From FfD4 commitments on digital finance to concrete policy action

Image of the Square in Seville, “4th International Conference on Financing for Development 30 June–3 July 2025 Seville, Spain”

Image by Gerhard Bögner on Pixabay

The Compromiso de Sevilla, the outcome document of the 4th Financing for Development Conference (FfD4) highlights the importance of digital technologies for financial inclusion. It outlines three central insights – concerning financial inclusion, consumer protection and regulations, and competition rules – that provide general guidance for policy-makers with regard to digital finance. These considerations point in the right direction as they adequately reflect the fine line between maximising benefits from access to digital financial services (DFS) and mitigating negative, unintended consequences. However, they are too abstract to serve as a blueprint for governments and for regulatory and supervisory authorities on how to navigate the complexities of digital finance. This blog post aspires to translate the general commitments of FfD4 into concrete measures and policies that foster the potential of DFS for financial inclusion, address challenges for consumers, and deal with platformisation and monopolies.

How to deliver on the promise of financial inclusion

First, the FfD4 outcome document emphasises that digital finance holds great potential for expanding access to financial products and services – especially for women, the youth, rural communities, refugees and other marginalised or vulnerable groups. While the potential is undeniable, even in DFS frontrunner countries like Kenya, financial inclusion is still substantially lower among females, rural communities, and young (18-25 years) and older people (above 55 years). To unlock the potential of DFS, governments need to set incentives for the construction of the relevant infrastructure such as cell phone coverage and mobile money agents in commercially less attractive areas. Additionally, it requires tailored financial products for disadvantaged groups as well as more flexible on-boarding. For instance, tiered or simplified Know Your Customer (KYC) requirements, which reflect the realities of disadvantaged groups who often lack the formal identification required.

How to address challenges for consumers

Second, the outcome document acknowledges that access to DFS alone is insufficient and thus calls for complementary efforts with regard to financial literacy, consumer protection and regulations to ensure consumers’ financial health. The need for such complementary measures can, for instance, be observed in Kenya: Regulators employed a ‘wait-and-see’ strategy, low financial literacy (42.1 % in 2024 according to the FinAccess Household Survey) made large segments of the society vulnerable to risks associated with digital financial products and exploitative financialisation. Consequently, substantial shares of DFS consumers have experienced negative implications from DFS such as predatory lending (excessive interest rates, hidden and high costs), over-indebtedness (multiple borrowing and debt cycles), defaults and negative listings at credit bureaus, violations of privacy and data protection, as well as fraud and scams.

The most important policy response are reforms that introduce comprehensive licensing, regulation and supervision that cover all DFS providers. This enables regulators to ban predatory lending and aggressive debt collection practices, and to extend existing laws on consumer and data protection to digital finance. Importantly, the respective regulatory and supervisory authorities need to have sufficient capacities to enforce such regulations. Addressing issues around increased defaults and negative listings requires measures both on the supply side and on the demand side. Supply side policies could include obligation of DFS providers to report to credit bureaus and registries only for loan defaults above a minimum threshold and obligation of DFS providers to inform defaulting clients to allow them to appeal. On the demand side, governments should implement digital and financial literacy campaigns that are designed to reach different age groups and geographical regions – overcoming barriers due to language and/or remoteness. Such efforts can use AI translations, infographic videos and similar technical solutions integrated into DFS platforms. This could be supported by bilateral and multilateral development cooperation. Younger generations should already be trained in schools by including digital competencies and financial literacy into the educational curriculums.

How to deal with platformisation and (quasi-)monopolies

Third, the FfD4 outcome document describes prudential competition rules as the cornerstone for a fair and inclusive environment that is conducive to continued innovation and technological development in the field of digital finance. The Kenyan example underlines that due to network effects, informational advantages and further market specificities, mobile money providers – in Kenya: Safaricom – tend to grow into (quasi-)monopolists. This undermines competition, comes at the expense of consumer-friendly innovations like interoperability between different providers – with regard to both platforms and mobile money agents – and keeps prices unnecessarily high. Such patterns extend beyond mobile money, since Safaricom leverages on informational advantages – e.g., with regard to various transaction data – that puts them into an advantageous position to offer other DFS that build on the mobile money rails, which is sometimes described as platformisation. Healthy competition can only be achieved by levelling the playing field – for instance, through agent interoperability and separation of mobile money platforms from mobile network operators. The latter diminishes the threat of excessive market power through vertical integration of diverse DFS by one single player. The former, i.e. agent interoperability, is a necessary condition for competition as it reduces the entry costs (investment in agent network) to the mobile money market, which may otherwise be prohibitively high (deterred entry). As the example of Tanzania shows, such pro-competitive regulation can lead to level playing fields and oligopolistic competition.

The Kenyan case shows both the unmatched potential of digital finance to foster financial inclusion, but it also shows the need for financial literacy, consumer protection, regulations and competition rules to make digital finance beneficial for the average citizen and not just profitable for fintechs, mobile network operators and the finance industry. It is a valuable contribution of FfD4 to make these general insights known throughout the international arena. Hence, FfD4 should serve as a kick-off for a deeper exchange of knowledge and expertise on how to harness digital finance for inclusive and pro-poor socio-economic development.

This piece builds on the IDOS policy brief “How to make mobile money and digital financial services work for consumers: lessons from Kenya”.

This blog post is part of a series on the 4th FfD conference by the German Institute of Development and Sustainability (IDOS). Please also read the previous contributions to this series: