MTN MOMO’s Yego upbeat about impact of National Payments Switch on electronic cash transactions
Mobile Money platform operators are demanding for government intervention in the industry’s challenges to ensure that the services are affordable, both to the customers and the companies.
Mobile money services are considered more expensive than in other markets in the regions particularly Kenya and Rwanda, and this has been blamed for the lower uptake and limited adoption of the various products available.
The most affected areas are withdrawing cash from the mobile wallet at a mobile money agent, as well as transacting between the wallet and the bank account.
Richard Yego, the Managing Director MTN Mobile Money Uganda Limited, attributes the high costs to government taxes as well as the independent operations of platforms in the absence of a National Payments Switch.
Yego says that for example, withdrawing half a million shillings costs more than UGX 9,000, including the charge and the tax, which has forced people into avoiding agents by instead sending the money from the mobile wallet to the bank and withdrawing in via the ATM.
One-way traffic
Depositing money from the wallet to the bank account is considered relatively affordable, though many people would rather walk to a banking hall or an agent and bank the cash there.
However, even the wallet to bank transaction is still cheaper than moving money from the bank to the mobile wallet, which Yego says is unfair, since it means that more business flows one way.
He proposes that the 0.5 percent tax on transferring money from the bank account to the wallet which has made that transaction very costly, should at least be spread between the bank and the mobile money platform, to ensure a “level playing field”.
This, however, does not mean that the banks are enjoying a windfall. They are also incurring expenses, which, if they were reduced, even at the bank agent’s services would be cheaper.
Yego says that banks are also faced with costs of running the agency systems, though it has remained relatively affordable.
However, the fact that there is less money coming from the banking segment to the mobile platforms, is limiting the inflows of new money, which they need for operations like mobile loans Managing Director MTN Mobile Money Uganda Limited, he says.
Until recently, the other challenge was moving money from one mobile wallet to another one on a different platform or network, which in some cases almost doubled the cost compared to transacting between wallets on the same platform.
This was recently worked around by the two leading platforms, MTN and Airtel Money with developed their interoperability, and the costs harmonised. Yego says that this is an example of how much the cost of services can go down if the government completed and rolled out the National Payments Switch.
He is however, sure that the government is working on it.
The national payments switch
The Bank of Uganda, which in 2022 assumed the role of regulator of mobile money services, is also charged with the establishment of the National Payments Switch, a project that has been in the pipeline for more than five years.
It is a centralized, interoperable infrastructure connecting banks, mobile network operators, financial technology firms, and payment service providers.
It enables real-time completion of transactions saving time and reducing costs, acting as a central hub for clearing and settling payments across different financial platforms, such as ATM, POS, mobile money, and online banking.
Yego says that they are discussing with the Central to ensure it is fast-tracked. The procurement process for a developer commenced in 2022/2023, but last year, it was reported that BoU halted the process citing irregularities, which led to the further delay of the project.
The Director National Payments Systems Department, Twinemanzi Tumubweinee says they expected the National Payments Switch will be operational by late 2026.
In July 2023, the BoU invited bids for the project, and the shortlisted candidates included Axiom Group, Blue Bytes, Interswitch Group and Paylogic SA, the latter of which was awarded the contract.
However, in 2024, the contract was cancelled, further delaying the process.
The central bank cited security concerns that were supposedly overlooked in the initial selection process, but other sources cited influence peddling, and lack of proper due diligence which therefore posed mismanagement risk issues.
-URN
