Sola Salako writes on the need for government to explore ways of improving standards and safety of online transactions for consumers
As the world celebrated another World Consumer Rights Day (WCRD) on March 15, 2018, global focus was on the fast evolving, ubiquitous marketplace enabled by the Internet. The theme set for the 2018 celebration by Consumers International (CI), the global consumer protection watchdog, was “Making Digital Marketplaces Fairer” in recognition of the growing challenges of protecting consumers in a new market that transcends physical borders, ignores geographical boundaries and confirms the age old maxim that the world has truly become a global village.
In less than twenty years, the conventional definition of markets has evolved from physically defined and geographically identified spaces of commercial activity, to multiple intangible, boundless and real time e-locations enabled by the internet. Whereas subsisting consumer protection laws and guidelines attempt to protect consumers within physical locations and the sovereignty of national policies, research shows that up to 12% of all global commercial transactions now take place on the internet; intra and inter countries, between multiple currencies and with little or no physical contact between the seller or service provider on the one hand and the consumer at the receiving end.
E-commerce, enabled by electronic financial instruments has thus become our progressive reality. According to the Director General, Consumer Protection Council, Mr. Babatunde Irukera in a Facebook post, a recent research by the Council show 67% of consumers between ages 18-40 now shop online; showing how important online markets are to commercial activity in Nigeria. As to be expected, the issues of exploitation, unfair trade practices and sub-standard products and services, which gave rise to the need for government to protect consumers in conventional markets, now occur at breathtakingly alarming rates online.
Consumer Protection regulators appear to be playing catch-up as the issues transcend the capacity of existing laws and regulations. More so, the challenges consumers face in the new marketplaces online are sometimes new, thus existing laws are inapplicable to check the excesses of most merchants in this nascent frontier. Consumers daily fall victim to issues like lack of redress, misleading advertisement, outright frauds and scams and poor customer care with little or no regulation or intervention from regulatory agencies. Though a few of the organised formal merchants online have shown initiative by establishing their own consumer protection structures to build confidence in their store, they are not directly supervised by any particular agency of government.
The first issue raised by the global watchdog is the lack of fair access to the Internet for millions of consumers around the world. Whereas the Internet is fast becoming an essential commodity in developed countries, nations like Nigeria are still struggling to make the Internet adequately available for the majority of consumers. Even when consumers pay for data access, they rarely get value for money thus they are unable to maximise the full benefits of the online marketplace and the few who do, pay dearly for the privilege.
This challenge of access becomes even more critical as essential services like governance, utilities and financial services are now being digitized globally. Consumers now need the Internet to apply for a driver’s license or national identity card, pay their taxes and access banking and other financial services. E-marketplaces must therefore be made more accessible, affordable and safe for every consumer in Nigeria.
Another critical issue is the menace of fraudulent transactions at e-marketplaces. The fact that businesses take place without any physical contact between the seller and the consumer creates a cover of anonymity which unscrupulous merchants hide under to exploit consumers through misleading advertisements, fake products or services, scams and poor after sales support. Due to this, most consumers find it difficult to trust e-transactions or its providers. CI research shows 49% of Internet users in Nigeria claim they are wary of e-transactions because of the trust issue.
Consumer distrust of e-markets arises from the apparent lack of regulation or adequate legislation to police marketplaces online. Government seems to be taking its time to catch up with the digital economy, as it appears to lack the capacity to fully regulate and monitor the digital marketplace. One of the challenges to regulation is the ubiquitous nature of the platform and the multiple sectors involved. While a comprehensive legislation might take years to materialize, government needs to explore options that can immediately improve the standard and safety of online transactions for consumers.
Some options regulators could consider include increased consumer education to empower the consumer with better information on the risks of e-transactions, how to identify scams and frauds and how to insist on redress if their rights are violated. Government can also work with sectors to encourage peer-to-peer checks or self-regulation. When online markets agree to sign up to a code of conduct relevant to a specific sector on standards and consumer protection principles, digital markets in such a sector become safer for the consumer which builds trust and improves consumer patronage.
A good example of sector self- regulation is the Smart Campaign, a global effort to unite microfinance institutions around the goal to protect customers as a driving force in that industry. The Smart Campaign has developed a series of Client Protection Principles, which participating microfinance institutions can implement to build strong, lasting relationships based on trust. Once an institution subscribes to these principles, the Smart Campaign compliance team will visit to inspect and verify its compliance before issuing such an institution a certificate. Consumers can then look out for that certification as proof of the institution’s ethical and consumer protection credentials thus safe for business. The Smart Campaign Principles include Appropriate Product Design; Prevention of Over-indebtedness; Transparency; Responsible Pricing; Fair and Respectful Treatment of Customers; Privacy of Customer Data and a Mechanism for Complaint Resolution.
The Smart Campaign Principles could be adopted by financial digital marketplaces, as there has been a significant rise in online microfinance merchants who offer consumers alternative banking and microfinance services on the Internet. While their platforms provide much needed choice options to conventional banking, most consumers are wary to patronise their services because of a lack of trust.
If such microfinance service providers strive to earn a Smart Campaign certification, for instance, consumer confidence will improve because of the perceived regulation, which in turn should increase patronage. Government needs to encourage independent and credible sector self-regulating institutions like the Smart Campaign to improve consumer confidence in digital market places. Imagine if one of such is established for online stores to guide acceptable practices for e-transactions? Consumer confidence will soar which will directly impact patronage on those digital marketplaces, improving the economy.
Another aspect of digital market place is the informal platforms of personalised selling. Many individuals offer goods and services for sale on person-to-person platforms like WhatsApp, Instagram, Facebook and so on. This form of e-commerce is more challenging to regulate because it is a private transaction between two individuals yet, the rate of fraud and scams are higher in these instances.
Consumer Protection in this situation must focus on consumer enlightenment and education so the consumer can make informed choices on whether to take the risk of buying goods and services from individuals without means of tracking. Government could also explore the possibility of putting checks and balances on the payment platforms for these transactions, which are mostly Internet based. A regulation that empowers a bank to take action if an account is used for online selling fraud could help to monitor these person-to-person transactions in order to shut them down once it is proven to be fraudulent or a scam.
While these issues are definitely not exhaustive, they show the enormity of action required to keep consumers safe as they conduct commercial transactions on digital platforms. There are issues of protecting consumer personal data from abuse, ensuring redress in cases of consumer dissatisfaction and peculiar challenges that a dynamic economic platform would face as it evolves into a mainstream accepted marketplace in Nigeria’s economy.
As Irukera, DG CPC rightly pointed out; distrust of digital marketplaces is not just about consumer protection, it has implications for national survival as it stifles economic growth. Nigeria must thus take bold steps to deepen the conversation on making digital marketplaces safer beyond the World Consumer Rights Day celebrations as the digital marketplace hold more promise for employment and economic emancipation for the Nigerian youth population apart from being a vital key to the globalisation of local products and services.
– Sola Salako Ajulo is a Consumer Rights and Protection Advocate and President/Founder of Consumer Advocacy Foundation of Nigeria (CAFON)