Protecting Branchless Banking Consumers: Policy Objectives and Regulatory Options

Fostering consumer protection in branchless banking
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This Focus Note discusses regulation and consumer protection in branchless banking, drawing on CGAP’s ongoing work in this area.

As with conventionally delivered financial services, consumers using branchless banking services face risks and challenges as well as benefits. Regulation should obey the principles of proportionality and effectiveness. Based on insights gained from diverse country contexts, the note identifies seven priority policy objectives to guide consumer protection regulation in transformational branchless banking. These include:

  • Protecting client funds held as electronically stored value;
  • Ensuring safety and reliability of services;
  • Reducing opportunities for agent fraud and other harmful conduct;
  • Ensuring clear and effective disclosure;
  • Protecting clients’ personal information;
  • Ensuring clients have knowledge and access to effective redress and complaint procedures;
  • Keeping providers liable for agents’ compliance with regulation.

The note calls for a balance between allowing innovation that increases financial access and ensuring a minimum level of consumer protection. It identifies one overarching policy objective, which is to hold providers liable for compliance with applicable regulations when using agents.