Digital Financial Services (DFS) are held out as key financial solutions for improving financial inclusion. However, targeted end-users often offer little in the way of obvious profitable opportunities and so market forces alone are not enough to ensure the supply of services and products which match end-users’ means, needs or wants. As a result DFS in emerging markets may suffer from limited uptake and usage, with consequently little effect on financial inclusion. In emerging markets, financial regulators have been focusing on supporting the success of DFS largely through institutional and regulatory framework efforts. This paper argues that financial regulators must first work to understand and build consumer demand for DFS rather than purely focusing on developing enabling regulatory frameworks.

This requires a change in mind-set for financial regulators who are more familiar with promoting financial stability, safety and efficiency. In this paper we explore this changing role for financial regulators. We recommend that regulators particularly focus on building consumer demand through promoting partnerships in DFS as a means of promoting financial inclusion. We highlight that partnerships introduce collaboration risks and heighten consumer risks; requiring regulators to adjust regulatory frameworks to ensure such risks are identified and mitigated.