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The future of mobile banking looks brighter in Uganda given the rapidly changing technological innovations even to the extent of challenging the dominance of traditional banks in the financial sector.
The Governor Bank of Uganda, Tumusime Mutebile told participants at a workshop on the Economy of Mobile Money in Kampala recently that mobile banking is already providing a partial substitute for the retail payment services of banks and could eventually challenge the dominance of banks in the provision of other types of services, including deposits.
“For more than a century, finance has been dominated by a traditional banking model in which customers hold deposit accounts in banks and receive a range of services from their banks, Mobile banking is already peeling away some of these services, notably payment services,” Mutebile said.
Atwine agrees with Mutebile about traditional retail banks being challenged.
“This is already happening all over the world. It’s just not called mobile money; they don’t use USSD (Unstructured Supplementary Service Data) or SMS (Short Message Service) but mobile apps. There are countless digital-only-banks in the world now that are challenging retail banks. We have Atom Bank, Simple, N26, Monzo, Starling, etc.,” says Atwine.
But Atwine says the digital banking revolution has also started happening even in Uganda where MoKash is taking savings and giving loans. He also mentions companies like his own Yetu which are giving loans from one’s phone.
“As more services are added the retail branch will become less useful. Banks should be clamouring to work with or even to buy small players trying to disrupt the ecosystem. That is the future,” Atwine says with confidence.
Atwine explains that Uganda’s cashless economy is growing rapidly especially with the use of mobile money services provided by the telecommunication companies.
“We see many newer and smaller players that are coming in with great ideas and products. Telecom companies by their nature are not financial service providers and their innovation and implementation is limited. It is important for them to set up real innovation departments and work with the local ecosystem of startups to deliver real financial inclusion. We are on the right path but the journey is long,” Atwine says.
As regards the contribution of his startups, Atwine says they have played a big part in the development of Uganda’s cashless economy.
“I used to send money to my grandmother and she would have to get on a bus and travel for an hour to get a Western Union or Money Gram agent. Then she would have to produce documents and fill in paperwork. It was a mess. With useremit.com, she now gets the money delivered straight to her mobile phone and cashes out at the mobile money agent who is a 5 minutes’ walk away from her farm. As a sender it was also a mess, I had to withdraw cash and get to an agent, now I can do that anywhere on my phone or computer. Yetu is also doing a good job with the mobile loans. Now employees can request for a loan from the comfort of their homes as long as their employers are signed up. This is fantastic, if one needs an emergency fund to take care of something, it comes to them,’ Atwine praises his Fintech innovations.
Banks responding
A paper by Bank of Uganda Research Department says innovations in ICT have revolutionalised the financial sector resulting in novel delivery channels for financial products like Automatic Teller Machines (ATMs), cell phone banking, PC and internet banking in what is all termed as ‘e-banking.’ Banks offer customers with Visa ATM debit cards which enable them to purchase goods from major supermarket without requiring them to carry cash.
By 2015 there were five banks in Uganda offering the latest card technology referred to as Chip and Pin used by banks to offer more security to customers when transacting than the original magnetic strip cards. That number has also grown bigger.
Other non-cash innovations by banks include Electronic Fund Transfer (EFT), Uganda National Interbank Settlement System (UNIS) and the Real Time Gross Settlement (RTGS). These are cashless transfers of money from one bank to another or within the same financial institution in real or shortest time.
