One issue many fintechs (and even traditional banking) tech leaders overlook when building their solutions are the hidden pitfalls of harmful design. These often unintended, but sometimes insidious, design missteps adversely impact the user experience, and could see companies on the wrong side of future regulations.

There are hundreds of fintech startups delivering inclusive financial services to previously underserved areas. And a good deal of them have leaned into the benefits of building their applications and systems using interoperable payment protocols. However, Interledger Ambassador Caroline Sinders has warned of the growing danger posed by harmful design, which they say could be putting the most vulnerable communities at risk.

Caroline describes themselves as a human rights defender and researcher, as well as a critical designer. They are currently conducting research on harmful design patterns, sometimes called ‘dark patterns’ or ‘manipulative design’. Caroline says these phenomena are design patterns that “unintentionally or intentionally trick, confuse, or nudge users into making decisions they normally wouldn’t make.”

When design goes dark

Whether it's the design of complex cross-border money transfers, or the app on our phones designed to tell us how to care for our plants, design fills an important part of how users experience and use any piece of technology. But Caroline points out that it’s only recently that design has captured the attention of researchers and policymakers and how it can possibly harm consumers, users, and even societies.

In their work, Caroline references “harmful nudge or sludge techniques” which can be used against consumers to make choices they would not otherwise have made, and that do not align with their best interests or preferences. These could include selecting less privacy-enhancing choices when personalising their privacy settings or making it difficult to change their privacy settings. Struggling to unsubscribe from a newsletter may be an annoyance, but these nudges become a lot more insidious when it comes to the design of financial services products.

Caroline believes these nudges can be particularly harmful to consumers who are new to using digital financial products. In some instances, apps can give the impression services are free, but obfuscate hidden costs. In other cases, money transmitter services or financial technology platforms may look and feel like a traditional bank (and even include a debit card), but they are not traditional banks and don’t have the same regulatory guardrails. Caroline says this lack of disclosure or clarification is what constitutes a harmful design pattern.

Friction can also pose hidden risks

While some friction can be very annoying, Caroline is quick to point out that annoying is not the same as harmful, and that in some instances, friction is necessary to protect users from themselves. An example of necessary friction would be childproof caps on medication, while digitally necessary friction occurs in some step-up authentication processes in high-risk transactions.  

However, friction can be added into the design with nefarious intentions. For instance, an unscrupulous designer might add friction to discourage unprofitable actions, such as increasing privacy settings or canceling subscriptions.

“There are differences between ‘poor’ design or ‘bad design’ versus harmful design patterns; harmful design often nudges, confuses or manipulates the user into making a decision they normally wouldn’t make. An app that hides fees, or tricks a user into paying more for something than they should would be examples of harmful design patterns. Having UI, logos, or color choices that feel out of date might be ‘bad’ design’ but that doesn’t make it a harmful design pattern. Burying a necessary setting, depending upon what that setting is, could be a harmful design pattern. Like friction, it all depends upon the context.”

Regulators are not sitting idly by

Even if the harmful design doesn’t lead to direct financial loss, the damage done through diminishing trust in financial services can have a negative impact on the introduction of new and inclusive financial products to previously underserved communities.

Fortunately, regulators have recognized this often-overlooked issue, and India has already passed regulations against harmful design patterns. The European Union, meanwhile, has prohibited harmful designs in its Digital Services Act, and regulators in the US and UK are leaning on existing laws to address the issue.

Further research, such as that being conducted by Caroline, is also contributing to the body of work on which regulators can rely on.

Other insights can be found in the recently published paper,  "Unlocking Inclusion: A Policy Blueprint for Interoperable Payment Protocols," written by the Internet Governance Forum (IGF) Dynamic Coalition on Digital Financial Inclusion and rapporteured by the Interledger Foundation.  

The blueprint has a dedicated chapter on consumer-focused ecosystem design, in which Dynamic Coalition concludes: “Applications and systems built on interoperable payment protocols must prioritise usability, accessibility, inclusivity, and trust.” This approach has the aim of placing the consumer ahead of any other stakeholder, limiting disputes, and making any decisions by businesses (or the regulators governing them) simpler, by providing a clear hierarchy.

The foundational principles leave no room for debate. The blueprint states that, should design trade-offs arise, user needs must take precedence. Design must also be governed by trust and user protection, with systems transparent by default to protect against hidden fees, risks, dispute processes, and the real consequences of user actions. The blueprint is also explicit that inclusion should be non-negotiable and that any design must be “usable by people across literacy levels, connectivity conditions, abilities, and geographic locations.”

While harmful or dark design is not yet a big talking point when it comes to either the financial inclusion or the mainstream technical conversations, it is gaining traction. Here at Interledger Foundation, we believe that systems designed with integrity are not only possible but necessary for an inclusive digital economy. Our commitment is to facilitate these critical conversations and to contribute to building the Internet of Opportunity - where technology empowers rather than exploits.