Digital financial inclusion or expanding financial abuse online?
There is an emerging trend in the financial services sector to move towards all things digital. Physical shop fronts are being closed, while exciting, interactive and Artificial Intelligence backed online shops are being set up everday. Financial Technology (FinTech) is the new buzzard in modern financial marketplace and its easy to get swept up with features such as mobile lending, digital lending and credit, big data and the like. Digital financial Inclusion is one of the reasons FinTechs are popular with international organisations such United Nations as these technologies can have impact at scale. But its important to review whether taking financial inclusion online is necessary, and if so, what are the best ways to achieve this? In today’s original blogpost, Dana Beiglari, will provided the needed pause and reflection on digital financial inclusion, specifically from a gendered lens. (Dana is a Senior Solicitor at Legal Aid NSW and the views expressed in this article are her own, and not the views of Legal Aid NSW.)
Maria is an Australian woman in her mid forties. When she left a violent marriage, she fled to her brother’s granny flat above his garage. She continues to live there with her two children, and relies on Centrelink benefits for her income. Her current finances do not qualify her for a personal loan, or a credit card. However, since she left her relationship, five loans have been taken out in Maria’s name. Not by Maria, but by her ex husband using her online profile.
The vignette presented above articulates the very real risks of digital financial services that are on the horizon. A number of international organisations are calling for government, business and civil society to use digital financial inclusion as a catalyst for progress on economic equality. These organisations argue that digital financial services may help achieve gender equality and empower women and girls, in line with the UN General Assembly’s Sustainable Development Goals.
But with one in four women in Australia experiencing emotional abuse from their partner, and one in five suffering violence, it is critical that the rise in digital financial services does not perpetuate abuse in the form of fraudulent financial activity.
What are inclusive digital financial services?
Digital financial services refer to mobile money, online accounts, electronic payments and insurance and credit products that can be applied for and delivered online. These services are “inclusive” if they aim to reach people who were formerly excluded from safe and fair financial services.
Champions of inclusive digital financial services argue that there are significant benefits for disadvantaged groups. It can encourage the storage and increase of savings, strengthen the ability to cope with unexpected economic shocks, promote cheaper access to social benefits and allow investment in economic opportunities.
Impact on financial abuse
Increasing access to digital financial services may lead to economic empowerment, but it also risks further entrenching financial abuse of victims of domestic or family violence.
In my work as a social justice lawyer, I regularly see clients who have escaped a domestic violence relationship, but not without a large amount of debt. Often, the perpetrator in the relationship fraudulently uses the victim’s name and identifying information to sign up for credit online. The perpetrator takes the money, and the victim is left with the debt. In many cases, the victim learns about her financial obligations only when debt collectors pursue her.
The harm to the victim does not only present as debt - her credit report may also be marred, impacting her ability to obtain credit in the future. Credit reports not only list debts that are in default, they also list when a person has made an enquiry for a credit product. It is common for a victim of domestic violence to have a number of debts in default listed on her credit report, as well as a number of enquiries where the credit application was ultimately denied. Both listings decrease the victim’s credit score, which impacts a person’s ability to get credit. Changing the situation requires the victim to make a complaint of fraud to the credit provider, which then will inform the credit-reporting agency. This process can be traumatic and lengthy.
A potential solution
The digital world offers new opportunities for inclusive financial services, but safeguards are needed to help protect the people we’re hoping to bring within the financial system. In the context of women leaving violent relationships, these safeguards could include:
· more rigorous ID checks on online applications;
· implementing a trauma-informed approach (which is sensitive to the experiences of the victim) to fraud reporting and investigation processes; and
· ensuring that credit reporting agencies and financial service providers communicate easily with each other to remove any fraudulent credit listings.
Digital financial services must be developed with the end user in mind, with regard to their unique challenges and needs. Failing this, the rise of digital financial services may open the door to financial abuse, and many perpetuate financial exclusion for disadvantaged groups.
 Australian Bureau of Statistics’ 2016 Personal Safety Survey https://www.abs.gov.au/ausstats/abs@.nsf/mf/4906.0