Building digital and financial world consumers can trust

By: CUTS Ghana

It is an undeniable fact that increased regulatory reforms, more open global markets, the advancement in new technologies, and growth of services have brought far-reaching benefits to consumers. However, these recent developments have bestowed a lot of challenges to consumers.

The challenges stem from the fact that the current marketplace suffers from information asymmetry and preponderance towards quantity of information over quality. Existence of broader range of increasingly complex products exacerbates the situation. Information provided is misleading, either incomplete or too voluminous.

Additionally, there is remarkable differentiation among similar products and services; hence consumers have more difficulty in comparing and evaluating the value of the available products. The challenges are compounded by the fact that although modern consumers are relatively more educated, many lack the quantitative and literacy skills necessary to cope with more complex, information-intense marketplaces. More importantly, the technological advancements are making products and services accessible to hitherto excluded like never before, while also exposing them to related risks and uncertainties.

As identified in the realm of Behavioural Economics, the manner in which information is given and the way that choices are structured can greatly affect marketplace choices, occasionally in ways that are of disadvantageous to the consumer.

The Digital World

Undoubtedly, the digital world is improving the lives of consumers globally. For example, the advent of internet has improved communication, access to information and greater choice and convenience. However, there are several crucial consumer welfare issues that need to be addressed. Some of these are: how to create access to the internet for many consumers who are not connected, how to improve the quality of services, which online services and products consumers can trust and what happens to the data they share (TACD, 2008). There are also issues with respect to post-sales consumer engagement and grievance redress. To tackle the aforesaid issues therefore, it is incumbent on every government and civil society organisation to critically take the following issues into consideration, though not exhaustive.

In the first place, regulators must examine the level of competition in broadband internet access, and to make sure that users have continued access to neutral networks. Regulatory authorities must ensure privacy of consumers’ data and prevent its violation. That is, the anonymity of users of digital media must be protected. Going forward, businesses should guarantee that data about consumers is collected, processed and used only with their informed and express consent. Governments should make sure that competition law is strictly observed by taking into consideration the upward surge in vertical integration in the digital world. Relevant information must be disseminated to consumers to enable informed decision making and transparency and accountability in service delivery needs to be ensured.

The Financial World

Like the digital world, the advancement in financial products and services, payment systems employed in the deposit, lending and borrowing of funds has also provided consumers variety of options that they can choose from. These innovations have also not happened without their own challenges to consumers. Among some of the challenges to consumers are:

Transparency: The pricing of many financial products is not clear for the normal consumer. The lack of transparency stems from the fact that the “price” may include fees for research or advice, rather than reflect the cost of the product alone. Also, a lot of financial products are complex and thus result in unfair pricing structures. Complex disclosures: Information given to retail consumers about product features and prices are often imperfect. However, the information revealed may not always allow easy for comprehension and comparisons. Hence, consumers find it difficult to process huge complex information. Product complexity: Financial products are often complex. They often have fixed contingent claims that result in a nonlinear pay-out dynamics.

Also, variations in tax treatment for alternatively similar products can exacerbate consumers’ perceptions of complexity. Unknown quality: Despite the fact that financial results might have been achieved, the problem of information asymmetry in assessing financial services may still exist. Most often than not, it is difficult to establish conclusively whether an unfavourable result emanated from the incompetency or disloyalty of the service provider, or clearly a case of bad luck, although good service was competently and honestly provided.

Consumers often are unable to contact service providers or use formal mechanisms of grievance redress for issues like misselling, overcharging or sub-optimal experience with relevant product and service. Among these also requires appropriate product design and delivery, prevention of over-indebtedness, responsible pricing and the privacy of client data should be paramount in the delivery of financial services.

To address the said problems, governments and regulatory authorities should make sure that stiffer penalties are employed to address mis-selling, fraud or other firm misconduct. Also, better governance and internal controls should be instituted to ensure proper controls over new product development and distribution. Efficient grievance redress and customer engagement mechanisms are must to establish trust between consumers and service providers.

Again, competition law and policy should be intensified to ensure entry barriers remain low to enable more efficient providers to have access to the market, and non-performers have no option but to exit. Additionally, there is the need for competition policy to tackle market structure failings; whilst at the same Consumer Protection Law protects the rights of consumers in the market.

World Consumer Rights Day

World Consumer Rights Day (WCRD) is observed every year on March 15. The WCRD was first celebrated in March 1962 and became an important annual occasion for mobilising citizen action and solidarity within the international consumer movement. The day is an opportunity for promoting the basic rights of all consumers, demanding that those rights are respected and protected and protesting about the market abuses and social injustices which undermine them.

Conclusion

As a consumer organisation, CUTS Ghana is committed to promote ‘consumer sovereignty’ and it is our belief that the passage of Consumer Protection Law will go in a long way to protect consumers from the usurpation of their rights. Ghana’s attempt to get a Consumer Protection Law started before google became a verb. The progress has been slow. We would like to use this this occasion to remind the Ministry of Trade and Industry (MOTI) and the Attorney General’s Department to get the law drafting completed.

CUTS Ghana is a research and advocacy policy think tank which works in the areas of consumer protection and education, economic regulation, trade and development, regional integration, competition policy and law, etc. CUTS can be contacted through | Office: +233-30-224-5652 | Email: [email protected], Website: http://www.cuts-international.org/ARC/accra