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Kampala, Uganda | THE INDEPENDENT | Finance experts have called for the harmonization of the regulations for the financial technology companies or fintechs. The experts argue that there are currently too many regulators that govern the industry, limiting its growth.
Fintech refers to the integration of technology to allow companies provide digital financial solutions that ease transactions with just a tap of a button, through the use of smartphones for mobile banking and investment services among others. Fintech has enabled new business models that offer expanded services to customers and continue to generate new revenue streams for financial service providers.
Examples of Fintech companies providing financial services include InterSwitch, Mobile money services, Xente, Safe Boda, Fenix International, International Airtime Top Up, Future Link Technologies, Chap and Cellulant and others which have all built technologies to provide financial services.
But although financial technology is flourishing, it is not comprehensively regulated. One of the challenges was that the government had failed to agree on the regulatory responsibility under which Fintech lies since it intersects between financial services and telecommunications.
The growth of fintechs rose mainly with the coming of mobile money transfers by the major telecommunication companies. This has since revolutionized payments and movement of money by reducing the need to carry physical cash.
The National Payments System Act provides for the separation of functions carried out by a company, requiring them to create separate entities, if they are to continue with the said business.
Telecommunications companies for example are now required to create a subsidiary to run mobile money transfers which will then be regulated by the Central Bank and not the Uganda Communications Commission while the provision of micro loans will go to the Microfinance Regulatory Authority.
The law gives the companies up to six months to prepare and apply for the licenses under the new law which also provides for regulations of partnerships between corporations and smaller innovators like fintechs.
Now many smaller entrepreneurs have innovated different mobile and online-based payments applications which called for a review of the regulatory regime.
While telecom companies are regulated by UCC for data and voice services, they could not be regulated by the same for financial services hence the coming of the National Payment System Act.
The Financial Sector Deepening Uganda, a not-for-profit company advocating for financial inclusion says a fintech finds itself regulated by at least four authorities due to the activities it carries out.
Rashmi Pillai, the chief executive director FSD told the Fintech symposium, 2020, that the regulatory regime must be harmonized if the industry is to grow further and better services delivered.
MTN Uganda’s Head of Legal and Regulatory Affairs Enid Adroma welcomes the new law that is now awaiting enforcement.
She says that now with the company split into units to deal in the different activities, they have the freedom to develop as many products as possible under different regulators.
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