KAMPALA – In May this year, the Parliament of Uganda passed the National Payment System bill into law. The law regulates payment systems and issuers of electronic money.
By passing it, experts in Financial Technologies (Fintechs) have said that it will enable them to have a balanced field for risk-free participation since the law will act as their shield.
While making his opening remarks during the Fintech Symposimun in Uganda at Hotel Serena on Wednesday, Peter Kawumi, the chairman of Financial Technology Service Providers’ Association (FITSPA) said that the law came in a good time where Financial service providers in Uganda need protection.
“The potential to reach consumers at a large scale and accelerate financial inclusion in the country and abroad has improved economies and created more jobs however without adequate supervision and regulations, the rapid growth in the sector may lead to other risks such as money laundering , risks of data breaches due to inadequate security measures, there is also a risk of loss of consumer trust due to poor practices like non-pricing transparencies,” he said.
Kawumi, however, said that to minimise such financial risks, all financial regulators have also come up with their own measures that will enable players to move on smoothly and such measures include the enacting of the National Payments Systems Act, 2020.
“These growing Fintechs in Uganda are mostly may not withstand the pressure of the increased compliance and responsibilities coming their way as they get regulated due to lack of capacity or experience. To help improve their readiness FISTPA working with Financial Deepening Uganda, we have developed a members’ code of conduct which has been well received and will help them,” he said.
According to the Executive Director of Financial Deepening Uganda Rashmi Pillai, Fintechs are now being used by Ugandans every day and basing on statistics she said that 4 million Ugandans were financially included between 2013 to 2018. This was as a result of electronic payment services which is one of the examples of a fintech product/service.
“There is always tension between fintech and regulators. Fintechs have a culture of innovation and with innovation comes risk-taking while banks largely are risk-averse. Since we have already entered a generation of Digital-first natives, for example, there are children today who don’t know how to live without a mobile phone, they will be the adults of tomorrow and their demands will be more specific than we expect today and the way to manage this is having regulations,” she said.
Mackay Aomu, Director, National Payment Systems at Bank of Uganda noted that the regulations are important because they describe how payment service providers enter the payments space, their conduct and they also provide for an orderly audit.
Enid Edroma, General Manager, Corporate Affairs at Mobile Telephone Network (MTN) also welcomed Bank of Uganda’s move to put up regulations controlling Financial Payment System.
“We are pleased that Bank of Uganda has taken this approach and at the end of the day, the customer will be the beneficiary of this.
“MTN is required by the law to separate its fintech business from its general business. We have commenced this process. We have already started to see the benefits of having to separate the two. Our customers will get more clarity” said Edroma.
However, experts also asked Bank of Uganda and the government to find a way of regulating other big financial service providers like Google, Alibaba, Amazon, eBay etc which also offer digital services within the country.