Fintech refers to the integration of technology to allow companies provide digital financial solutions that ease transactions with just a tap of a button, through the use of smartphones for mobile banking and investment services, among and others. Fintechs have enabled new business models that offer expanded services to customers and continue to generate new revenue streams for financial service providers.
The government is mooting to
regulate electronic payment services and products offered mainly under new
Financial Technologies also referred to as Fintech.
Fintech refers to the integration of technology to allow companies
provide digital financial solutions that ease transactions with just a tap of a
button, through the use of smartphones for mobile banking and investment
services, among and others. Fintechs have enabled new business models
that offer expanded services to customers and continue to generate new revenue
streams for financial service providers.
Examples of Fintech companies
providing financial services include InterSwitch, Mobile Money services Xente,
Safe Boda, Fenix International, International Airtime Top Up, Future Link
Technologies, Chap and Cellulant and others, which have all built technologies
to provide financial services.
But although financial technology
is flourishing, it is not comprehensively regulated. One of the challenges was that
the government had failed to agree on the regulatory responsibility under which Fintechs
lie since they intersect between financial services and telecommunications.
Today, a team from the
Central Bank told the Finance Committee of Parliament that the government is in
the process of drafting the National Payment Systems Bill, 2019, to guarantee
the regulation of the services brought about by the digital revolution.
Bisaso Kizito, an official from
the Bank of Uganda (BoU) Payment Systems Department says that the financial
technologies will be regulated under the regulatory sandbox framework which is
applied the world over. He says that the regulatory framework was to prescribe the
criteria and minimum requirements for operating a sandbox and the manner in
which to conduct it.
“It allows Fintechs to come up
with innovations and be able to test them and once they have been successful
then move them into the normal regulatory environment,” he said.
The Bill requires a person who
wishes to operate a sandbox to apply to the Central Bank for approval within
the established regulatory sandbox framework. The application shall specify the
location, whether physical or virtual, that is adequately accessible to the
Central Bank from which experiments will be developed and performed and where
all required records, documents and data will be maintained.
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Bisaso’s explanation followed a
question by Agago Woman MP, Judith Franca about the regulation of the several new
financial technologies coming up. The MP also queried whether the new Bill proposed
a tribunal where complainants will go for hearings.
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Jacinta Anyinge, a Senior
Principal Legal Officer in BoU said the Bill provides for no tribunal because
they do not want to cause a conflict in the financial sector and given the
existence of Courts of Law. She said
that the consumer protection provision under the Bill is where complaints will
be handled in a given mechanism.
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Currently, Uganda has no
comprehensive payment systems law and the Bank of Uganda has always relied on
Article 162 (1) of the Constitution which provides for its existence and
the function of encouraging and promoting economic development through effective
and efficient operations of the banking and credit system.
The proposed National Payment
Systems Bill, 2019 will also provide for electronic money issuance and
circulation for example how the issuance of mobile money will be licensed,
supervised and regulated, and provide for the protection of the payment and
settlement systems against insolvency proceedings by providing for transfer
orders finality, irrevocability and protection of collateral arrangements.
The Bill also provides on how to
deal with dormant accounts held with electronic money issuers where after a
period of 10 years, the funds on the dormant accounts will be transferred to
the Consolidated Fund.