The Governor, Bank of Uganda, Prof Emmanuel Tumusiime Mutebile, has called upon banking institutions to embrace the digital revolution, while at the same time managing challenges that come with it. He notes that 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.
Mutebile made the remarks while opening the 4th Annual Bankers’ Conference 2021 organised by Uganda Bankers Association (UBA). The theme; Bend But Don’t Break: How Players in the Financial Services Sector Can Thrive In The Era Of The 4th Industrial Revolution. “In Africa and the East African Community (EAC), we still lag behind in the utilisation of fintech. Yet the phenomenal growth in mobile money services has been critical in increasing the financial services outreach. Something 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 operational costs while improving 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 real-time manner. This has also improved the financial service providers’ understanding of customer behaviour and needs, thus allowing for the personalisation of financial services.
“It is 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, has remained relatively high,” Mutebile added.
Prof Mutebile observed that there exist challenges that the financial industry has to contend with. He pointed out digital transformation may polarise the market by excluding 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 stressed. He noted that the Bank of Uganda, through the growing use of technology to capture, store and analyse data, which was consistent with the 4IR, increases the risk of data misuse and privacy violations.
“An increasing reliance on technology solutions and third-party service providers increases operational risks, including cyber-security and money laundering risks,” he noted, revealing that the pace and dynamism of fintech present 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 locally, there are issues relating to the enforcement of domestic regulatory frameworks. The key question for policy-makers is how to position economies to benefit from the 4IR while managing the challenges that it presents.”