When people talk about protecting digital payment users, the conversation usually turns to technology: stronger encryption, biometric authentication, artificial intelligence and better fraud-detection systems.

Those tools matter. But research on mobile-money users across 35 economies suggests that another factor deserves equal attention: the quality of the institutions that oversee the digital financial system. The study matched information from 16,387 mobile-money account owners with governance indicators measuring regulatory quality and government effectiveness. It found that stronger governance was associated with lower exposure to attempts by unknown persons to obtain users’ PINs or passwords. The finding becomes more interesting when digital engagement is considered. The research found that greater digital payment exposure was associated with more fraud attempts. But the strength of that relationship varied according to the governance environment.

In weaker regulatory environments, increased digital engagement was associated with a larger rise in the predicted probability of being targeted. In stronger regulatory environments, the increase was smaller. In other words, governance appeared to act as a shield: it did not necessarily eliminate the exposure created by digitalisation, but it could........

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