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China-Africa Trade Information Service
The Interswitch platform, Uganda’s pioneer banking switch, posted double digit growth between 2015 and 2016, in spite of fewer transactions at the ATMs connected to the platform.
Total transactions on the platform rose by 39.2 per cent, from 1.6 million by the end of June 2015, to 2.2 million at the end of June 2016. The sharp growth in transaction activity was attributed to the entry of Centenary Bank onto the platform in 2014.
The Interswitch platform had 10 commercial banks, two credit institutions and one micro-deposit taking institution (MDI) by the end of June 2016. There are 25 licensed commercial banks in Uganda, three credit institutions and four MDIs supervised by the Central Bank. Interswitch Ltd, a Nigerian payments solutions provider, acquired majority shares in Bankom Uganda Ltd in 2010.
Expansion strategy
The parent company is focusing on its pan-African expansion strategy.
“The switch operator should invest in innovative products like school fees payment solutions and agent banking channels. The idea of sharing ATM networks has lost appeal among big banks because there is a greater need to concentrate on digital payment tools, and reduce cash management costs and related security risks. We spend a fortune carrying money from northern Uganda to BoU every week. Under these conditions, there is opportunity for cashless payments in an economy dominated by cash transactions estimated at 95 per cent of all transactions,” said Patrick Mweheire, the managing director of Stanbic Bank Uganda.
Interswitch’s reluctance to introduce a cheap and efficient card-driven payments system in the local market, coupled with Visa Card’s prohibitive transaction charges, have denied local consumers access to cost effective and cashless payments services, observers say.
“The Interswitch platform is still viable for local banks because it shares infrastructure and cuts expansion costs. We are addressing the gap in cashless payments through the rollout of efficient mobile and online banking channels,” said Fabian Kasi, managing director of Centenary Bank Ltd.