Page 55 - ITU-T Focus Group Digital Financial Services – Consumer Experience and Protection

ITU-T Focus Group Digital Financial Services
Consumer Experience and Protection

Executive summary

The success of Digital Financial Services (DFS) in developing countries and its contribution to increasing financial
access to previously unserved and underserved populations is indisputable. Even though the exponential
growth of DFS is praiseworthy, it has caused a number of spill-over effects, some of which are not so laudable.
In this regard, one key area that is worthy of examination relates to the consumer experience with user
agreements. User agreements are standard form contracts which spell out the terms and conditions of use,
and quite a few are unduly burdensome for consumers. Others may actually cause direct harm to consumers.

This report explains the findings from an analysis of DFS user agreements in nine African countries and attempts
to understand the overall consumer experience and whether or not there is a disconnect between contract
provisions and the legal and regulatory provisions governing DFS. It highlights key findings, and makes a number
of recommendations for action by the appropriate regulator in the various markets examined. Countries need
to take these considerations into account as they continue to nurture their DFS markets so as to safeguard
customers from harmful practices and ensure trust in the market.

The summary of findings below indicates that consumers face a number of challenges as they use DFS, including:
i. Lengthy contracts: Some contracts run quite long, which discourages consumers from reading them.
Findings from behavioural science further support this conclusion. Consequently, this throws doubt
as to whether there is truly a meeting of the minds when consumers enter into user agreements with
providers.
ii. Fees and charges associated with transactions, including for money transfers, bill payments, interest on
loans, and USSD charges for transactions are not always stated in the agreements. Thus, consumers may
not be aware of the cost of services prior to entering these binding arrangements.
iii. Language barriers: Contracts are predominantly in English, which is not spoken by a large number of the
populations at issue. Furthermore, these contracts often use complex legal language and consequently
even those consumers who are fluent in English may still fail to understand the true implications of the
provisions.
iv. Providers stipulate a number of obligations towards customers in these agreements. Areas such as fraud
and funds protection are of concern. Of the agreements reviewed, only 50 per cent of agreements
outlined specific obligations related to fraud and funds protection. Moreover, the customer must notify
the provider as a pre-condition for providers to address incidences of fraud, when consumers may not
be in the best position to identify a fraud.

v. Over 80 per cent of contracts contain clauses permitting providers to share information with third
parties, such as credit reference bureaus, provider agents and subsidiaries, and also “for reasonable
commercial purposes related to the provision of services”. This is quite vague and may give providers
overbroad license to share consumer data, which raises privacy concerns. Management of privacy and
data protection is further complicated by the lack of specific data protection legislation in the jurisdictions
reviewed. Consumers have to rely on provisions contained in various pieces of legislation that do not
comprehensively protect them.
vi. Half of the contracts included clauses requiring consumers to indemnity providers for legal fees incurred
in pursuing a legal matter related to their offer of service to the consumer. Such clauses could result in
customers avoiding pursuing redress, even where they have a valid complaint, for fear that they may
accrue legal fees that they cannot afford.
vii. Clauses governing a change of terms and conditions by providers can be problematic, such as those
that result in customers being legally required to accept terms and conditions that are retroactively
introduced, whether they have read and agreed to these new terms or not.
The contracts reviewed provide a useful snapshot of practices in the area of DFS user agreements and it is
possible that the findings may not apply across the board in the various jurisdictions. However, regulators
and policy makers would do well to carry out a more detailed analysis, looking at a greater number of
contracts and potentially conducting consumer surveys in order to establish whether the issues highlighted

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