 82/81 for ODTIs, 96/93 for CCPs, and 86/86 for NBEMIs. Account Statements banks are required to do this in the greatest number of jurisdictions (62). About two-thirds of these 62 jurisdictions require that this be The 2017 Good Practices explains not only that FSPs should be offered at no charge. For other types of FSPs, between 20 and 34 required to provide consumers with periodic written statements (in jurisdictions require statements to be provided, whether for free or print or electronic form) for their accounts, to assist consumers with not. Most notably, up to 24 jurisdictions (depending on institution their effective use of relevant products, but also that this should be type) have regulations that do not specify the requirements around free of charge. Among all financial institution types, commercial account statements. Table 4.11: Requirements for FSPs to Provide Customers with Account Statements Number (percentage) of jurisdictions with requirements for account statements in place, by institution type COMMERCIAL OTHER FINANCIAL BANKS BANKS COOPERATIVES ODTIs CCPs NBEMIs Total yes 62 (61%) 34 (65%) 26 (43%) 20 (51%) 29 (45%) 20 (37%) Yes 18 (18%) 11 (21%) 7 (11%) 7 (18%) 10 (15%) 4 (7%) Yes, periodic statements must be provided free of charge 44 (44%) 23 (44%) 19 (31%) 13 (33%) 19 (29%) 16 (30%) No, but a statement can be provided free of charge upon request 17 (17%) 6 (12%) 10 (16%) 5 (13%) 17 (26%) 9 (17%) No, but customer can purchase this additional service 5 (5%) 4 (8%) 4 (7%) 4 (10%) 5 (8%) 1 (2%) Regulations do not specify 17 (17%) 8 (15%) 21 (43%) 10 (26%) 14 (22%) 24 (44%) No. of responding jurisdictions 101 52 61 39 65 54 It is also important, for several reasons, for consumers to receive of changes to terms and conditions at least in writing (including in adequate notice of changes to the terms and conditions of their electronic form).32 Most jurisdictions follow this best practice; 105 of financial products and services, so, for example, if the changed them (94 percent of respondents) require FSPs to notify customers terms are not acceptable to the consumer, they have the opportu- of changes to any of their terms and conditions. nity to stop using the product or move to another provider. The 2017 Good Practices states that an FSP should notify its customers 32 See Chapter 1, B: “Disclosure and Transparency.” Financial Consumer Protection   53 Table 4.12: Disclosure Requirements for Periodic Statements Number of jurisdictions reporting disclosure requirements, by institution type COM. OTHER FNCL BANKS BANKS COOPs ODTIs CCPs NBEMIs General Information about the procedures to dispute the accuracy of the 49 (49%) 26 (29%) 21 (24%) 18 (21%) 22 (25%) 15 (18%) transactions recorded in the statement within a stipulated period Detailed transactional information for the reporting period (for 82 (80%) 41 (45%) 33 (38%) 26 (30%) 38 (42%) 28 (33%) example, itemized credits and debits to the account) Deposit Products All transactions concerning the account for the period covered by 78 (78%) 37 (43%) 29 (33%) 24 (30%) 15 (17%) 16 (20%) the statement Effective interest yield calculated using a standard formula 56 (49%) 28 (25%) 24 (21%) 22 (20%) 11 (12%) 10 (9%) Amount of interest earned 75 (66%) 35 (31%) 32 (29%) 21 (19%) 13 (15%) 12 (11%) Fees imposed 80 (70%) 40 (26%) 36 (32%) 27 (24%) 15 (17%) 17 (16%) Account balance 82 (72%) 40 (36%) 32 (29%) 28 (25%) 14 (16%) 16 (15%) Credit Products All transactions concerning the account for the period covered by 81 (70%) 40 (36%) 35 (31%) 29 (26%) 42 (38%) 16 (15%) the statement Effective interest rate calculated using a standard formula 72 (63%) 32 (29%) 33 (29%) 27 (24%) 43 (39%) 14 (13%) Interest rate charged for the period 84 (73%) 40 (36%) 40 (35%) 34 (31%) 49 (44%) 16 (15%) Fees charged for the period 84 (73%) 41 (37%) 38 (34%) 29 (26%) 47 (42%) 16 (15%) Minimum amount due 78 (68%) 39 (35%) 33 (29%) 28 (25%) 46 (41%) 15 (15%) Due date 80 (70%) 37 (33%) 35 (31%) 27 (24%) 46 (41%) 16 (15%) Outstanding balance 85 (74%) 40 (36%) 36 (32%) 29 (26%) 48 (43%) 15 (14%) Note: Number of responding jurisdictions varies across all options for each institutional category. Responses on disclosure and transparency across cycles suggest compliance actions. The 2017 Good Practices discusses a range of that such requirements remain levied mostly on commercial banks. fair treatment and conduct elements for FCP frameworks. Subse- This is not surprising given that, in the vast majority of jurisdictions, quent publications, such as the World Bank Group’s Product Design this type of FSP has been subject to regulation and supervision by and Distribution: Emerging Regulatory Approaches for Retail Bank- the financial authorities for the longest period of time. However, ing Products and CGAP’s Making Consumer Protection Regulation given the range of other FSPs that consumers now interact with, the More Customer-Centric, highlight the continuing development of fact that many vulnerable consumers do not deal with banks but regulatory measures focusing on such appropriate customer out- with other provider types, and the importance of consumers receiv- comes. ing the same level of effective disclosure regardless of the provider they deal with, the apparent gap in relation to other provider types Restrictions or Prohibition on Unfair Business Practices is a concern that needs addressing. Many jurisdictions indicate having various general restrictions or prohibitions on unfair business practices. Such obligations can 4.8 FAIR TREATMENT AND BUSINESS CONDUCT assist with promoting fair treatment at all stages of an FSP’s relation- ship with consumers. The restrictions also assist in covering poten- Disclosure and transparency requirements alone, of course, can- tial regulatory gaps if examples of unfair conduct arise that are not not address the range of risks that financial consumers may face. yet addressed by more specific requirements. The nature of some risks—such as those relating to poor practices by FSPs or poor product design—means that it is more appropriate Consumers often find it difficult to identify, or to understand and effective to place the onus on FSPs to address these. Fair treat- fully, contractual terms that can be unfair or detrimental to them. ment and business conduct rules are important, at the very least, to This can be due to the complexity of those terms or the opaque- ensure that FSPs do not engage in practices that are unfair or even ness of their language. It can also be because their detrimental abusive to consumers. There is also increasing recognition of the effect becomes apparent to a consumer only at a later time. Even if need to encourage (and require) FSPs to focus on appropriate and a consumer can identify potentially unfair terms before acquiring a beneficial outcomes for consumers, rather than on tick-the-box financial product or service, the consumer is usually unable to nego- 54   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report tiate different terms. Thus, restrictions on such terms are an import- Figure 4.8 compares the restrictions and prohibitions on unfair ant FCP measure. Ninety-eight jurisdictions (87 percent of business practices between 2017 and 2022. For each type of prohi- respondents) prohibit the use, in a consumer agreement, of any bition given as an option in 2017, a higher percentage of respond- term or condition that is unfair, excessively unbalanced, or abusive. ing jurisdictions have those in place in 2022. A common practice of High-income jurisdictions are at least 10 percentage points more FSPs is to seek to bundle or tie financial products, to have consum- likely than each of the other income groupings (which differ little ers take up multiple products from the FSP or a connected third among themselves) to have this restriction. Ninety jurisdictions (78 party. Bundling or tying is not necessarily always harmful, and there percent) limit any term or condition that excludes or restricts the can be some legitimate reasons for doing so. However, it is import- liability of the FSP to the consumer. Eighty-six jurisdictions (76 per- ant that bundling or tying does not inappropriately limit consumer cent) outlaw discrimination against certain segments, such as choice and hinder competition. women and indigenous populations, or based on faith, political affiliation, disability, a consumer’s appearance, and so on. Unfortu- The most significant improvement between 2017 and 2022 nately, this means that in about a quarter of jurisdictions there relates to the bundling or tying of products and services in a way appears to be no regulatory restrictions against such concerning that restricts the choices of customers. For all other variables that conduct. In fact, upper-middle-income jurisdictions perform at least appeared in both cycles of the survey, there were five more jurisdic- 15 percent worse on the discrimination metric than do high, low- tions in 2022 with each restriction in place than in 2017. For bun- er-middle, or lower income jurisdictions. dling, this number is nine. Eighty-seven jurisdictions (77 percent) have restrictions or prohi- Approaches for Regulating Product Design and Distribution bitions on bundling or tying products and services in a way that unduly restricts the choices of consumers. The lower income group While product-suitability rules oblige an FSP to assess whether a has the most progress still to make on this; only 60 percent of those particular product meets the financial objectives, needs, and capa- jurisdictions restrict bundling/tying. Finally, 86 jurisdictions (80 per- bility of an individual customer at the offer/sales stage, product cent) have prohibited the use of inappropriate sales and marketing design and distribution rules relate to ensuring the appropriateness practices, such as aggressive high-pressure sales tactics. of a product for the intended target customers when it is being first designed. The two types of requirements are therefore comple- Figure 4.8: Restrictions or Prohibitions on Unfair Business mentary, and both are recognized as essential elements of FCP Practices, 2017 vs. 2022 frameworks. Percentage of reporting jurisdictions with restrictions on unfair business practices As discussed in the World Bank’s note on product design and 2017 2022 distribution, regulation of the design and distribution of financial 60% 70% 80% 90% products, including retail banking products, has been increasing internationally. Also, technological advancements are increasing Using, in a consumer agreement, any term or the scale of potentially adverse consumer issues resulting from condition that is unfair, excessively unbalanced or abusive financial products or their distribution. These issues are especially acute in environments with low levels of financial inclusion, where Using in a consumer agreement, any term consumers are likely to have limited financial capability. It is there- or condition that excludes or restricts the liability of the financial service provider to fore more important than ever to encourage and ensure that FSPs the consumer offer financial products designed to meet the needs of consumers in the market. Discriminating against certain segments, such as women, indigenous populations, or based on faith, political affiliation, the As it relates to deposit products, 37 jurisdictions (45 percent of manner a consumer dresses respondents) have provisions in law or regulation that require FSPs to provide consumers with products only if they are determined to Bundling or tying products and services and in a way that unduly restricts the be appropriate for a consumer’s specific needs and circumstances. choices of consumers Forty-seven jurisdictions (57 percent) have the same requirement for other products, too. For this and other survey findings as it Using inappropriate sales and marketing relates to credit, see section 4.9 on responsible credit. practices such as aggressive, high-pressure sales tactics A core element of product design and distribution frameworks is  Using in a consumer agreement, any term or the obligation of regulated entities to establish and implement condition that excludes or restricts the right of clear, documented product oversight and governance require- the consumer ments. Between 60 and 80 percent of responding jurisdictions, Note: Figure based on responses from 95 jurisdiction that participated in both 2017 and 2022 data cycles. depending on whether the product is a deposit or credit or other Financial Consumer Protection   55 type of product, mandate that FSPs have internal oversight and responded to this question require that FSPs have specific product governance arrangements for the design and distribution of their design and approval policies and procedures (table 4.13). Between products (table 4.13). 46 and 58 percent of responding jurisdictions (depending on prod- uct type) require FSPs, when developing a new financial product, to Another core element of product design regulatory frameworks assess the target market for the product. A subset of these also is the need for an assessment of the target market when a product requires FSPs to ensure the appropriateness of the product and dis- is being developed, to ensure appropriateness for that target mar- tribution channels for the target market (table 4.14). ket. Between 57 percent and 71 percent of jurisdictions that Table 4.13: Approaches for Regulating Product Design and Distribution Number (percentage) of reporting jurisdictions reporting selected approaches DEPOSIT CREDIT OTHER Implement internal oversight and governance arrangements for the design and distribution 75 (75%) 80 (81%) 56 (60%) of their financial products Have specific product design and approval policies and procedures 72 (71%) 73 (72%) 54 (57%) When developing a new financial product, assess the target market for the product 58 (58%) 59 (58%) 44 (46%) No. of responding jurisdictions (total) 100 101 94 Table 4.14: Market Assessment Requirements for Product Design and Distribution Number (percentage) of reporting jurisdictions with product appropriateness and distribution requirements in place DEPOSIT CREDIT OTHER Ensure that the final product is appropriate for that target market 52 (91%) 54 (92%) 40 (91%) Ensure that the distribution channels and distributors for the product are appropriate for that target market 47 (82%) 48 (81%) 39 (89%) No. of responding jurisdictions (total) 57 59 44 Management of Conflict of Interest flicts already frequently arise in traditional financial product and service settings, but new or changed fintech business models have It is important that FCP frameworks include requirements to mit- also been found to give rise to conflicts under new circumstances igate the risk that the interests of the consumer (for example, to be unforeseen by regulators (or expected by consumers) and to pro- treated fairly, not to be mis-sold a financial product, and so forth) duce new variations of typical conflicts. Table 4.15 shows the per- might become misaligned with those of an FSP or their staff or centage of responding jurisdictions that have various conflict agents (for example, recommending unsuitable products or engag- management obligations for FSPs. ing in pressure selling due to sales incentives). Such con Table 4.15: Management of Conflict of Interest Percentage of reporting jurisdictions (percentage of respondents for this specific question) UPPER- LOWER- HIGH MIDDLE MIDDLE LOWER ALL INCOME INCOME INCOME INCOME EAP ECA LAC MENA SAR SSA Requiring FSPs to manage or avoid potential 80 34 19 22 4 10 26 11 11 4 17 conflicts of interest with consumers (75%) (89%) (58%) (73%) (80%) (80% (74%) (48%) (92%) (80%) (89%) Ensure that compensation policies for staff 59 25 15 16 3 8 19 7 9 3 12 do not create conflicts of interest with consumers (57%) (69%) (44%) (55%) (60%) (67%) (58%) (29%) (75%) (60%) (71%) Ensure that compensation policies for agents 51 19 13 16 3 8 15 6 7 3 11 do not create conflicts of interest with consumers (51%) (58%) (39%) (55%) (60%) (67%) (50%) (25%) (64%) (60%) (65%) Require clear disclosure of conflicts of interest 58 26 10 19 3 9 20 5 10 1 12 to consumers (57%) (74%) (31%) (63%) (60%) (75%) (65%) (22%) (83%) (20%) (67%) No. of responding jurisdictions 107 38 33 29 5 12 35 24 12 5 19 Note: Percentages by income group and region reflect the percentages of respondents from that region/income group that responded in the affirmative. Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, SAR = South Asia, SSA = Sub-Saharan Africa. 56   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report Restrictions or Prohibitions on Limiting Customer Mobility tions (61 percent) now have provisions allowing consumers a cool- ing-off period for credit products, during which they can withdraw Of 113 respondents (table 4.16), 58 jurisdictions (51 percent) from the product or service without incurring penalties. This is par- have provisions that limit/prohibit fees and charges for account clo- ticularly useful for financial products with a long-term commitment, sure, and 60 jurisdictions (53 percent) have provisions that prohibit those that are commonly sold using high-pressure sales practices, extra burdening procedures for account closure. For each of these and those sold remotely (such as over the telephone). Each of these provisions, 50 jurisdictions (42 percent) had these in place in 2017, provisions listed are more common in high income jurisdictions than thus highlighting a notable increase in 2022. In addition, 69 jurisdic- upper or lower-middle income jurisdictions. Table 4.16: Restrictions or Prohibitions on Limiting Customer Mobility Number (percentage) of jurisdictions reporting provisions on customer mobility, by income and regional group (2022) UPPER LOWER HIGH MIDDLE MIDDLE LOWER PROVISION TYPE ALL INCOME INCOME INCOME INCOME EAP ECA LAC MENA NA SAR SSA Provisions that limit/prohibit fees and charges 58 27 16 11 3 2 22 10 8 1 2 13 for account closure (51%) (65%) (46%) (35%) (60%) (17%) (56%) (42%) (67%) (50%) (40%) (68%) Provisions that prohibit extra burdening 60 24 18 14 3 3 22 12 6 1 3 13 procedures for account closure (53%) (59%) (51%) (45%) (60%) (25%) (56%) (50%) (50%) (50%) (60%) (68%) Provisions that allow consumers a cooling-off 69 30 20 15 4 5 31 10 9 1 2 11 period for credit products, during which they (61%) (73%) (57%) (48%) (80%) (42%) (79%) (42%) (75%) (50%) (40%) (58%) can withdraw from the product or service with- out incurring penalties Provisions that limit penalties for early repay- 71 32 26 17 4 5 35 11 11 1 2 15 ment of a loan (80%) (78%) (74%) (55%) (80%) (42%) (90%) (46%) (92%) (50%) (40%) (79%) No. of responding jurisdictions 113 41 35 31 5 12 39 24 12 2 5 19 Note: Percentages by income group and region represent the proportion of all jurisdictions that said they had certain restrictions or prohibitions in place. Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa. Finally, in 2022, 80 jurisdictions (71 percent) have legal require- Figure 4.9: Restrictions or Prohibitions on Limiting Customer ments that limit penalties for early repayment of a loan, as opposed Mobility, 2017 vs. 2022 to 65 in 2017. The 2017 Good Practices notes, for example, that Percentage of jurisdictions reporting provisions on customer mobility: FSPs should be allowed to charge a reasonable prepayment pen- (set of 95 overlapping jurisdictions) alty only if foreseen in the consumer agreement, which should also 2017 2022 contain its method of calculation. 40% 50% 60% 70% 80% Figure 4.9 details the progress made with regard to the imple- Provisions which allow consumers a cooling-off period for credit products during mentation of restrictions on obstacles to mobility for the “Set of 95” which they can withdraw from the product or jurisdictions that responded to this question in both the 2017 and service without incurring penalties the 2022 cycles of the survey. (See appendix B.) It should be noted that, with regard to cooling-off periods, the 2022 survey asks Provisions that limit/prohibit fees and charges for account closure whether provisions allow consumers a cooling off period for credit products specifically, whereas the 2017 survey did not refer to prod- Provisions that prohibit extra burdening ucts specifically. Because of this change, the responses for this procedures for account closure aspect of the question cannot be compared directly. This notwith- standing, there is only one percentage point difference between Provisions that limit penalties for early repayment of a loan responses in 2017 versus 2022 (whether it covers all or credit prod- ucts alone). Therefore, there appears to be very little change gener- ally on the topic of cooling-off periods. Competency Requirements for Staff and Agents For all other restrictions listed in this question, jurisdictions with One essential measure for ensuring that FSPs comply with their measures to restrict FSPs from limiting customer mobility have FCP obligations and treat consumers fairly and appropriately is increased by between six and nine percentage points between the ensuring that both their staff and their agents are competent and two survey cycles, which is an encouraging trend that policymakers knowledgeable enough to engage on behalf of the FSP. Often the should aim to accelerate. sole or main representative of an FSP that consumers deal with is a Financial Consumer Protection   57 third-party agent, rather than an employee. For example, this can business), and if agents are unqualified or lacking adequate train- be the case for individuals living in remote areas in some jurisdic- ing, they may be more likely to commit errors in providing services tions. Agents can often be individuals with little expertise in finan- to consumers. cial services (for example, if such activities are not their main Figure 4.10: Laws or Regulations on Competency of Staff or Agents Percentage of respondents indicating requirements on competency are in place, by geographic region Law or regulation to maintain a minimum level of professional competence: For staff For agents 100% 100% 92% 92% 88% 85% 83% 80% 80% 77% 80% 79% 75% 74% 74% 71% 70% 66% 60% 61% 52% 55% 52% 36% All EAP ECA LAC MENA NA SAR SSA High Upper- Lower- Lower Income Middle Middle Income Income Income Note: Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa. Eight-five jurisdictions (75 percent of 114 responding jurisdic- said, authorities must be mindful that over-indebtedness stemming tions) have requirements in place that FSPs ensure a minimum level from the irresponsible provision and use of retail credit products can of professional competence for staff dealing with consumers (figure have significant negative effects on both the individual and the 4.10). Seventy jurisdictions (66 percent of 106 respondents) have financial ecosystem. Ensuring a responsible lending regulatory equivalent competency requirements for agents. The North Amer- framework is therefore essential to mitigating such risks and to set- ica, East Asia and Pacific, and Middle East and North Africa Regions ting appropriate expectations and requirements for all types of all have a very high prevalence of this requirement for staff (over 90 FSPs offering credit to consumers (and not just traditional lenders). percent of responding jurisdictions within each Region). The Middle Such requirements encompass ensuring that credit is offered to East and North Africa has the largest gap between the percentage consumers only when it is affordable and suitable for their circum- of jurisdictions with competency requirements for staff as opposed stances, ensuring non-usurious pricing, and establishing minimum to agents. As it relates to agents, the Sub-Saharan Africa Region has standards for debt collection practices. the highest percentage of jurisdictions with this legal requirement in place (88 percent), which is similar to the requirement for staff (84 Assessing Credit Product Suitability percent). A crucial and more specific aspect of product suitability with regard to credit is ensuring that a product is offered only when 4.9 RESPONSIBLE LENDING affordable to the consumer—that is, when the consumer can afford to repay it without resulting in hardship. Sixty-five jurisdictions (78 Access to credit is recognized internationally as a crucial aspect percent of respondents) require FSPs to provide only suitable credit of financial inclusion. The Financial Access Survey of the Interna- products to consumers. Table 4.17 details specific provisions aimed tional Monetary Fund, for example, uses the number of retail loans at restricting excessive borrowing and determining product suitabil- as one of the key statistics when evaluating financial inclusion in a ity. Ninety jurisdictions (87 percent) require that providers assess a country. Availability of credit in general can provide the population prospective borrower’s ability to repay a loan. in an economy with broader options to realize economic goals. That 58   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report Table 4.17: Assessing Product Suitability UPPER LOWER HIGH MIDDLE MIDDLE LOWER ALL EAP ECA LAC MENA NA SAR SSA INCOME INCOME INCOME INCOME Debt-to-income or similar ratio 49 6 15 10 8 1 1 8 17 18 12 2 (47%) (50%) (39%) (50%) (67%) (100%) (20%) (50%) (35%) (37%) (24%) (4%) Restrictions on multiple borrowing 20 2 3 6 3 1 1 4 5 8 6 1 (19%) (17%) (8%) (30%) (25%) (100%) (20%) (25%) (25%) (40%) (20%) (5%) Requirement to assess a prospective bor- 90 11 31 18 10 1 5 14 31 28 26 4 rower’s ability to repay the loan (87%) (92%) (82%) (90%) (83%) (100%) (100%) (88%) (35%) (31%) (29%) (4%) Other 24 1 12 4 4 0 2 1 10 10 3 1 (23%) (8%) (32%) (20%) (33%) (0%) (40%) (6%) (42%) (42%) (13%) (4%) No. of responding jurisdictions 104 12 38 20 12 1 5 16 38 32 28 5 Note: Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa. Ninety jurisdictions (87 percent) require FSPs to assess loan Gaps and deficiencies in a country’s credit reporting information repayment ability for their potential customers. While this is promis- system can significantly undermine the quality of affordability ing, only 49 jurisdictions require that providers use debt-to-income assessments. From an FCP perspective, access to accurate, com- or similar ratios in making a lending decision. In addition, 20 juris- prehensive credit information for all credit providers is essential to dictions, including Chile, the Philippines, and Uzbekistan, have support the effectiveness of affordability assessment requirements restrictions on multiple borrowing. This requirement is the least and to help providers avoid inappropriately lending to consumers common across respondents but ideally should be more so, given who are already over-indebted or whose credit-related behavior that over-indebtedness resulting from borrowers having multiple indicates other indebtedness concerns. loans, each with an outstanding balance, is increasingly common and leads to significant hardship. Finally, 24 jurisdictions have a mix Figure 4.11: Access to Credit Registries and Bureaus for of other requirements that they indicate are aimed at ensuring Financial Institutions Required to Assess a Borrower’s Ability affordability, though few details were provided on what these are. to Repay a Loan Overall, this data highlights that policymakers could be more Number of each type of financial institution in those jurisdictions with aggressive in requiring FSPs to establish product suitability in light requirements to establish loan repayment ability that have access to of how doing so better protects borrowers. credit bureaus and registries Commercial Bank CCPs NBEMIs Affordability and Pricing 64% 64% Beyond establishing suitability, it is also critical to determine affordability. It is important that an individual’s capacity to repay 58% credit is based on appropriate data. Table 4.18 details the type of 51% data that national authorities require to be collected or validated to 46% confirm affordability. The most required information is an individu- al’s income and other loans, but a significant number of jurisdictions 39% 37% also require a provider to understand the demands on a potential 31% customer’s income from living expenses. 24% Table 4.18: Requirements to Collect/Validate Customer 18% Information to Determine Repayment Capacity, 2022 13% Number (percentage) of jurisdictions with relevant requirement 10% COLLECT VALIDATE Obtain information about individual’s 83 (91%) 67 (75%) income Has access to Has access to Required to check Required to check Obtain information about individual’s other 83 (91%) 69 (78%) credit bureau credit registry credit bureau and/ credit bureau and/ data data or credit registry or credit registry loans information information for Obtain information about individual’s living 61 (67%) 41 (47%) for all loans some types of loans expenses No. of responding jurisdictions 91 89 Financial Consumer Protection   59 Some jurisdictions also impose limits on interest rates or other Debt Collection pricing relating to credit (such as maximum profit margins or maxi- mum spread). As discussed briefly in the section on strategies to Consumers may suffer financial, psychological, or physical harm increase financial inclusion, interest rate caps are a blunt instrument due to abusive debt collection practices (whether undertaken by that can sometimes lead to market distortions. While they are FSPs directly, by the debt collection agents they may engage, or by sometimes a potentially useful tool—for example, to prevent usuri- third parties to whom debts are sold). Debtors may also experience ous (truly predatory) pricing—other initiatives may be available to adverse outcomes, such as breaches of privacy, as a result of inap- achieve similar aims (such as initiatives to stimulate competition propriate debt collection practices. FCP regulations should both among credit providers) to bring about desired outcomes while prohibit abusive debt collection practices and foster minimum stan- avoiding unintended consequences. dards of good conduct at each step of the debt collection process. In addition, regulations should ensure that there is clear liability and About 40 percent of responding jurisdictions (across all financial responsibility for debt collection agents by the principals on whose institution types) have no interest-rate caps of any kind (figure 4.12). behalf they collect debts. A relatively smaller percentage (33 percent) of jurisdictions have no interest rate caps on CCPs, and a relatively larger percentage (50 Seventy jurisdictions indicated they have such regulations, com- percent) have no caps on any kind on NBEMIs. Between 32 and 39 pared to 56 jurisdictions in 2017 (figure 4.13). The directionality of percent of jurisdictions across institution types impose some inter- this is certainly promising, but the pace could still be quickened. In est rate caps. CCPs are the only type of institution reporting a addition to an absolute increase, the number of jurisdictions with higher proportion of jurisdictions imposing some caps (39 percent) these regulations has also increased in all regions. The greatest per- than those with no caps of any kind (33 percent). Finally, CCPs and centage rise was in Sub-Saharan Africa, followed by the Europe and financial cooperatives (in about 28 percent of jurisdictions) are the Central Asia region. types of financial institutions on which responding jurisdictions most commonly impose caps on all loan products. Figure 4.13: Provisions in Law or Regulations Establishing Minimum Standards for Debt Collection Practices, 2017 Figure 4.12: Interest Rate Caps or Limitations on Loan vs. 2022 Pricing, 2022 Number of jurisdictions with minimum standards in place, by region: (set Percentage of jurisdictions with relevant restriction by FSP type of 95 overlapping jurisdictions) All products Some products No caps 80 30 have caps have caps of any kind 12% 70 All ECA 24% 23% 29% 24% 28% 25 60 38% 37% 38% 32% 36% 39% 20 50 40 15 39% 40% 39% 40% 33% 50% LAC 30 MENA 10 Commercial Other Financial ODTIs CCPs NBEMIs SSA banks banks COOPs 20 EAP Note: Number of respondents varies across institutional categories, falling between 26 (for NBEMIs) and 97 (for commercial banks). 5 10 SAR Overall, NBEMIs are the least subjected to caps on either some or all credit products; only 50 percent of jurisdictions restrict them 0 0 in this way. Alternatively, 67 percent of jurisdictions have some or 2017 2022 2017 2022 total caps on loans from CCPs. The other types of institutions fall in the middle; about 60 percent of each type face some or total caps. Note: Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, SAR = South Asia, SSA = Sub-Saharan Africa. 60   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report Gaps in FCP Regulatory Perimeter for Credit unregulated in 16 jurisdictions. The fact that almost half of these are in Latin America and the Caribbean highlights a particular risk there. As the range of credit products and providers in a country expands (including as a result of digital and fintech offerings), a Payday lenders are unregulated in 17 jurisdictions, which are country’s existing FCP framework, or the mandate of its regulator(s), mostly concentrated in Latin America and the Caribbean and the may not necessarily cover all providers or product types. This may Middle East and North Africa. Microcredit providers are unregu- be due to the country’s existing FCP rules applying only based on lated in 11 jurisdictions, over half of which are in Latin America and the type of institution or, even if they apply on a product or activity the Caribbean. Digital credit via e-wallet providers is unregulated in basis, not extending to certain products due to their nature or the 10 jurisdictions and financial companies in eight. An additional 19 nature of related business arrangements. As a result, affected con- jurisdictions have unregulated CCPs, which they describe as sumers may receive less protection, and regulators may have diffi- “Other,” including fintech lenders in Chile (although the authors are culty addressing relevant gaps and new risks. aware of a new fintech law in Chile intended to assist in bridging this gap), buy now, pay later in Malaysia, and loan-based crowd- This survey sought to collect more granular information on CCP funding in Poland. Overall, and particularly in light of the potential types that are not regulated or supervised. Twenty-one jurisdictions, risks to consumers, the fact that this FSP type is unregulated in a for example, indicate that money lenders are unregulated in their number of jurisdictions is a cause for concern. market. Digital lenders (including app- and web-based lenders) are Table 4.19: Types of Unsupervised CCPs across Regions, 2022 Number (percentage) of responding jurisdictions with CCPs present but not regulated, by geographic region TYPES OF CCPS ALL EAP ECA LAC MENA SAR SSA Payday lenders 17 (36%) 1 (20%) 3 (27%) 4 (27%) 4 (66%) 2 (66%) 3 (43%) Financial companies 8 (17%) 0 (0%) 3 (27%) 4 (27%) 1 (17%) 0 (0%) 0 (0%) Microcredit providers 11 (23%) 0 (0%) 1 (9%) 6 (39%) 1 (16%) 1 (33%) 2 (28%) Digital lenders (including app and web-based lenders) 16 (34%) 1 (20%) 4 (36%) 7 (47%) 2 (33%) 1 (33%) 1 (14%) Money lenders 21 (45%) 1 (20%) 4 (37%) 8 (54%) 2 (34%) 3 (100%) 3 (43%) Digital credit providers via e-wallets 10 (21%) 0 (0%) 3 (27%) 5 (33%) 0 (0%) 0 (0%) 2 (28%) Other 19 (40%) 5 (100%) 6 (54%) 5 (33%) 2 (33%) 0 (0%) 1 (14%) No. of responding jurisdictions 47 5 11 15 6 3 7 Note: Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, SAR = South Asia, SSA = Sub-Saharan Africa. 4.10 COMPLAINTS HANDLING, DISPUTE RESOLUTION, Financial consumer complaints handling mechanisms comprise AND RECOURSE two stages: complaints that are handled by FSPs, generally referred to as internal dispute resolution (IDR), and complaints that, if not Central to an effective FCP framework is an accessible and effi- satisfactorily resolved internally, are handled by an alternative, out- cient recourse mechanism that allows consumers both to know and of-court process, generally referred to as alternative dispute resolu- to assert their rights to have their complaints addressed and tion (ADR). The World Bank’s technical note Complaints Handling resolved in a transparent and just manner and within a reasonable within Financial Services Providers discusses that financial consumer timeframe. Complaint handling mechanisms are especially import- complaints should be handled in a tiered structure. Consumers ant for low-income and vulnerable financial consumers, to whom should first seek resolution of the complaint with their FSPs via their timely and effective recourse processes can have a significant provider’s IDR mechanism (G20/OECD 2013). When complaints are impact on their level of trust in their FSP and in the financial sector not resolved by FSPs to the consumer’s satisfaction or within the overall. Increased trust contributes to consumers’ uptake and sus- established timeframe, then consumers should have access to an tained usage of financial services and, consequently, their economic external dispute resolution process where complaints can be livelihoods. resolved with the assistance of a third party that is impartial to the complaint, always retaining the option to undertake formal legal action through the court system (WBG 2019). See figure 4.14 for details of IDR coverage among survey respondents. Financial Consumer Protection   61 Figure 4.14: Presence of Laws or Regulations for IDR, 2022 Percentage of jurisdictions reporting a legal IDR framework, by region and income level 2017 2022 100% 98% 100% 100% 100% 98% 92% 94% 89% 89% 87% 79% 81% 80% 78% 78% 76% 73% 72% 60% 55% 57% 40% 0% All EAP ECA LAC MENA NA SAR SSA High Upper- Lower- Lower Income Middle Middle Income Income Income Note: Figure is based on 116 responses in 2022. The two multijurisdiction respondents (the Central African Economic and Monetary Community and Eastern Caribbean Central Bank) are not included in income group classifications. Percentages represent the proportion of each responding region or income group that have IDR laws or regulations in place. In 107 jurisdictions (92 percent of responding jurisdictions), independent, fair, accountable, timely, and efficient. The survey there are laws or regulations setting standards on IDR. This is up reveals that IDR laws vary significantly by jurisdiction, but some from 92 jurisdictions (78 percent) in 2017, when comparing the full common tenets do exist across survey responses (figure 4.15). sample of respondents in each cycle. Looking only at the “Set of 95” jurisdictions (appendix B), however, the growth in the number In 102 jurisdictions (88 percent of respondents), a relatively high of jurisdictions with an IDR law or regulation in 2022 is more mod- number of economies currently require FSPs to have a process in est, going from 85 percent of respondents in 2017 (81 jurisdictions) place for addressing consumer complaints. Indeed, this figure has to 94 percent in 2022 (88 jurisdictions). Whereas the 107 jurisdic- increased both in percentage and absolute terms since 2017, when tions with these laws and regulations in 2022 tend to skew toward only 87 jurisdictions (74 percent) had this requirement. The direc- higher income regions, of the nine responding jurisdictions that do tion of travel is therefore promising. not have any such guidelines, five are in upper-middle income regions. This highlights the need for additional work around IDR Another requirement that has become more prevalent since mechanisms beyond low-income economies. 2017 relates to the timeliness of complaints response and resolu- tion by FSPs. This requirement exists in 104 jurisdictions (90 per- By institution category, commercial banks are most commonly cent) in 2022, as compared to 78 jurisdictions (66 percent) in 2017. subject to IDR laws or regulations (in 88 jurisdictions). CCPs, other Also, 97 jurisdictions (84 percent) require that there be an adequate banks, NBEMIs, and financial cooperatives then follow, with 53, 46, record of those complaints, as compared to 76 jurisdictions (64 per- 43, and 43 jurisdictions, respectively, having IDR laws or require- cent) in 2017. ments that apply to each provider category. Since CCPs and NBE- MIs in particular are FSP types that are displaying significant growth The collection of complaints data in a standardized format that over time, recourse through IDR mechanisms is becoming increas- allows for analysis across providers allows supervisory authorities to ingly important. In jurisdictions without any such requirements, analyze consumer satisfaction with specific FSPs (as compared to national authorities should thereby seek out appropriate opportuni- others), identify emerging consumer issues early as they develop, ties to introduce sound IDR laws or requirements. and track inquiries and complaints trends over time (WBG 2019). Despite this, only 49 jurisdictions (42 percent) require this. In addi- Requirements for IDR tion, only 51 jurisdictions (44 percent) require FSPs to conduct root cause analysis to identify the underlying reasons behind complaints. As set out in the G20/OECD High-Level Principles, jurisdictions These two requirements are related, given that having a standard- should ensure that consumers have access to adequate complaint ized format for data collected lends itself to better analysis in the handling and redress mechanisms that are accessible, affordable, first instance. 62   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report A related requirement, which is present in 69 jurisdictions (59 representing an FSP. In 2017, 58 jurisdictions (58 percent) had such percent), is the standardized storing of and sharing of complaints a requirement in place, and the trend has continued in a positive data with a government agency. Such sharing of information with direction: Seventy-eight jurisdictions (67 percent) have a require- the relevant government agencies contributes to better FCP over- ment in 2022. all. This is because over the longer term, making authorities more aware of the issues arising from financial consumer complaints sup- Table 4.20: Requirements for IDR ports legislative change to enhance FCP frameworks both by facili- Number (percentage) of all responding jurisdictions with certain tating and by creating political support for the same. Also, analysis requirements of consumer complaints at a market level is an important mar- ALL ket-monitoring tool that helps authorities identify the most preva- Requirements for FSPs to implement procedures 102 (88%) lent consumer risks and problematic products and services, as well and processes for resolving customer complaints as the key providers reflected in complaints. This in turn helps reg- Requirement for FSPs to have a designated, 83 (72%) ulators prioritize their supervisory efforts (Izaguirre et al. 2022a). independent officer or unit in charge of handling customer complaints Authorities need to use all tools available to get FSPs to collect, Timeliness of complaints responses and resolu- 104 (90%) analyze, and resolve complaints as efficiently as possible; then tion by FSP authorities need to follow up with a sound system of their own for Accessibility (for example, whether a consumer 78 (67%) tracking, cataloguing, and analyzing complaints data. Finally, in can submit a complaint via multiple channels, including at a local branch, by phone, by e-mail, addition to standardized classification and format, supervisory and so on) authorities should consider the level of granularity of data needed Record keeping for complaints 97 (84%) and their capacity to analyze the data collected (WBG 2019). Data Standardized categorization of complaints data to 49 (42%) should not be collected for its own sake but with an eye for how it be captured across providers can be analyzed and used for better supervision. Standardized storing and reporting of complaints 69 (59%) data to a government agency Given that individuals with disabilities and those in remote areas Providing consumers details of a relevant ADR 81 (70%) are among those who tend to be at a disadvantage when it comes mechanism (if any) to accessing and using financial services, the 2017 Good Practices Undertaking root cause analysis to identify the 51 (44%) also highlights the importance of ensuring access to IDR mecha- underlying reason behind a complaint nisms through a variety of channels. More specifically, this means Informing customers on when/how to escalate 66 (57%) that a consumer can submit a complaint via multiple channels, complaints to external dispute resolution mech- including at a local branch, by phone, by e-mail, or even to an agent anisms Figure 4.15: Requirements for IDR, 2017 vs. 2022 Percentage of all responding jurisdictions with certain requirements 88% 90% 2017 2022 84% 74% 72% 66% 67% 64% 64% 58% 59% 50% 44% 42% Undertaking root Standardized Requiring FSPs to Requiring FSPs to Timeliness of Accessibility (e.g., Record-keeping Standardized cause analysis a categorization of implement procedures have a designated, complaint whether a consumer for complaints storing/reporting of complaint complaints data and processes for independent officer responses and can submit a complaint complaints data to a captured across FSPs resolving customer or unit in charge of resolution by FSP via multiple channels) government agency complaints customer complaints Note: Figure is based on 118 responses in 2017 and 116 responses in 2022. Financial Consumer Protection   63 As per figure 4.15, between 2017 and 2022, the percentage of 81 jurisdictions (70 percent) in 2022. Furthermore, a new question jurisdictions in which national authorities have IDR-related laws or that was added in the 2022 survey highlights that in 66 jurisdictions requirements in place has increased for every requirement asked (57 percent), customers must be informed of when and how to esca- about. In particular, the jurisdictions requiring FSPs to maintain late complaints to those ADR mechanisms. complaints records and track timeliness of resolution have increased by at least 20 percentage points within this period. That said, given In 2022, 84 jurisdictions (72 percent of responding jurisdictions) that fewer than half of responding jurisdictions collect standardized have an out-of-court ADR mechanism in place to resolve financial complaints data across FSPs or conduct root cause analysis on com- consumer complaints, as compared to 80 jurisdictions in 2017. In plaints, there is room for improvement around the form in which the fact, except in South Asia, there has been an increase in the abso- data is collected and the extent to which it is analyzed to improve lute number and percentage of jurisdictions by region with an ADR supervision and consumer protection. mechanism between the two cycles of the survey. Finally, whereas in 2017 the South Asia Region had the highest proportion of its juris- Requirements for ADR dictions with an ADR mechanism and the Middle East and North Africa the lowest, in 2022 it is the East Asia and Pacific region with In cases where financial consumers are unable to resolve their the highest proportion. The Middle East and North Africa has also complaints with an FSP through IDR, some jurisdictions have estab- made strides: going from having only three to eight jurisdictions lished an ADR mechanism. In 2017, 60 jurisdictions (51 percent) with an ADR mechanism in place is notable progress. required consumers to be provided with details of a relevant ADR mechanism, if indeed one existed. The same requirement stands in Figure 4.16: Prevalence of ADR Mechanisms Percentage of jurisdictions with an ADR, by region and income level 2017 2022 92% 88% 79% 75% 72% 72% 71% 68% 65% 62% 64% 64% 67% 61% 63% 57% 60% 59% 61% 45% 40% 33% All SSA SAR MENA LAC EAP ECA High Upper- Lower- Low Income Middle Middle Income Income Income Note: Figure based on 123 responses in 2017 and 116 responses in 2022. Multijurisdiction respondents (the Central Bank of West African States, Central African Economic and Monetary Community, Bank of Central African States, and Eastern Caribbean Central Bank) are not included in income group classifications. Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, SAR = South Asia, SSA = Sub-Saharan Africa. As per figure 4.16, the percentage by income group of respond- (but not on the consumer). However, the survey data shows that ing jurisdictions with an ADR mechanism increased for all income only about 41 percent of respondents issue binding decisions, that groups between 2017 and 2022. This is also true for the absolute 40 percent offer mediation services, and that the remaining 28 per- number of jurisdictions by income group except for the lower-mid- cent issue non-binding decisions or recommendations. dle-income group, where the number of jurisdictions with an ADR framework fell from 20 in 2017 to 19 in 2022. Respondents from this An analysis of the funding sources and fee structures of ADR income group differ between the two surveys, however; as such, mechanisms reveals that they are funded primarily through national this should not be taken to mean that a jurisdiction that had an ADR budgets and that the services are mostly free of charge (figure 4.17). mechanism in 2017 no longer has one in 2022. That said, the choice of institutional model does not necessarily constrain the ability of the industry to fund an ADR scheme as an International good practice requires that out-of-court ADR enti- alternative to government or regulator funding. ties have the power to issue decisions that are binding on the FSP 64   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report Figure 4.17: Figure 4.18: Funding There are also a range of institutional models for ADR entities ADR Fee Structure Sources for ADR Entities (figure 4.19). Of the 82 jurisdictions with an ADR entity, 60 were established by law, while 22 were established by industry. The Financial Government industry authority’s majority of statutory entities are focused exclusively on the financial At a cost association own budget sector, and about half of them are located within a financial regula- 15% 8% tor itself. If the entity is located within the financial regulator, good 12% practice requires that the complaint handling function be kept sep- 53% arate from the supervisory function. Combining the two depart- Free of charge ments could often lead to a diversion of valuable supervisory 85% 27% Budget resources solely toward complaints handling. It is not uncommon allocated from central for FCP supervisory departments to run out of capacity due to Note: Figure for fee structure is government Contributions being overloaded with customer complaints due to the two depart- based on 85 responses and for funding on 88 responses. ments being combined. Figure 4.19: Institutional Models of ADR Entities ADR Entity 82 Jurisdictions (71 percent of responding jurisdictions) Statutory Industry-based 60 jurisdictions* 22 jurisdictions (73 percent) (27 percent) Financial Multiple Voluntary Mandatory sector specific sectors 11 jurisdictions 11 jurisdictions 51 Jurisdictions 8 jurisdictions (13 percent) (13 percent) (86 percent) (14 percent) Within financial Within financial sector regulator but part sector regulator but of broader FCP unit separate from FCP unit 18 jurisdictions (62 percent) 11 jurisdictions (38 percent) *Due to one jurisdiction skipping the sequential follow-up questions, the number of jurisdictions falls from 60 to 59 on the left hand side of the illustration. In addition to mediating and/or resolving disputes between con- most common topics of complaint among the 51 jurisdictions that sumers and FSPs, ADR entities can undertake several useful func- provided data are (i) unauthorized transactions, (ii) excessive inter- tions to monitor trends and provide a feedback loop to industry and est or fees, (iii) unclear interest or fees, (iv) mistaken or unauthorized financial sector authorities. Data collected from ADR entities on the transactions, and (v) fraud. On the product side, the most frequently prevalence of complaints around certain issues and products pro- complained about products are (i) consumer loans, (ii) credit cards, vides insight into common friction points between financial con- (iii) mortgage/housing loans, (iv) deposit accounts, and (v) debit sumers and FSPs. Complaints data can also point to systemic issues cards. Regarding distribution channels, the channels most fre- that are likely of particular interest to financial-sector authorities. quently complained about are (i) internet banking, (ii) branches, (iii) ATMs, and (iv) mobile banking. ADR entities were asked to rank a set of issues and products based on those that are the focus of the largest number of com- plaints. Figures 4.20–4.22 show the issues as a percentage of ADR entities for which the issue is a “top-three” complaints topic. The Financial Consumer Protection   65 Figure 4.20: Issues Commonly Addressed by ADR Entity larly. Finally, 65 percent and 64 percent of jurisdictions with ADR Number of relevant responding jurisdictions ranking the issue as one of entities, respectively, have the ADR entities that communicate their three most commonly addressed issues by ADR entities trends and report complaints statistics to financial sector regulators. Unauthorized transactions 36 Figure 4.23: Functions of ADR Entities with Respect to Com- Excessive fees/interests 34 plaints Data, 2017 vs. 2022 Percentage of relevant responding jurisdictions that report function of Fraud 29 ADR entity with respect to complaints data Unclear fee 28 Maintain a database of registered/recorded complaints 2017 95% Note: Based on 43 responding jurisdictions. Respondents ranked a predeter- 2022 89% mined set of issues according to the frequency with which the issue is addressed by the ADR entity in response to complaints. Although more jurisdictions (29) Analyze the complaints data to identify trends reported fraud as a commonly addressed issue, more respondents ranked “Unclear fee” higher as an issue. 86% 88% Figure 4.21: Financial Products Commonly Addressed by Regularly publish complaints statistics ADR Entity 77% Percentage of responding jurisdictions ranking each financial product as 73% one of their three most commonly addressed products by ADR entity Consumer loans 45 Communicate trends to the financial sector regulator 75% Credit cards 42 65% Deposit accounts 35 Report complaints statistics to the regulator Mortgage/housing loans 31 76% 64% Debit cards 26 Note: Figure is based on responses from 51 jurisdictions. Respondents ranked a Based on the trends indicated in the comparison in figure 4.23, predetermined set of financial products according to the frequency with which the there is a percentage-term reduction in jurisdictions undertaking product is addressed by the ADR entity. most ADR functions between 2017 and 2022.33 This reduction is attributable only to the fact that percentages are a function of the Figure 4.22: Distribution Channels Commonly Addressed by number of responding jurisdictions, which has changed over the ADR Entity course of the two surveys. The absolute number of jurisdictions with Percentage of responding jurisdictions ranking financial channels as one their ADR having these functions, however, has increased for all of their three most commonly addressed channels by ADR entities functions but two (“Communicate trends to the financial sector reg- Branches 42 ulator” and “Report complaints statistics to the regulator”). Internet banking 40 The survey asked respondents if they collect aggregated con- ATM 36 sumer complaints data from supervised FSPs or ADR entities (rather than directly from consumers). In response, 74 of 108 respondents Mobile banking 27 (69 percent) indicated that they do. Note: Figure based on responses from 47 jurisdictions. Respondents ranked a predetermined set of issues according to the frequency with which the ADR entity For both jurisdictions with ADR entities and those without, up to addresses the issue. Although more jurisdictions (29) reported branches as a commonly complained about channel, more respondents ranked internet banking 87 jurisdictions reported on the supervisory actions they take about higher as a channel. the data collected. Across all FSP types, though some collect data manually (ranging from 11 percent of responding NBEMIs to 15 The main data-related function of ADR entities is to maintain a percent of responding commercial banks and up to 18 percent of database of complaints that are referred to them and remain unre- responding CCPs), a far larger number of jurisdictions collect data solved by FSPs. This is a function undertaken in the ADR entities of either through an emailed spreadsheet (between a quarter and a 89 percent of responding jurisdictions (figure 4.23). In 88 percent of third of responding jurisdictions across all FSP types) or a web portal jurisdictions, the ADR entities also analyze the complaints data to (on average, about 45 percent of responding jurisdictions across all identify trends, and 73 percent publish complaints statistics regu- FSP types). The use of APIs and directly pulling data from FSP serv- 33 This comparison is not for the “Set of 95” jurisdictions that responded in both cycles, but for all respondents in both cycles, which was 74–76 responding jurisdictions in 2017 and 82–83 responding jurisdictions in 2022, depending on the question. 66   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report ers, two methods that are quite sophisticated, is very limited. Only The ideal regime from a data protection perspective would likely a handful of jurisdictions (fewer than four jurisdictions for each FSP combine a data protection law of general application (so protec- type) use this approach to collect data. tions apply irrespective of sector) in combination with sector spe- cific regulation that builds upon the national data protection law Once collected, almost all commercial banks (in 92 percent of and may provide specific rules needed for the financial sector. It is jurisdictions) keep the data in an electronic database. ODTIs have also true that the data protection law of general application can the lowest level of usage of such databases; only 60 percent of build in provisions relevant to the financial sector, such as by consid- jurisdictions indicate that data is stored electronically. All other FSP ering certain types of financial data as “special categories of data” types fall somewhere in between commercial banks and ODTIs. To (due to their sensitivity). However, the function of the legal frame- facilitate future analysis, however, it is best practice for data to be work is the critical piece, and the appropriate form may depend on maintained electronically. Considering this, it is clear that significant jurisdictional specificities. It is thus advisable to be more prescrip- progress remains to be made. tive about the process and substance than about the form. This being said, 66 jurisdictions (74 percent of respondents) 4.11 DATA PROTECTION have a national law, while 39 jurisdictions have a specific law appli- cable to FSPs. Thirty-one jurisdictions have other regimes in place, Data Protection Regimes including the General Data Protection Regulation (GDPR), which is directly applicable in member states of the European Union; a code There are several possible data protection regimes for a juris- of conduct for FSPs in Angola, and relevant provisions embedded diction to have in place, but broadly speaking, these fall into two in different laws and regulations in Pakistan. categories: either a national data protection law or data protection rules that apply only to FSPs. Having a national data protection law that covers areas beyond the financial sector can be very effective, especially where enforcement is optimal. Table 4.21: Types of Data Protection Regimes Number (percentage) of jurisdictions reporting data protection regimes by region DATA PROTECTION REGIME TYPE ALL EAP ECA LAC MENA NA SAR SSA National data protection law (data protection law of general application) 66 (74%) 7 (78%) 23 (79%) 16 (73%) 8 (73%) 1 (50%) 0 (0%) 11 (79%) Data protection rules that apply only to FSPs 39 (44%) 7 (78%) 7 (24%) 8 (36%) 7 (64%) 2 (100%) 1 (50%) 7 (50%) Other 31 (35%) 4 (44%) 10 (34%) 7 (32%) 3 (27%) 1 (50%) 1 (50%) 5 (36%) No. of responding jurisdictions 89 9 29 22 11 2 2 14 Note: Results based on responses from 89 jurisdictions. Percentages under regional groups represent the percentage of responding jurisdictions within each region with certain data protection regimes in place. Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa. BOX 4.4 General Data Protection Regulation The European Union’s 2016 General Data Protection Regulation is a law on data protection and privacy in the European Union. The regulation’s primary aim is to enhance individuals’ control and rights over their personal data and to simplify the regulatory environment for international business. The regulation became a model for many other laws across the world, including in Argentina, Brazil, Chile, Japan, Kenya, Mauritius, South Africa, South Korea, and Turkey, among others. The California Consumer Privacy, adopted June 28, 2018, also has many similarities with the GDPR. Source: Horizon 2020 Framework Programme of the European Union, “Complete Guide to GDPR Compliance,” https://gdpr.eu/ https://gdpr.eu/. Key Elements of Data Protection als, and in particular individuals’ right to the protection of personal data.34 International guidance has provided some clarity on the col- Data protection refers to regulation of the processing of per- lection of personal data. Specifically, it indicates that any such data sonal information, including imposing limits on the processing and should be processed in a lawful and proportionate manner, with use of personal data and securing data against unauthorized access appropriate limits on use and sharing. Where appropriate, the pro- while protecting the fundamental rights and freedoms of individu- cessing of personal data requires securing the free and informed 34 For a list of internationally recognized frameworks on data protection, see OECD (Organisation for Economic Co-operation and Development), “Privacy,” https://www.oecd.org/sti/ieconomy/oecdguidelinesontheprotectionofprivacyandtransborderflowsofpersonaldata.htm, and EDPS (European Data Protection Supervisor), “International Standards,” https://edps.europa.eu/data-protection/our-work/subjects/international-standards_en. Financial Consumer Protection   67 consent of consumers.35 That said, what constitutes informed con- or underserved by the traditional financial sector. Moreover, individ- sent can also pose challenges for effective implementation, particu- uals may be affected by fintech-related data privacy issues regard- larly in the era of a certain opacity in decision making brought about less of whether they are ever customers or prospective customers of by digitization, big data, and alternative credit scoring models. fintech entities. The DFS market has driven an exponential increase in the vol- Consumers, however, often lack awareness or understanding of ume of customer and market data being collected, stored, pro- how and what data about them is collected or disclosed. These risks cessed, and used. FSPs have historically collected different types of are heightened in a data-driven digital environment (WBG 2021b). information from their customers, including personal data, contact Under these conditions, several jurisdictions have put requirements details, consumer agreements, transaction logs, and passwords in place to bolster the protection of data in their domain (table (WBG 2017). The nexus between financial services, digital identi- 4.22). In 86 jurisdictions (92 percent), FSPs have an obligation to ties, and technology has created space for fintech models that are safeguard the security and integrity of personal data, and in 81 juris- able to design and deliver financial services that are (i) more cus- dictions (86 percent), customers must be informed about the collec- tomized (for example, using customer behavior data), (ii) almost real tion of their data and its intended use. Even considering the time (for example, automating entire loan cycles for straight-through obligation that FSPs give individuals access to their personal data at processing), and (iii) complex (for example, processing large vol- little or no cost, which is a requirement that is present in the least umes of data from traditional and alternative sources). DFS are also number of jurisdictions, still 67 jurisdictions (71 percent) mandate becoming more integrated with new avenues of economic activity this. Because the GDPR covers the European Union, it is also not (such as installment payments within e-commerce). surprising that the Europe and Central Asia region is the most highly represented in jurisdictions with these types of data protections in Finally, in several cases, DFS are expanding financial access to place. Latin America and the Caribbean and Sub-Saharan Africa fol- wider segments of populations and businesses that were unserved low and are quite at par with each other. Table 4.22: Requirements for Data Protection Number (percentage) of jurisdictions reporting data protection requirements by region REQUIREMENT TYPE ALL EAP ECA LAC MENA NA SAR SSA Rules regarding how they can collect personal data 77 8 31 13 9 2 1 13 (82%) (80%) (100%) (59%) (82%) (100%) (25%) (93%) Rules regarding what types of personal data they can collect 73 6 30 12 9 2 1 13 (78%) (60%) (97%) (55%) (82%) (100%) (25%) (93%) Obligations to inform individuals when their personal data is 81 9 30 17 8 2 1 14 collected and for what purpose(s) (86%) (90%) (97%) (77%) (72%) (100%) (25%) (100%) Rules restricting the purposes for which they can use/process 80 9 30 14 11 2 1 13 personal data (85%) (90%) (97%) (64%) (100%) (100%) (25%) (93%) Obligations to inform individuals about how their personal data is 74 7 29 14 7 2 1 14 used/processed (79%) (70%) (94%) (64%) (64%) (100%) (25%) (100%) Rules restricting when they can share/disclose personal data with 76 6 30 13 10 2 1 14 other parties (81%) (60%) (97%) (59%) (91%) (100%) (25%) (100 Obligations to inform individuals when their personal data is shared 69 7 26 11 8 2 1 14 with/disclosed to other parties (73%) (70%) (84%) (50%) (72%) (100%) (25%) (100 Rules limiting the period for which they can retain personal data 68 5 29 13 6 2 0 13 (72%) (50%) (94%) (59%) (55%) (100%) (0%) (93%) Obligations to safeguard the security and integrity of personal data 86 9 30 20 10 2 2 13 (92%) (90%) (97%) (91%) (91%) (100%) (50%) (93%) Obligations to inform individuals and/or regulators if there is a data 68 7 23 14 8 2 1 13 breach (personal data is accessed/obtained without authorization) (72%) (70%) (74%) (64%) (72%) (100%) (25%) (93%) Obligations to give an individual access to their personal data 67 5 26 13 7 2 2 12 at little or no cost (71%) (50%) (84%) (59%) (63%) (100%) (50%) (86%) Obligations to correct erroneous personal data they hold about 70 6 27 14 8 2 1 12 an individual (74%) (60%) (87%) (64%) (72%) (100%) (25%) (86%) No. of responding jurisdictions 94 10 31 22 11 2 4 14 Note: Results based on responses from 94 jurisdictions. Percentages under income and regional groups represent the percentage of jurisdictions from each income and regional group that indicated they had requirements for data protection in place. Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa. There are, however, a number of “lawful bases” for processing personal data that do not involve consent—for example, due to contractual necessity, legiti- 35 mate interests, public interest, and so forth. 68   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report Personal Data Disclosure Figure 4.24: Conditions for Sharing and Disclosing Customer Data to Other Parties, 2022 There are legitimate instances in which a person’s personal data Percentage of responding jurisdictions reporting conditions for sharing can or should be shared. The survey asked respondents which of customer data these situations exist in their jurisdiction (figure 4.24). The condi- With the individual's consent tions that precipitate those instances, however, must be clear to all 99% parties involved. For some of those conditions, there is broad con- sensus across jurisdictions and authorities. For example, 75 jurisdic- If the personal data is shared/disclosed in circumstances permitted tions (99 percent of the respondents), subscribe to the premise that by law or to comply with a legal obligation the sharing or disclosure of customer data to other parties should 93% be done only with the individual’s consent. If the sharing/disclosure is consistent with the purpose(s) for which the data On the issue of consent, emerging best practice is that policy was originally obtained and about which the individual is aware makers should consider going beyond individual consent as the pri- 70% mary basis for data protection. While the concept of consent is fun- damental, the choice to accept a set of terms and conditions comes Other at a time when people are about to access a service, website, or 9% app and are therefore least likely to consider it critically. In addition to initial consent, people should be equipped with rights that give Note: Data based on responses from 76 jurisdictions. them greater control over their data beyond the moment they sign up for a service (Murthy and Medine 2019). Figure 4.25: Consent Requirements for Sharing Personal Data, 2022 Beyond the threshold issue of identifying which legal basis Percentage of responding jurisdictions reporting consent requirements should be used for data processing, the focus should be on the There must be informed consent responsibility/obligation of data controllers to process data in accordance with other key data protection principles, including pur- 98% pose limitation, data minimization, restrictions on third party data sharing, and storage limitations. Obtaining consent, in and of itself, The consent must be specific to the relevant purpose does not give the data controller carte blanche to collect and use 88% personal data without restriction. The consent must have been given freely by the individual In that spirit, 71 jurisdictions (93 percent) maintain that personal 88% data can be shared/disclosed in circumstances permitted by law or to comply with a legal obligation (such as disclosure to law enforce- The consent must be clear and unambiguous ment agencies). Also, 51 jurisdictions (67 percent) agree that shar- 83% ing/disclosing personal data is appropriate if the sharing/disclosure is consistent with the purpose(s) for which the data was originally The individual must be able to withdraw their consent at any time obtained and about which the individual is aware. 82% Note: Data based on responses from 82 jurisdictions. 5 FINANCIAL EDUCATION AND CAPABILITY KEY HIGHLIGHTS • Financial sector authorities and other key stakeholders are • National financial inclusion/awareness campaigns, such as prioritizing financial education and other interventions to national savings week campaigns, are the most common improve the financial capability of consumers. Currently, 78 type of financial education programming. This is followed by jurisdictions have a stand-alone financial education strategy public service announcements on radio, online, social media, in place or in development, and since 2017, the prevalence or TV. Online educational tools rank third in popularity. of such strategies has increased by 10 percent. One-third of • The prevalence of digital financial literacy programs remains the 110 jurisdictions that responded mandate FSPs to limited. Furthermore, the subjects covered in those trainings provide financial education to their customers. Ideally, for the tend to be limited. sake of uniformity and assuring content quality, FSPs should work closely with their governments to develop and • The most common approach is to target financial education implement this training. programming by age, followed by financial education programs for self-employed demographics. Initiatives aimed • In terms of incorporating financial education into large at self-employed people are the most common. Gender is government programs, only 48 jurisdictions report this. the third most common segmentation of financial capability Financial education in public schools is more common, content. however, with 64 jurisdictions doing so. • Three-quarters of responding jurisdictions (or about 88 economies) indicate that the government has a financial literacy website. In certain situations—such as in open banking/open finance sce- and targeted consent. Again, 72 jurisdictions (88 percent) also narios, in the use of alternative data for creditworthiness evaluation, require that the consent must have been given freely by the individ- or when the data is used for purposes that differ from those of the ual. initial data collection—consent is necessary for sharing personal information. As detailed in figure 4.25, 80 jurisdictions (98 percent) Sixty-eight jurisdictions (83 percent) require that the consent require that there be informed consent that indicates that the indi- must be clear and unambiguous, indicating that silence/failure to vidual must have understood the nature and purpose of the data disagree or pre-ticked boxes would not be sufficient. Finally, 67 sharing/disclosure (WBG 2021b). Seventy-two jurisdictions (88 per- jurisdictions (82 percent) require that an individual must be able to cent) further require that the consent must be specific to the rele- withdraw their consent at any time. Unfortunately, this requirement, vant purpose (and not general or combined with other matters). which would allow customers to extract themselves from an agree- This speaks to the increasingly clear shift away from bundled, over- ment they are not comfortable with whenever they choose, is the arching consent and toward models requiring more active, granular, disclosure requirement subscribed to by the lowest number of juris- dictions. 70   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report The GDPR (box 4.4) reinforces the importance of consent while equipping people with other autonomies. In the spirit of going BOX 5.1 beyond traditional consent, CGAP research (Murthy and Medine Comparing Financial Literacy, Financial Edu- 2019) on this subject has identified the following rights that policy makers should consider giving individuals as part of their data pro- cation, and Financial Capability tection policy, especially as it relates to digital data: Though unique concepts, the terms financial literacy, financial education, and financial capability are often used inter- 1. Rights to access personal data from a data collector and receive changeably. it in an easy-to-read format Financial literacy represents the level of aptitude in under- 2. Rights to update data in the case of errors or legitimate evolu- standing personal finance. It often refers to awareness and tion (such as the achievement of a new level of education) knowledge of key financial concepts required for managing personal finances and is generally used more narrowly than 3. Rights to erase data to prevent it from existing or spreading financial capability. once consent is revoked Financial capability is the capacity to act in one’s best finan- 4. Rights to port data from one data controller to another to access cial interest, given socioeconomic environmental conditions. additional services It encompasses the knowledge (literacy), attitudes, skills, and behaviors of consumers regarding managing their resources 5. Rights to object to information use after a period or for a new and understanding, selecting, and making use of financial ser- use case even after consent has been initially given vices that fit their needs. 6. Rights with regard to automated processing (for example, the Financial education is a tool for increasing consumer financial literacy. According to the OECD, financial education is the use of artificial intelligence and machine learning) process by which financial consumers and investors improve their understanding of financial products and concepts and, Ultimately, even if consent is the appropriate lawful basis for pro- through information, instruction, and objective advice, cessing personal data in the context of a financial services transac- develop skills and confidence to become more aware of tion, obtaining consent is just the threshold question before other financial risks and opportunities to make informed choices, data protection requirements apply—including obligations on data know where to go for help, and take other effective actions to controllers to minimize the amount of data they collect, ensure lim- improve their financial well-being. its on third party sharing, limit the purposes for which this data is used, and ensure that data is stored only for as long as it’s needed. Financial-sector authorities and other stakeholders are therefore These obligations are mirrored by data subject rights, including the prioritizing financial education and other interventions to increase rights listed above. In addition, policymakers should consider alter- the financial capabilities of consumers. As noted in section 3.1, natives and additions to their existing policy frameworks that would many jurisdictions have either established or are developing a enhance data protection, particularly for low-income and vulnera- national strategy for financial capability (or financial literacy or finan- ble populations. These include (1) shifting the onus to providers cial education). Currently, 78 jurisdictions (70 percent) have such a through a legitimate purposes test or fiduciary duty requirement, (2) stand-alone strategy either in place (63 jurisdictions) or in develop- empowering consumers with modern digital rights that go beyond ment (15 jurisdictions). The prevalence of this type of strategy has consent, and (3) enabling fairness in processing through privacy increased by 10 percent since 2017. The institutional arrangements representatives (Medine and Murthy 2020). for leading and/or coordinating financial-education policies and programs vary by jurisdiction. Currently, 33 percent of the respond- Financially capable individuals who make good financial deci- ing jurisdictions have multiple agencies sharing responsibility for sions and interact effectively with FSPs are more likely to achieve executing financial-education programs. For example, in Croatia, their financial goals and therefore improve the welfare of their the Ministry of Finance has the mandate to lead and coordinate the households. The expectation is that financial-education programs, financial-education efforts, while the National Bank of Croatia, the when effectively designed and delivered, can be implemented as Croatian Financial Services Supervisory Agency, and the Ministry of tools to increase consumers’ financial capability, helping consumers Education act as the implementing partners. make better choices and improve their financial health, allowing them to save, borrow, and invest more safely. (See box 5.1.) This has When comparing the prevalence of this arrangement across sur- the potential not only to promote responsible consumer behavior vey cycles, we see an increase: 38 jurisdictions report having a mul- but also to advance broader financial inclusion while helping to tiple-stakeholder arrangement in place in 2022, as compared to 31 ensure stability and the effective functioning of the financial mar- in 2017. In addition, 34 jurisdictions currently have a single agency kets. model, while in 22 jurisdictions, there is no agency responsible for financial education. Financial Education and Capability   71 Figure 5.1: Types of Institutional Arrangements for Financial financial capability. These trends point to an increasing awareness Education, 2017 vs. 2022 among policy makers of the value of coordination in developing Percentage of responding jurisdictions reporting institutional and implementing financial education initiatives. arrangement Figure 5.2: Coordination Structure to Promote and Coordi- Multiple agencies are responsible nate Financial Education, 2017 vs. 2022 2017 26% Percentage of responding jurisdictions reporting coordination structure approach 2022 33% 63% A single agency is responsible 31% 29% 46% 41% No agency is responsible 31% 19% 33% 20% Other 13% 12% 2017 2022 2017 2022 2017 2022 19% Dedicated, Financial capability None multi-stakeholder addressed under the Note: Data based on 121 jurisdictions responding in 2017 and 116 responding in structure for mandate of a broader 2022. financial capability multi-stakeholder structure Given the cross-sectoral nature of financial education and the wide range of stakeholders involved, many jurisdictions have estab- lished a dedicated multistakeholder entity to promote and coordi- Note: Figure based on 121 jurisdictions responding in 2017 and 115 in 2022. nate the provision of financial education. Sixty-three percent of reporting jurisdictions report having such a dedicated multistake- As national authorities increasingly recognize the link between holder entity promoting and coordinating financial-education initia- high levels of financial capability and a robust FCP regime, many tives. This model is highly preferred in South Asia, where 60 percent authorities are dedicating resources to activities aimed at realizing of reporting jurisdictions in this Region have this approach. this objective. These activities are FSP facing, customer facing, as well as general. Table 5.1 highlights that a significant number of For jurisdictions with a multistakeholder coordination approach, responding jurisdictions report engaging with providers (72 jurisdic- these mostly included government authorities (in 62 percent of tions), consumers (68 jurisdictions), or media outlets (70 jurisdic- responding jurisdictions), industry representatives such as FSPs (in tions) to improve financial literacy. A further 58 jurisdictions report 48 percent of reporting jurisdictions), nongovernment organizations undertaking financial-education activities that fall outside of these (in 40 percent of reporting jurisdictions), international organizations categorizations. (in 21 percent of reporting jurisdictions), and unaffiliated experts (in nine percent of reporting jurisdictions). Table 5.1: Financial Education Activities Undertaken by Authorities Twenty-three percent of all jurisdictions report having no coordi- Number (percentage) of jurisdictions reporting activities nation structure at all, and a higher proportion in the Middle East ACTIVITIES JURISDICTIONS and North Africa (33 percent) and in Europe and Central Asia (30 Engage with FSPs to promote financial education 72 (71%) percent) fall under this category. Figure 5.2 highlights the changes Engage with customers for financial-education 68 (67%) between 2017 and 2022 to the coordination structures in place for purposes financial education when looking at the full sample of responses in Have media campaign (radio/TV/social media) to 70 (70%) each cycle. A very notable and positive change is that the percent- increase financial education age of jurisdictions with no coordination structure in place at all Other financial-education activities 58 (57%) decreased from 46 percent in 2017 to 23 percent in 2022. Also Note: Table based on 101 responding jurisdictions. notable is the 22 percentage point increase between the two cycles in the jurisdictions with a dedicated multistakeholder structure for 72   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report The above financial education activities are often undertaken as National authorities were also asked if they require providers to part of the broader implementation of financial capability strate- provide financial education and, if so, if those directives to FSPs gies. These strategies are tools used by authorities to increase safe took the form of written guidelines detailing a specific financial-ed- engagement with financial services. Currently, 78 jurisdictions (70 ucation approach. Whereas only a third of 110 responding jurisdic- percent) have such a stand-alone strategy either in place (63 juris- tions require that some or all FSPs provide financial education to dictions) or in development (15 jurisdictions). The prevalence of this their customers, 67 percent of jurisdictions do not have such a type of strategy has increased by 10 percent in 2022. In addition, if requirement in place (figure 5.3). This notwithstanding, 88 jurisdic- one compares only the “Set of 95” (appendix B), the number of tions have issued written guidelines to providers on approaches to jurisdictions with a financial capability strategy either in place or in integrating financial education; most of these are targeted at a lim- development grew from 58 to 66, while those without fell from 38 ited set of providers of financial education, such as schools (figure to 27. 5.4). As the authorities develop a coordinated approach toward Figure 5.3: Requirement for FSPs to Provide Financial financial education, they are also undertaking an increasing amount Education of M&E of financial capability indicators to track progress. These Percentage of responding jurisdictions requiring FSPs to provide finan- assessments are essential elements of gauging the effectiveness of cial education to their customers financial education policies, benchmarking against desired out- Yes, directed at a comes, and helping to roll out evidence-based actions to improve limited set of FSPs these policies. National strategies for financial education are com- 10% plex, multiyear, multistakeholder, public policy projects that can strongly benefit from comprehensive evaluation designs. Yes, directed at 23% No 67% all FSPs One good practice recommended by the World Bank is to coor- dinate with financial inclusion stakeholders to integrate key finan- cial-capability indicators into existing surveys of financial inclusion. Integrating a few, select financial-capability indicators into existing, relevant, and established surveys of financial inclusion can be a more effective method of sustainably collecting relevant financial Note: Figure based on responses from 110 jurisdictions in 2022. capability data (see box 5.3) (WBG 2021a). Figure 5.4: Issuance of Written Guidelines on Integrating On this basis, respondents were asked about the data-collection Financial Education efforts undertaken by government, whether alone or in coordina- Percentage of responding jurisdictions that report having issued written tion with other institutions, to establish the level of financial capabil- guidelines ity in the past five years (figure 5.4). In 2022, 56 percent of 111 Yes, directed at a limited set of providers of financial education (e.g. schools) responding jurisdictions, including Brazil, Canada, and Indonesia, 32% indicated that they have undertaken national mappings of relevant financial education initiatives. This compared to 45 percent of 120 responding jurisdictions in 2017. Yes, directed at all providers of financial education 15% In addition, 46 percent of jurisdictions (such as Brunei Darus- salam) in 2022 are collecting data on financial capability directly Yes, directed at all financial service providers from financial education providers. 10% The 2022 survey also probes trends around needs assessments Yes, directed at a limited set of financial service providers and gap analyses for financial education learning. The results reveal 9% that 50 jurisdictions (49 percent) have undertaken financial educa- tion gap analyses (including Ethiopia, Ireland, and Japan) and 48 Yes, directed at all financial service providers and providers of financial education jurisdictions (44 percent) have conducted a learning needs assess- 9% ments (such as North Macedonia, Thailand, and the United States). This modest level of collection of data to assess the gaps and needs No as it relates to financial education is likely a constraint to the devel- 25% opment of evidence-based and successful initiatives to increase financial capability. Note: Figure based on responses from 117 jurisdictions in 2022. Financial Education and Capability   73 One trend that does not appear to be moving in a positive direc- tions that have financial education incorporated in each type of pro- tion is the number of jurisdictions that have conducted nationally gram. The most common types of programs with financial education representative surveys of individuals or households. In 2022, 43 components are those related to financing micro, small, and medi- jurisdictions report having conducted a dedicated survey on finan- um-sized enterprises (28 jurisdictions), pension programs (22 juris- cial capability, while 14 jurisdictions report having a financial capa- dictions), and social cash transfers (21 jurisdictions). bility module integrated as part of a broader financial inclusion survey. These 57 combined jurisdictions (50 percent) in 2022 is a Figure 5.6: Incorporation of Financial Education in Govern- drop from the 80 jurisdictions (67 percent) in 2017. This reduction, ment Programs however, could simply be explained by the fact that the survey asks Number of responding jurisdictions that report including financial educa- respondents to report on their activities over a five-year period. tion in government programs Given the complexity and expense involved with conducting MSME finance 28 nationally representative surveys, jurisdictions may be implement- Pension programs 22 ing these at a longer interval than every five years. In addition, a select number of financial capability related indicators may be Social assistance 21 embedded into other surveys. cash transfer Agri lending 15 Figure 5.5: Elements of M&E Systems for Financial Education SME finance 14 Percentage of responding jurisdictions undertaking M&E activity Tax payment 9 2017 2022 programs 30% 40% 50% 60% 70% 80% Remittance 7 Government National mapping of relevant 5 wage programs financial education initiatives Other 14 Direct collecton of data from financial education providers Note: Figure based on responses from 117 jurisdictions in 2022. National representative surveys of individuals or households BOX 5.2 Undertaken Financial Integrating Financial Capability into Govern- Education Gap Analysis ment Cash Transfer Programs Conducted a learning Large-scale government financial programs are often well needs assessment positioned to leverage their own programmatic infrastruc- tures/training platforms and embed core financial education. Note: Figure based on 120 jurisdictions responding in 2017 and 113 responding Social cash transfer programs already provide orientations in 2022, but with the exception in 2022 of the option “Conducted a learning needs assessment,” which had 110 respondents. and onboarding to recipients to help familiarize them with their new cash transfers, but in most cases, onboarding can be strengthened to include financial education. When imple- Respondents were also asked whether financial education is mented correctly, such messaging can strengthen financial included as a component of any government financial programs capability at a teachable moment—that is, at a time when a provided to recipients. Such programs might include government recipient is about to make an important financial decision or wage digitization, pensions, cash transfers, remittances, agricultural use a financial service. Since beneficiaries are more likely to lending, or programs to finance micro, small, and medium-sized be receptive to new information and adopt behavioral enterprises. (See box 5.2.) Overall, only 45 percent of 107 respond- changes as part of receiving their transfer, leveraging these teachable moments is an effective strategy to connect real-life ing jurisdictions report that financial education is included as part of decision-making with financial education and their cash trans- government-provided financial programs. This approach is more fer. This ensures that information is more likely to be retained common in North America, South Asia, and East Asia and Pacific and used and can influence cash management behaviors. regions. The World Bank toolkit Integrating Financial Capability into Government Cash Transfer Programs analyzes expected ben- The government programs with financial education program- efits when integrating financial education into government ming in place vary widely across jurisdictions and include everything transfer programs and its linkages with financial inclusion and from government wage digitization programs, pension programs, provides guidance and best practices in approaching the cash transfer programs, remittance programs, agricultural lending design and implementation of such programs. programs, and programs to finance micro, small, and medium-sized enterprises, among others. Figure 5.6 details the number of jurisdic- 74   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report As it relates to the channels for the dissemination of financial the government maintains a financial literacy website. Among the education, 64 jurisdictions (59 percent of respondents) indicate that 88 jurisdictions that have websites, 23 percent have these for the financial education is included as a topic in public school curricu- primary purpose of disclosing information about pricing and terms lums. Thirty eight jurisdictions do not include financial education in of financial products; 56 percent have websites with educational public school curriculums at all, though eight of these jurisdictions content, tools, and resources for broader financial education; and plan either to develop or to implement the curriculum within one or 15 percent have websites with other resources. These other two years. Of the 64 jurisdictions with financial education programs resources include, in Bahrain, a website on consumer protection in schools, 51 have financial education content integrated into one and corporate procedures and, in Mexico, a financial fraud portal to or multiple other topics, while only 13 have literacy content as a help consumers decide, defend against, and make reports to pre- distinct topic or subject. vent fraud. For those jurisdictions in which financial education is included in Figure 5.8 details the response to the question on which finan- the public school curriculum, the educational level at which this cial education programs are implemented by the government reg- content is introduced is quite evenly distributed. Specifically, 53 ularly (either alone or in coordination with other entities). National percent of jurisdictions have this content at the senior secondary financial inclusion/awareness campaigns, such as a national savings school level, 50 percent at the junior secondary school level, and 43 week campaign, came in first; 81 jurisdictions (69 percent) under- percent at the primary school level. Financial education at the uni- take these. A close second are public service announcements via versity level is the least prevalent intervention. Only 19 percent of radio, online, social media, or TV, which are implemented regularly jurisdictions implement such programs. in 78 jurisdictions (67 percent). The third most preferred program is online educational tools. Fifty jurisdictions (50 percent) deploy In addition to channeling financial education content through these. school curricula, three-quarters of 117 jurisdictions indicated that Figure 5.7: Types of Financial Education Programs Regularly Implemented Percentage of responding jurisdictions undertaking financial education programs 50% 29% 35% Online Financial education education Digital games during teachable tools or apps moments 11% Digital nudges 69% 67% 45% 20% National financial 17% 9% education/awareness Public service Edutainment Text messages/ campaigns annoucements programs SMS reminders Simulations Chatbots AI-ML financial education: 4% Note: Figure based on responses from 117 jurisdictions. Perhaps reflecting the still-nascent use of technology in financial cial literacy that focuses on DFS (AFI 2021). While the data shows education, the programs that are least regularly used (by only 17 that digital financial literacy focused on data protection as well as percent of jurisdictions) were simulations (for example, on the use of the use of DFS is now being implemented, they remain fairly limited ATMs and mobile money). Other approaches that are undersub- in their reach: only 42 percent and 57 percent of jurisdictions, scribed are digital nudges (only 11 percent of jurisdictions), chat respectively, opt for such programs (figure 5.9). Also, with only two boxes (only nine percent of jurisdictions), and artificial intelligence/ jurisdictions responding in North America, this is the Region with machine learning financial education (only four percent of jurisdic- the highest level of digital financial-literacy programming, followed tions). by the East Asia and Pacific and South Asia regions. Interestingly, Latin America and the Caribbean and Europe and Central Asia are The rapid rise in the use of DFS, their complexity, and increasing quite evenly matched as the regions with, on average, the lowest DFS-related consumer protection risks (such as fraud and over-in- level of programming on digital financial literacy. debtedness) call for a more nuanced and expanded scope of finan- Financial Education and Capability   75 Figure 5.8: Financial Education Programs Specifically Finally, while financial capability levels often vary by population Focused on Digital Literacy and Awareness segment—with disparities along the lines of gender being a per- Percentage of responding jurisdictions with digital literacy programs sistent challenge, among others—many financial capability pro- Protecting personal digital information grams tend to take a one-size-fits-all approach (Arnold and 56% Venkatesan 2021). Figure 5.9 details the extent to which govern- ments have implemented financial capability programs that are Accessing and using DFS specifically targeted at particular vulnerable populations. 54% Data privacy and governance 42% Other digital literacy 38% Understanding digital recourse/complaint handling 32% Digital money management 24% Understanding digital troubleshooting 10% Note: Figure based on responses from 117 jurisdictions in 2022. Figure 5.9: Differentiation of Financial Education Programs by Segment Percentage of responding jurisdictions with segmented financial education content Gender Age Self-employed Nationality 17% 40% 67% 48% Note: Figure based on responses from 117 jurisdictions from 2022. The results show that targeting financial education program- The third most prevalent segmentation of financial capability ming by age is the most common approach; this is undertaken in 78 content is by gender; 40 percent (or 47 jurisdictions) report having jurisdictions, or 67 percent of respondents. The prevalence is partic- this in place. According to the Global Financial Literacy Excellence ularly high in the North America, East Asia and Pacific, and Europe Center at George Washington University, 35 percent of men world- and Central Asia regions, where over two-thirds of all jurisdictions in wide are financially literate, compared with 30 percent of women. those regions have age-segmented financial capability initiatives. Moreover, this gender gap is found both in advanced economies, such as Canada, France, Germany, Italy, Japan, the United King- The next most prevalent are initiatives that target those who are dom, and the United States—the so-called Group of Seven, or self-employed. This is implemented by 40 percent of respondents G7—and in emerging economies, such as Brazil, China, India, the or 56 jurisdictions. An area of opportunity here is for authorities in Russian Federation, and South Africa—the so-called BRICS (Hasler Europe and Central Asia, where only 28 percent of the jurisdictions and Lusardi 2017). It is therefore critical that national authorities in that region (as compared to 67 percent of jurisdictions in East develop targeted programming to address this gap. This is espe- Asia and Pacific, for example) report having financial literacy con- cially true in Europe and Central Asia and East Asia and Pacific, tent targeted at this segment. where only about a quarter of jurisdictions in those Regions have gender-focused programming. In the Latin America and the Carib- 76   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report bean, Sub-Saharan Africa, Middle East and North Africa, and North responses above highlight, policy makers continue to use conven- America Regions, at least 50 percent of the jurisdictions in each of tional approaches to financial education (financial-literacy events, these regions have such programming. training sessions, seminars, workshops, and classroom-based lec- tures) that, empirical evidence suggests, are generally unsuccessful Finally, 20 jurisdictions (17 percent) segment their programming in sustaining behavioral change (WBG 2021a). by nationality, which includes refugees or those with immigrant sta- tus. This approach is most prevalent in the Latin America and the Emerging evidence suggests that key behavioral tools and prac- Caribbean, where 31 percent of jurisdictions in that Region indicate tices, such as simplifying financial education into concrete, action- they have this segmentation. Conversely, no jurisdictions in South able steps, personalizing education, providing short timely Asia and only one in the Middle East and North Africa tailor their messages, and making education convenient and easy to access, financial literacy content to this segment. Particularly for the Middle have successfully changed consumer knowledge, decision-making, East and North Africa, this is surprising, given the high numbers of and financial behaviors. Therefore, to ensure that financial educa- refugees and internally displaced people that can be found there. tion interventions are suitable for their target audience, adopting the appropriate tool and delivery channel is essential for any finan- While it is encouraging to see that policy makers around the cial education activity. Before selecting a particular tool, however, it world have financial literacy and education on their agenda, most of is important for policymakers to consider the range of stakeholders the work has focused on traditional financial education, which involved, the needs and preferences of consumers, and the types of hinges on the basic principles of financial management (that is, sav- risks that consumers may face—particularly those who are new ing, budgeting, and so forth) and the use of traditional financial users of DFS. services, such as current and savings accounts. Furthermore, as the BOX 5.3 Building More Effective Financial Education Approaches: Lessons for policymakers The 2021 World Bank technical note Building a Financial Education Approach: A Starting Point for Financial Sector Authorities aims to help authorities get better results from their various financial capability initiatives. The report provides specific insights for financial sector authorities to help them build an effective financial education approach. The key guidance is the following: Tackle risks first: Authorities should focus on addressing the inherent risks posed to consumers. This helps them remain more targeted in their financial education interventions and have a greater impact. Understand trade-offs: Authorities should consider how best to prioritize their goals by assessing trade-offs between methods that are easy to implement, their capacity and resources, and the most pressing consumer risks. Implement through partnerships, guidance, and public tools: Three key areas are critical for building an effective financial capabil- ity framework: (i) partnerships with key institutions to embed financial education into existing financial programs, (ii) guidance to regu- lated entities on their day-to-day interactions with customers, and (iii) development of financial education tools that are then offered to the public, including consumers, institutions, and intermediaries, among others. Monitor and evaluate: Adopt a practical M&E framework that tracks progress, monitors resource allocation, helps pilot new initiatives, and, to the extent possible, measures impact. Identify the right tools: Choosing the right tool and delivery channel is a critical step to ensure that financial education interventions are appropriate for their target audience. The technical note summarizes good practices and a growing body of evidence and country applications around interventions that use newer, innovative methods, behavioral insights, and rigorous testing to demonstrate lasting behavioral change. 6 KEY TAKEAWAYS AND POLICY IMPLICATIONS Digitization of financial services: COVID-19 has boosted the E-money as a catalyst for financial inclusion: E-money pres- adoption of DFS in emerging markets and developing economies. ents new opportunities for increased financial inclusion. As evi- According to the Global Findex Database 2021, about 40 percent denced by the Global Findex 2021, e-money has been a key driver of adults in developing economies excluding China who made a of financial inclusion. E-money lets users safely and inexpensively digital merchant payment using a card, phone, or the internet did store funds and transact with them quickly and affordably across so for the first time after the start of the pandemic. Fintech and DFS long distances, which leads to higher remittances and consumption are now considered key enablers of more efficient and competitive and more investments. The fact that non-banks have been allowed financial markets and have the potential to help expand access to to issue e-money has been a significant catalyst for the growth of finance for underserved consumers. The importance of fintech and DFS in many markets. For countries where e-money has not been DFS among national authorities is clearly underscored by the rise in codified in law, this highlights a lag in an important enabling legal the number of fintech strategies and digital development strategies framework among lower-income jurisdictions. with financial inclusion components. This calls for a need for author- ities to revisit existing NFISs, keeping in mind the growing role of Remote account opening and CDD: Regulators often face chal- fintech and DFS in their financial sector landscapes. Effective coor- lenges in balancing policies on anti-money laundering and combat- dination between relevant stakeholders—including multiple regula- ing the financing of terrorism with placing the least burden and tory authorities across borders—is also key to the success of these costs on outreach to the poor and unbanked. As financial services strategies. have increasingly moved to digital forms, the CDD of individuals looking to open such accounts has also become more digital. Addressing consumer risks in fintech to maximize its bene- Because of this trend, and because of lockdowns during the COVID- fits: Along with its benefits, fintech also poses a range of risks to 19 pandemic, authorities are increasingly allowing FSPs to make consumers. Some of these risks are new, but many represent new onboarding a partially to fully non-face-to-face process. These manifestations of existing risks resulting not only from the technol- trends should be leveraged with the risk-based approach for identi- ogy supporting and enabling fintech offerings but also from new or fying and onboarding clients, in line with Financial Action Task changed business models, product features, and provider types, as Force’s requirements and to help minimize documentary hurdles for well as consumers’ greater accessibility to sometimes unfamiliar or the poorest and most vulnerable populations. more complex financial products. Authorities responsible for FCP are increasingly facing the challenge of addressing these risks but Data protection and disclosure of personal data: Consumers often lack the technical expertise or tools to do so. To address these often lack awareness or understanding of how and what data about risks, a step-by-step approach will be crucial. This should include them is collected or disclosed. These risks are heightened in a data- assessing the market, consumer experiences, and current regula- driven digital environment. An emerging best practice in relation to tory framework and determining the right regulatory and supervi- the disclosure of personal data is that policy makers should go sory approach based on that assessment (WBG 2021b). beyond individual consent as the primary basis for data protection. Ultimately, even if consent is the appropriate lawful basis for pro- cessing personal data, obtaining consent is just the threshold ques- 78   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report tion before other data protection requirements apply—including obligations on data controllers to minimize the amount of data they collect, ensure limits on third party sharing, limit the purposes for which this data is used, and ensure that data is stored only for as long as necessary. Crypto-assets: As the adoption and usage of crypto-assets rap- idly evolves, monitoring and continued progress on key policy con- siderations is called for. Most authorities have advised the public regarding the risks related to crypto-assets, such as their volatile nature. Unsophisticated users can easily lose their funds or have them stolen, and there are currently few, if any, redress options. Several projects also appear to be outright scams and frauds. Addi- tionally, the technologies themselves remain untested at scale and pose various risks that are not yet well understood. Moreover, a lack of access to smartphones and ID documents and a need for physi- cal access points could make exchanges between physical fiat cur- rencies and crypto-assets difficult for the currently excluded customer segments (WBG 2022). FCP regulation: The 2017 Good Practices notes that no single model of institutional arrangements for FCP is optimal for all juris- dictions. Various institutional arrangements are structured along several dimensions, including through a single authority or multiple sectoral authorities; integrating prudential and FCP supervision within a single institution or being separated into multiple institu- tions; and having a general consumer protection authority play a role in FCP. However, a recurring theme from the survey responses is that commercial banks are more likely than non-banks to be sub- ject to FCP rules and regulations (such as disclosure and transpar- ency). This raises the question of consumer risks arising from unregulated non-banks or regulated non-banks outside the regula- tory perimeter of the authority in charge of FCP. FCP supervision and suptech: There are pervasive questions concerning the regulatory capacity and allocation of adequate resources for supervisory activities. Ensuring effective, adequately resourced supervision is crucial to the successful implementation of FCP measures. On the use of suptech, 84 jurisdictions have strate- gies to enable data-driven supervision. But most supervisors use these methods for supervising only commercial banks. Supervisors appear to be lagging in the adoption of suptech solutions for the supervision of non-bank entities—especially fintech/DFS providers. This further underscores the need for collaboration across authori- ties in the supervision of financial institutions given the diversity of risks. Digital and financial-literacy measures: With the rapid rise in the use of DFS, their complexity, and new manifestations of con- sumer risks, a more nuanced and expanded scope of financial liter- acy is the need of the hour. There is a need to go beyond traditional financial-education content as well as delivery channels and focus on digital financial literacy. 7 REFERENCES AFI (Alliance for Financial Inclusion). 2021. Digital Financial Literacy. De Mesquita Gomes, S. J., A. Kasdorp, G. Boeddu, and J. Chien. Guideline Note No. 45. Alliance for Financial Inclusion. https:// 2022. An Introduction to Developing a Risk-Based Approach to www.afi-global.org/wp-content/uploads/2021/05/AFI_Guide- Financial Consumer Protection Supervision. Guidance Note. line45_Digi_Finance_Literacy_aw5.pdf. Washington, DC: World Bank Group. https://openknowledge. worldbank.org/server/api/core/bitstreams/59a72e53-11fb-57fe- Alibhai, S., N. Buehren, R. Coleman, M. Goldstein, and F. Strobbe. 95a9-2500cbe31b61/content. 2019. “Disruptive Finance: Using Psychometrics to Overcome Collateral Constraints in Ethiopia.” Washington, DC: World Bank Demirgüç-Kunt, A., L. Klapper, and D. Singer. 2017. “Financial Group. https://documents1.worldbank.org/curated/ Inclusion and Inclusive Growth: A Review of Recent Empirical en/651751524666164146/pdf/125731-WP-PsychometricsEthiopiaf- Evidence.” World Bank Policy Research Working Paper 8040. inal.pdf. https://doi.org/10.1596/1813-9450-8040. Appaya, S. 2021. “On Fintech and Financial Inclusion.” Public Demirgüç-Kunt, A., L. Klapper, D. Singer, and S. Ansar. 2022. The Sector and Development Blog, October 26, 2021. https://blogs. Global Findex Database 2021: Financial Inclusion, Digital Pay- worldbank.org/psd/fintech-and-financial-inclusion. ments, and Resilience in the Age of COVID-19. Washington, DC: World Bank Group. https://www.worldbank.org/en/publication/ Arnold, J., and J. Venkatesan. 2021. Building Women’s Financial globalfindex. Capability: A Path toward Transformation. Center for Financial Inclusion. https://content.centerforfinancialinclusion.org/wp-con- FATF (Financial Action Task Force). 2017. Anti-Money Laundering tent/uploads/sites/2/2021/06/Building-Women%E2%80%99s-Fi- and Terrorist Financing Measures and Financial Inclusion with a nancial-Capability-4-1.pdf. Supplement on Customer Due Diligence. FATF, Paris. https://www. fatf-gafi.org/media/fatf/content/images/Updated-2017-FATF-2013- BCEAO (Central Bank of West African States). 2020. 1 April 2020 Guidance.pdf. Communique, Section 7. https://www.bceao.int/fr/communi- que-presse/communique-relatif-aux-mesures-depromo- Fathallah, S., and D. Pearce. 2013. Coordination Structures for tion-des-paiements-electroniques-dans-le. Financial Inclusion Strategies and Reforms. Washington, DC: World Bank. http://documents.worldbank.org/curated/ Brix Newbury, L., and E. Duflos. 2022. “Consumer Advisory Panels: en/350551468130200423/Coordination-structures-for-financial-in- A Tool to Bridge the Regulator–Consumer Gap.” CGAP Blog, clusion-strategies-and-reforms. August 29, 2022. https://www.cgap.org/blog/consumer-adviso- ry-panels-tool-bridge-regulator-consumer-gap. Feyen, E., Y. Kawashima, and R. Mittal. 2022. “Crypto-Assets Activity around the World: Evolution and Macro-Financial Drivers.” Buruku, B. 2020. “Ghana Launches World’s First Digital Finance Policy Research Working Paper 9962. Washington, DC: World Bank Policy amid COVID-19.” CGAP Blog, May 21, 2020. https://www. Group. https://openknowledge.worldbank.org/bitstream/han- cgap.org/blog/ghana-launches-worlds-first-digital-finance-policy- dle/10986/37115/Crypto-Assets-Activity-around-the-World-Evolu- amid-covid-19. tion-and-Macro-Financial-Drivers.pdf?sequence=1&isAllowed=y. 80   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report G20/OECD Task Force on Financial Consumer Protection. 2013. Izaguirre, J. C., D. Dias, E. Duflos, L. Brix Newbury, O. Tomilova, “Update Report on the Work to Support the Implementation of the and M. Valenzuela. 2022b. “Market Monitoring for Financial G20 High-Level Principles on Financial Consumer Protection” Consumer Protection.” CGAP Toolkit. Washington, DC: CGAP. (September 2013). OECD, Paris. https://www.oecd.org/finance/ https://www.cgap.org/topics/collections/market-monitoring. financial-education/G20EffectiveApproachesFCP.pdf. Izaguirre, J. C., D. Dias, E. Duflos, L. Brix Newbury, O. Tomilova, Hasler, A., and A. Lusardi. 2017. The Gender Gap in Financial and M. Valenzuela. 2022c. “Social Media Monitoring.” Tool 3 of Literacy: A Global Perspective. Washington, DC: Global Financial “Market Monitoring for Financial Consumer Protection.” CGAP Literacy Excellence Center. https://gflec.org/wp-content/ Toolkit. Washington, DC: CGAP. https://www.cgap.org/research/ uploads/2017/07/The-Gender-Gap-in-Financial-Literacy-A-Glob- publication/market-monitoring-tool-social-media-monitoring. al-Perspective-Report.pdf. Izaguirre, J. C., M. Kaffenberger, and R. Mazer. 2018. “It’s Time to Havrylchyk, O. 2018. “Regulatory Framework for the Loan-Based Slow Digital Credit’s Growth in East Africa.” CGAP Blog, Septem- Crowdfunding Platforms.” Economics Department Working Papers ber 25, 2018. https://www.cgap.org/blog/its-time-slow-digital-cred- No. 1513. OECD, Paris. https://www.oecd.org/officialdocuments/ its-growth-east-africa. publicdisplaydocumentpdf/?cote=ECO/WKP(2018)61&docLan- Knauth, D. 2022. “Factbox: Crypto Companies Crash into Bank- guage=En. ruptcy.” Reuters, December 1, 2022. https://www.reuters.com/ Hernandez, E., C. Blackburn, A. Raman, and P. Reynolds. 2020. technology/crypto-companies-crash-into-bankruptcy-2022-12-01/. “Agent Network Journeys toward the Last Mile: A Cross-Country Medine, D., and G. Murthy. 2020. Making Data Work for the Poor: Perspective.” CGAP Focus Note. Washington, DC: CGAP. https:// New Approaches to Data Protection and Privacy. Focus Note. www.cgap.org/sites/default/files/publications/2020_12_Focus_ Washington, DC: CGAP. https://www.cgap.org/sites/default/files/ Note_Agent_Network_Journeys.pdf. publications/2020_01_Focus_Note_Making_Data_Work_for_ ID4D (Identification for Development). 2019. Identity Authentica- Poor_0.pdf. tion and Verification Fees: Overview of Current Practices. Practi- Moy, C., and J. Carlson. 2021. “Cryptocurrencies Can Enable tioner’s Note. Washington, DC: World Bank Group. https:// Financial Inclusion. Will You Participate?” World Economic Forum, documents1.worldbank.org/curated/en/945201555946417898/ June 9, 2021. https://www.weforum.org/agenda/2021/06/ pdf/Identity-Authentication-and-Verification-Fees-Overview-of-Cur- cryptocurrencies-financial-inclusion-help-shape-it/. rent-Practices.pdf. MSC (MicroSave Consulting). 2019. Making Digital Credit Truly IMF (International Monetary Fund). 2011. “Financial Sector Responsible: Insights from Analysis of Digital Credit in Kenya. Supervision: The Twin Peaks Model.” Technical Note (June 2011). MicroSave Consulting, Uttar Pradesh, India, and Nairobi, Kenya. International Monetary Fund. https://www.imf.org/en/Publications/ https://www.microsave.net/wp-content/uploads/2019/09/Digi- CR/Issues/2016/12/31/Kingdom-of-the-Netherlands-Nether- tal-Credit-Kenya-Final-report.pdf. lands-Publication-of-Financial-Sector-Assessment-Program-25088. Murthy, G., and D. Medine. 2019. “6 Data Protection Rights for IMF (International Monetary Fund). 2021. “Five Things to Know Empowering People in the Digital World.” CGAP Blog, January 30, about the Informal Economy.” IMF News, July 28, 2021. https:// 2019. https://www.cgap.org/blog/6-data-protection-rights-empow- www.imf.org/en/News/Articles/2021/07/28/na-072821-five-things- ering-people-digital-world. to-know-about-the-informal-economy#:~:text=The%20infor- mal%20economy%20is%20a,important%20part%20of%20 Rhyne, E. 2019. “Red Flags in Kenya’s Nano-Credit Market.” Center advanced%20economies. for Financial Inclusion Blog, September 25, 2019. https://www. centerforfinancialinclusion.org/red-flags-in-kenyas-nano-credit-mar- InfoDev/World Bank Group. 2015. Crowdfunding in Emerging ket. Markets: Lessons from East African Startups. Washington, DC: World Bank Group. https://openknowledge.worldbank.org/ Staschen, S., and P. Meagher. 2018. “Basic Regulatory Enablers for handle/10986/23820. Digital Financial Services.” Focus Note 109. Washington, DC: CGAP. https://www.cgap.org/sites/default/files/Focus-Note-Basic- Izaguirre, J. C., D. Dias, E. Duflos, L. Brix Newbury, O. Tomilova, Regulatory-Enablers-for-DFS-May-2018.pdf. and M. Valenzuela. 2022a. “Analysis of Complaints Data.” Tool 2 of “Market Monitoring for Financial Consumer Protection.” CGAP Staschen, S., and A. Plaitakis. 2020. “Open Banking: 7 Ways Toolkit. Washington, DC: CGAP. https://www.cgap.org/research/ Data-Sharing Can Advance Financial Inclusion.” CGAP Blog, May publication/market-monitoring-tool-analysis-complaints-data. 7, 2020. https://www.cgap.org/blog/open-banking-7-ways-data- sharing-can-advance-financial-inclusion. References  81 Totolo, E. 2018. “Kenya’s Digital Credit Revolution Five Years On.” WBG (World Bank Group). 2022. Fintech and the Future of Finance. CGAP Blog, March 15, 2018. https://www.cgap.org/blog/ken- https://www.worldbank.org/en/publication/fintech-and-the-future- yas-digital-credit-revolution-five-years. of-finance. Ul Haq, I., and H. Gradstein. 2020. Leveraging Geospatial Technol- World Bank. 2015. “Key Terms Explained,” chapter in Global ogy for Financial Inclusion: Financial Inclusion Support Framework. Financial Development Report 2015/2016: Long-Term Finance. Technical Note. Washington, DC: World Bank Group. http:// Washington, DC: World Bank. https://www.worldbank.org/en/ documents.worldbank.org/curated/en/748001606161719948/ publication/gfdr/gfdr-2016/background/credit-registry. Leveraging-Geospatial-Technology-for-Financial-Inclusion. Vidal, M. F., and A. Plaitakis. 2022. “How Can Data Sharing Support Inclusion?” CGAP Blog, July 8, 2022. https://www.cgap.org/blog/ how-can-data-sharing-support-inclusion. WBG (World Bank Group). 2017. Good Practices for Financial Consumer Protection: 2017 Edition. Washington, DC: World Bank Group. https://openknowledge.worldbank.org/entities/publication/ ff9c9482-5ffe-5c98-b6f3-5b97eeab5ed1. WBG (World Bank Group). 2018. Developing and Operationalizing a National Financial Inclusion Strategy. Toolkit. Washington, DC: World Bank Group. https://openknowledge.worldbank.org/ bitstream/handle/10986/29953/NFIS%20Toolkit.pdf?se- quence=5&isAllowed=y. WBG (World Bank Group). 2019. Complaints Handling within Financial Service Providers: Principles, Practices, and Regulatory Approaches. Technical Note. Washington, DC: World Bank Group. https://documents1.worldbank.org/curated/ en/773561567617284450/pdf/Complaints-Handling-within-Finan- cial-Service-Providers-Principles-Practices-and-Regulatory-Ap- proaches-Technical-Note.pdf. WBG (World Bank Group). 2021a. Building a Financial Education Approach: A Starting Point for Financial Sector Authorities. Technical Note. Washington, DC: World Bank Group. https:// documents1.worldbank.org/curated/en/883771629960132032/ pdf/Building-a-Financial-Education-Approach-A-Start- ing-Point-for-Financial-Sector-Authorities-Financial-Inclusion-Sup- port-Framework-Technical-Note.pdf. WBG (World Bank Group). 2021b. Consumer Risks in Fintech: New Manifestations of Consumer Risks and Emerging Regulatory Approaches. Policy Research Paper. Washington, DC: World Bank Group. https://documents1.worldbank.org/curated/ en/515771621921739154/pdf/Consumer-Risks-in-Fin- tech-New-Manifestations-of-Consumer-Risks-and-Emerging-Reg- ulatory-Approaches-Policy-Research-Paper.pdf. WBG (World Bank Group). 2021c. The Next Wave of Suptech Innovation: Suptech Solutions for Market Conduct Supervision. Technical Note. Washington, DC: World Bank Group. https:// documents1.worldbank.org/curated/en/735871616428497205/ pdf/The-Next-Wave-of-Suptech-Innovation-Suptech-Solu- tions-for-Market-Conduct-Supervision.pdf. 8 APPENDICES APPENDIX A: LIST OF RESPONDING JURISDICTIONS JURISDICTION COORDINATING RESPONDENT REGION INCOME GROUP Albania Bank of Albania Europe and Central Asia Upper middle income Angola Banco Nacional de Angola Sub-Saharan Africa Upper middle income Argentina Banco Central de la República Argentina Latin America and Caribbean Upper middle income Armenia Central Bank of Armenia Europe and Central Asia Lower middle income Australia Australian Securities and Investments Commission East Asia and Pacific High income Austria Financial Market Authority Europe and Central Asia High income Azerbaijan Central Bank of the Republic of Azerbaijan Europe and Central Asia Upper middle income Bahamas, The Central Bank of The Bahamas Latin America and Caribbean High income Bahrain Central Bank of Bahrain Middle East and North Africa High income Bangladesh Bangladesh Bank South Asia Lower middle income Barbados Central Bank of Barbados Latin America and Caribbean High income Belarus National Bank of the Republic of Belarus Europe and Central Asia Upper middle income Belgium National Bank of Belgium Europe and Central Asia High income Belize Central Bank of Belize Latin America and Caribbean Upper middle income Bolivia Autoridad de Supervisión del Sistema Financiero Latin America and Caribbean Lower middle income Bosnia and Herzegovina Central Bank of Bosnia and Herzegovina Europe and Central Asia Upper middle income Botswana Bank of Botswana Sub-Saharan Africa Upper middle income Brazil Banco Central do Brasil Latin America and Caribbean Upper middle income British Virgin Islands Financial Services Commission Latin America and Caribbean High income Brunei Darussalam Brunei Darussalam Central Bank East Asia and Pacific High income Bulgaria Bulgarian National Bank Europe and Central Asia Upper middle income Cambodia National Bank of Cambodia East Asia and Pacific Lower middle income Canada Financial Consumer Agency of Canada North America High income Central and East African Banque des États de l’Afrique Centrale Sub-Saharan Africa * Monetary Community Chile Comisión para el Mercado Financiero Latin America and Caribbean High income Colombia Superintendencia Financiera de Colombia Latin America and Caribbean Upper middle income Costa Rica Superintendencia General de Entidades Financieras Latin America and Caribbean Upper middle income Croatia Croatian National Bank Europe and Central Asia High income Appendices  83 Denmark Danmarks Nationalbank Europe and Central Asia High income Dominican Republic Central Bank of the Dominican Republic Latin America and Caribbean Upper middle income Eastern Caribbean Eastern Caribbean Central Bank Latin America and Caribbean * Ecuador Superintendencia de Bancos Latin America and Caribbean Upper middle income Egypt, Arab Rep. Central Bank of Egypt Middle East and North Africa Lower middle income El Salvador Banco Central de Reserva Latin America and Caribbean Lower middle income Estonia Estonian Financial Supervision and Resolution Europe and Central Asia High income Authority Eswatini Central Bank of Eswatini Sub-Saharan Africa Lower middle income Ethiopia National Bank of Ethiopia Sub-Saharan Africa Low income Fiji Reserve Bank of Fiji East Asia and Pacific Upper middle income Finland Finnish Financial Supervisory Authority Europe and Central Asia High income France Autorité de Contrôle Prudentiel et de Résolution, Europe and Central Asia High income Banque de France Georgia National Bank of Georgia Europe and Central Asia Upper middle income Germany Deutsche Bundesbank Europe and Central Asia High income Ghana Bank of Ghana Sub-Saharan Africa Lower middle income Greece Bank of Greece Europe and Central Asia High income Guatemala Superintendencia de Bancos Latin America and Caribbean Lower middle income Guyana Bank of Guyana Latin America and Caribbean Upper middle income Haiti Banque de la République d’Haïti Latin America and Caribbean Low income Honduras Comisión Nacional de Bancos y Seguros Latin America and Caribbean Lower middle income Hungary Vilmos Freisleben Europe and Central Asia High income India Reserve Bank of India South Asia Lower middle income Indonesia Bank Indonesia East Asia and Pacific Lower middle income Ireland Central Bank of Ireland Europe and Central Asia High income Isle of Man Isle of Man Financial Services Authority Europe and Central Asia High income Israel Bank of Israel Middle East and North Africa High income Italy Banca d’Italia Europe and Central Asia High income Jamaica Bank of Jamaica Latin America and Caribbean Upper middle income Japan Financial Services Agency East Asia and Pacific High income Jordan Central Bank of Jordan Middle East and North Africa Upper middle income Kazakhstan Agency of the Republic of Kazakhstan for Regula- Europe and Central Asia Upper middle income tion and Development of Financial Market Kenya Central Bank of Kenya Sub-Saharan Africa Lower middle income Korea, Rep. Financial Supervisory Service East Asia and Pacific High income Kuwait Central Bank of Kuwait Middle East and North Africa High income Kyrgyz Republic National Bank of the Kyrgyz Republic Europe and Central Asia Lower middle income Lao PDR Bank of the Lao PDR East Asia and Pacific Lower middle income Latvia Bank of Latvia Europe and Central Asia High income Lebanon Banque du Liban Middle East and North Africa Upper middle income Lesotho Central Bank of Lesotho Sub-Saharan Africa Lower middle income Libya Central Bank of Libya Middle East and North Africa Upper middle income Liechtenstein Financial Market Authority Europe and Central Asia High income Lithuania Bank of Lithuania Europe and Central Asia High income Malaysia Bank Negara Malaysia East Asia and Pacific Upper middle income Maldives Maldives Monetary Authority South Asia Upper middle income Malta Ministry for Finance and Employment Middle East and North Africa High income Mauritius Bank of Mauritius Sub-Saharan Africa Upper middle income 84   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report Mexico National Banking and Securities Commission Latin America and Caribbean Upper middle income Moldova National Bank of Moldova Europe and Central Asia Lower middle income Morocco Ibtissam El Anzaoui Middle East and North Africa Lower middle income Mozambique Banco de Moçambique Sub-Saharan Africa Low income Namibia Financial Intelligence Centre Sub-Saharan Africa Upper middle income Netherlands De Nederlandsche Bank Europe and Central Asia High income Nicaragua Comisión Nacional de Microfinanzas Latin America and Caribbean Lower middle income Nigeria Central Bank of Nigeria Sub-Saharan Africa Lower middle income North Macedonia National Bank of the Republic of North Macedonia Europe and Central Asia Upper middle income Pakistan State Bank of Pakistan South Asia Lower middle income Panama Superintendencia de Bancos Latin America and Caribbean Upper middle income Paraguay Banco Central del Paraguay Latin America and Caribbean Upper middle income Peru Superintendencia de Banca, Seguros y AFP Latin America and Caribbean Upper middle income Philippines Bangko Sentral ng Pilipinas East Asia and Pacific Lower middle income Poland National Bank of Poland Europe and Central Asia High income Portugal Banco de Portugal Europe and Central Asia High income Romania National Bank of Romania Europe and Central Asia Upper middle income Russian Federation Bank of Russia Europe and Central Asia Upper middle income Rwanda National Bank of Rwanda Sub-Saharan Africa Low income San Marino Central Bank of San Marino Europe and Central Asia High income São Tomé and Príncipe Banco Central de S. Tomé e Príncipe Sub-Saharan Africa Lower middle income Saudi Arabia Saudi Arabian Monetary Authority Middle East and North Africa High income Serbia National Bank of Serbia Europe and Central Asia Upper middle income Seychelles Central Bank of Seychelles Sub-Saharan Africa High income Slovak Republic National Bank of Slovakia Europe and Central Asia High income South Africa South African Reserve Bank Sub-Saharan Africa Upper middle income Spain Bank of Spain Europe and Central Asia High income Sri Lanka Central Bank of Sri Lanka South Asia Lower middle income Sudan Central Bank of Sudan Sub-Saharan Africa Lower middle income Suriname Centrale Bank van Suriname Latin America and Caribbean Upper middle income Sweden Sveriges Riksbank Europe and Central Asia High income Tanzania Bank of Tanzania Sub-Saharan Africa Low income Thailand Bank of Thailand East Asia and Pacific Upper middle income Tunisia Central Bank of Tunisia Middle East and North Africa Lower middle income Turkey Central Bank of the Republic of Turkey Europe and Central Asia Upper middle income Ukraine National Bank of Ukraine Europe and Central Asia Lower middle income United Arab Emirates Central Bank of the UAE Middle East and North Africa High income United Kingdom Financial Conduct Authority Europe and Central Asia High income United States Treasury Department North America High income Uruguay Banco Central del Uruguay Latin America and Caribbean High income Uzbekistan Central Bank of Uzbekistan Europe and Central Asia Lower middle income Vietnam State Bank of Vietnam East Asia and Pacific Lower middle income West Bank and Gaza Palestine Monetary Authority Middle East and North Africa Lower middle income Zambia Bank of Zambia Sub-Saharan Africa Lower middle income Note: Multi-economy jurisdictions were not categorized by income level, as the economies within these jurisdictions correspond to a range of income categories. Appendices  85 APPENDIX B: OVERLAPPING JURISDICTIONS UNDER THE TIME SERIES ANALYSIS OVERLAPPING JURISDICTIONS OVERLAPPING JURISDICTIONS 2013, 2017, AND 2022 (SET OF 75) 2017 AND 2022 (SET OF 95) Albania Japan Albania Honduras Serbia Argentina Kazakhstan Angola Hungary Seychelles Armenia Kenya Argentina India Slovak Republic Australia Korea, Rep. Armenia Indonesia South Africa Austria Kyrgyz Republic Australia Israel Spain Azerbaijan Latvia Austria Italy Sri Lanka Bangladesh Lebanon Azerbaijan Jamaica Sudan Belgium Lithuania Bahamas, The Japan Sweden Bolivia Malaysia Bahrain Jordan Thailand Bosnia and Herzegovina Mauritius Bangladesh Kazakhstan Tunisia Botswana Mexico Belgium Kenya Turkey Brazil Moldova Bolivia Korea, Rep. Ukraine Bulgaria Morocco Bosnia and Herzegovina Kuwait United Kingdom Canada Namibia Botswana Kyrgyz Republic Uruguay Chile Netherlands Brazil Latvia Vietnam Colombia Nigeria Bulgaria Lebanon West Bank and Gaza Costa Rica North Macedonia Cambodia Lesotho Zambia Croatia Pakistan Canada Lithuania Denmark Panama Chile Malaysia Dominican Republic Paraguay Colombia Maldives Ecuador Peru Costa Rica Malta El Salvador Philippines Croatia Mauritius Estonia Poland Denmark Mexico Eswatini Portugal Dominican Republic Moldova Finland Russian Federation Ecuador Morocco France Saudi Arabia Egypt, Arab Rep. Namibia Georgia Serbia El Salvador Netherlands Germany Slovak Republic Estonia Nigeria Greece South Africa Eswatini North Macedonia Guatemala Spain Fiji Pakistan Guyana Sri Lanka Finland Panama Honduras Sudan France Paraguay Hungary Thailand Georgia Peru Indonesia Turkey Germany Philippines Israel Ukraine Greece Poland Italy United Kingdom Guatemala Portugal Jamaica Uruguay Guyana Russian Federation Japan Zambia Haiti Rwanda Kazakhstan Honduras San Marino Kenya Hungary Saudi Arabia 86   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report APPENDIX C: INSTITUTIONAL ARRANGEMENT MODELS FOR FINANCIAL CONSUMER PROTECTION FINANCIAL SECTOR IS PRUDENTIAL AND FCP SUPERVISION ROLE OF GENERAL CONSUMER SUPERVISED BY: ARE INSTITUTIONALLY: PROTECTION AUTHORITY: SINGLE OR INTEGRATED INSTITUTIONAL A SINGLE MULTIPLE MULTIPLE OR ARRANGEMENT MODEL AUTHORITY AUTHORITIES AUTHORITIES INTEGRATED SEPARATED SEPARATED NONE SHARED LEAD Integrated X X X single agency Integrated X X X multiple agency Dedicated market- X X X conduct authority General consumer X X X protection agency APPENDIX D: DATA BY REGION AND INCOME GROUP Table D.1: Types of Unregulated CCPs in a Jurisdiction Percentage of responding jurisdiction with unregulated CCPs types, by income and regional group UPPER- LOWER- HIGH MIDDLE MIDDLE LOW TYPE OF CCPs NOT SUPERVISED ALL INCOME INCOME INCOME INCOME EAP ECA LAC MENA NA SAR SSA Payday lenders 21% 5% 24% 39% 20% 17% 8% 27% 31% 0% 60% 26% Finance companies 11% 5% 18% 10% 20% 17% 8% 27% 31% 0% 60% 26% Microcredit companies 17% 49% 29% 23% 0% 8% 3% 46% 8% 0% 20% 21% Digital lenders 20% 7% 26% 29% 20% 8% 10% 46% 15% 0% 40% 11% Money lenders 30% 10% 34% 52% 40% 17% 10% 69% 15% 0% 80% 26% Digital credit provided via e-wallets 12% 7% 6% 18% 40% 0% 8% 31% 0% 0% 0% 16% No. of responding jurisdictions 117 41 38 31 5 12 40 26 13 2 5 19 Note: Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa. Appendices  87 Table D.2: Practices Pertaining to Industry Consultations across Jurisdictions, 2022 Percentage of responding jurisdictions with an industry consultation process in place along with the frequency of such consultations UPPER- LOWER- FORMAL PROCESS TO HIGH MIDDLE MIDDLE LOW ÆCONSULT WITH INDUSTRY ALL INCOME INCOME INCOME INCOME EAP ECA LAC MENA NA SAR SSA Yes 91% 36% 31% 28% 5% 12% 33% 24% 10% 2% 4% 16% No. of responding jurisdictions 112 39 35 31 5 12 39 26 11 2 5 16 FREQUENCY OF CONSULTATION Ad hoc 89% 38% 29% 29% 4% 11% 37% 23% 9% 2% 3% 14% Monthly 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Quarterly 9% 14% 43% 29% 14% 22% 0% 33% 11% 0% 11% 22% Annual 2% 0% 100% 0% 0% 0% 0% 0% 50% 0% 0% 50% No. of responding jurisdictions 102 36 31 28 5 12 34 24 10 2 4 16 Note: Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa. Table D.3: Practices Pertaining to Consultation with Consumers across Jurisdictions, 2022 Percentage of responding jurisdictions with a consumer consultation process in place along with the frequency of such consultations UPPER- LOWER- FORMAL PROCESS TO HIGH MIDDLE MIDDLE LOW CONSULT WITH CONSUMERS ALL INCOME INCOME INCOME INCOME EAP ECA LAC MENA NA SAR SSA Yes 57% 41% 23% 30% 7% 13% 34% 21% 8% 3% 2% 19% No. of responding jurisdictions 109 39 14 18 4 11 37 26 11 2 5 17 Frequency of consultation Ad hoc 95% 40% 23% 30% 7% 14% 35% 21% 7% 3% 0% 21% Monthly 2% 100% 0% 0% 0% 0% 0% 0% 100% 0% 0% 0% Quarterly 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Annual 3% 50% 50% 0% 0% 0% 50% 50% 0% 0% 0% 0% No. of responding jurisdictions 61 25 14 17 4 8 21 13 5 2 0 12 Note: Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa. 88   The Global State of Financial Inclusion and Consumer Protection  |  2022 Report Table D.4: Strategies to Promote Financial Inclusion Percentage of responding jurisdictions with national strategy in place or under development, by income and regional group NO. OF UPPER- LOWER- RESPOND- HIGH MIDDLE MIDDLE LOW ING JURIS- NATIONAL STRATEGY ALL INCOME INCOME INCOME INCOME EAP ECA LAC MENA NA SAR SSA DICTIONS NFIS In place 39% 10% 43% 71% 60% 67% 19% 52% 25% 0% 80% 47% 112 Under 17% 5% 23% 23% 40% 8% 11% 20% 25% 0% 20% 26% development National financial In place 38% 34% 34% 45% 60% 67% 34% 20% 31% 0% 20% 67% 112 sector strategy with Under 4% 0% 11% 0% 40% 0% 0% 8% 8% 0% 0% 11% a financial inclusion development component National develop- In place 32% 15% 40% 42% 60% 50% 21% 20% 33% 0% 40% 61% 113 ment strategy with Under 5% 5% 6% 6% 0% 0% 5% 12% 0% 0% 0% 6% a financial inclusion development component National microfinance In place 16% 5% 3% 43% 50% 36% 3% 4% 39% 0% 0% 41% 110 strategy Under 6% 8% 11% 0% 0% 9% 8% 4% 0% 0% 0% 12% development National financial In place 56% 68% 56% 39% 80% 50% 71% 44% 38% 100% 40% 58% 114 capability, literacy, or Under 13% 5% 14% 23% 20% 17% 8% 20% 15% 0% 20% 11% education strategy development Digital develop- In place 26% 37% 13% 27% 40% 50% 21% 17% 33% 0% 20% 35% 106 ment strategy with Under 17% 5% 31% 17% 0% 25% 12% 25% 17% 0% 29% 12% a financial inclusion development component DFS or fintech In place 33% 43% 18% 44% 0% 70% 32% 25% 42% 0% 0% 29% 103 strategy Under 21% 9% 26% 15% 25% 20% 24% 13% 42% 0% 0% 24% development Note: The two multi-jurisdiction respondents (the Central African Economic and Monetary Community and Eastern Caribbean Central Bank) are not included in income group classifications. High-income jurisdictions are not included in regional classifications. Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa. Table D.5: Fintech Products for Financial Inclusion, 2022 Percentage of responding jurisdictions reporting having each fintech innovation UPPER- LOWER- HIGH MIDDLE MIDDLE LOW NO. OF RESPOND- ALL INCOME INCOME INCOME INCOME EAP ECA LAC MENA NA SAR SSA ING JURISDICTIONS Crypto-assets: issuance, 56% 79% 52% 30% 0% 89% 71% 59% 22% 100% 0% 19% 95 exchange and custody Peer-to-peer lending 56% 58% 46% 27% 0% 75% 50% 41% 33% 100% 0% 27% 85 Digital credit 63% 68% 48% 74% 50% 78% 66% 59% 67% 100% 0% 53% 88 Crowdfunding 56% 71% 62% 32% 0% 89% 63% 52% 44% 100% 0% 33% 90 Investment products 42% 61% 32% 33% 0% 75% 54% 30% 33% 100% 0% 21% 83 with robo-advisers Note: Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa. Appendices  89 Table D.6: Requirement to Offer Basic Accounts Percentage of responding jurisdictions requiring financial institutions to offer basic accounts, by income level and regional group UPPER- LOWER- INSTITUTIONS REQUIRED HIGH MIDDLE MIDDLE LOW TO OFFER BASIC ACCOUNTS ALL INCOME INCOME INCOME INCOME EAP ECA LAC MENA NA SAR SSA All deposit-taking institutions are 48% 49% 48% 44% 50% 40% 41% 43% 67% 0% 50% 64% required to offer a basic account Selected deposit-taking institutions 16% 14% 11% 26% 0% 10% 19% 14% 8% 0% 25% 21% are required to offer a basic account Other 36% 37% 41% 30% 50% 50% 41% 43% 25% 100% 25% 14% No. of responding jurisdictions 94 35 4 27 27 10 32 21 12 1 4 14 Note: Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa. Table D.7: Eligibility Criteria for Basic Accounts Percentage of responding jurisdictions with specific eligibility criteria for basic accounts, by income level and regional group UPPER- LOWER- BASIC ACCOUNT HIGH MIDDLE MIDDLE LOW ELIGIBILITY CRITERIA ALL INCOME INCOME INCOME INCOME EAP ECA LAC MENA NA SAR SSA The basic account is only available to customers who 22% 17% 31% 23% 0% 40% 13% 9% 27% 0% 50% 38% meet specific eligibility criteria, such as low-income levels, pension recipients, welfare beneficiaries, etc. Any customer can open a basic account regardless of 65% 67% 62% 65% 75% 60% 68% 82% 55% 0% 50% 54% their income level or participation in government programs Other (explain) 13% 17% 8% 12% 25% 0% 19% 9% 18% 100% 0% 8% No. of responding jurisdictions 92 36 26 26 4 10 31 22 11 1 4 13 Note: Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa. Table D.8: Simplifications or Exemptions to CDD Requirements Percentage of responding jurisdictions reporting simplification or exemption to CDD requirement, by income and regional group UPPER- LOWER- SIMPLIFIED CDD HIGH MIDDLE MIDDLE LOW MEASURE ALLOWED FOR ACCOUNT OPENING ALL INCOME INCOME INCOME INCOME EAP ECA LAC MENA NA SAR SSA Acceptance of non-standard ID data or documents in 41% 38% 50% 35% 67% 21% 28% 17% 10% 3% 3% 17% lower risk cases Allowing for delayed authentication 57% 80% 50% 35% 100% 13% 38% 8% 15% 3% 3% 23% Some exemptions on documentation requirements 67% 71% 59% 75% 67% 9% 34% 26% 9% 2% 6% 15% The use of existing mobile phone registration details to 26% 4% 32% 30% 100% 17% 6% 22% 6% 0% 0% 50% automatically open a new mobile money account at the same MNO No. of responding jurisdictions 70 24 22 20 3 7 23 16 7 1 3 13 Note: Regions: EAP = East Asia and Pacific, ECA = Europe and Central Asia, LAC = Latin America and Caribbean, MENA = Middle East and North Africa, NA = North America, SAR = South Asia, SSA = Sub-Saharan Africa.