Prof. Emmanuel Tumusiime-Mutebile, the Governor, Bank of Uganda
The digital revolution has offered opportunities for financial inclusion and for the provision of a wider suite of financial products and services, regardless of income and location, Prof. Emmanuel Tumusiime-Mutebile, the Governor, Bank of Uganda has said.
He made while opening the 4th Annual Bankers’ Conference 2021
on the theme: “Bend but Don’t Break: How Players in the Financial Services Sector can thrive in the Era of the 4th Industrial Revolution”.
It was organized by Uganda Bankers Association (UBA).
“In Africa and the East African Community (EAC), while we still lag behind in the utilization of financial technology (Fintech), the phenomenal growth in mobile money services has been critical in increasing the financial services outreach, which is crucial for poverty eradication and inclusive economic growth,” Mutebile said.
He added that the digital revolution has also led to a dramatic reduction in the operational costs and improved efficiency in the provision and delivery of financial services.
In addition, he said, customers are able to transact and interact in a flexible, seamless and in a real-time manner. At the same time, it has improved the financial service providers understanding of customer behavior and needs, allowing for personalization of financial services, he said.
“It is, therefore, my sincere hope that after the recovery of the initial sunk capital costs in the form of investments in technological innovations, these developments will translate into a reduction in the cost of financial services, which although declining have remained relatively high,” Mutebile said.
Notwithstanding the aforementioned benefits, Mutebile said, there are also challenges that the financial industry has to contend with. First, he said, the digital transformation may polarize the market by excluding those segments with low levels of digital and financial literacy.
“Non-equitable access to technology-enabled user devices may also increase the already significant digital divide. In addition, access to efficient, reliable and secure infrastructure may itself be a constraint to seamless consumption of financial services,” Mutebile said.
Secondly, the BoU said, the growing use of technology to capture, store and analyze data, consistent with the 4IR, increases the risk of data misuse and privacy violations.
“In addition, an increasing reliance on technology solutions and third party service providers increases operational risks, including cyber-security and Money Laundering risks,” he said.
Thirdly, he revealed, the pace and dynamism of fintechs presents regulatory challenges.
“The fundamental question for any regulator is: How do we encourage financial innovation without compromising the safety of consumers in the marketplace? With the majority of the providers for these technologies not domiciled in the domestic jurisdiction, there are issues relating to enforcement of domestic regulatory frameworks. The key questions for policy makers is, therefore, how to position their economies to benefit from the 4IR while managing the challenges that it presents,” Mutebile said.
