Fintech start-ups deserve favorable policies to thrive, says Kawooya

Financial inclusion is increasingly becoming an inventory that is difficult to ignore. In an interview, the CEO of HiPipo, Innocent Kawooya, explains to Daily monitor‘s Ismail Musa Ladu, why technology industry players should put their differences aside and focus on the bigger picture. The CEO of HiPipo is also pushing for favorable guidelines that will strengthen the uptake of financial inclusion.

Everyone seems to be talking about financial inclusion these days. What is “hullabaloo” if it?
Well, you refer to it as rumbling – which means some noise about it, but there is more to it than you can imagine. First, financial inclusion refers to creating financial products and services with value for customers, especially the vulnerable and other excluded groups. I think the women fall into one of these categories. So digital financial service providers worldwide are building sustainable business models to deliver affordable financial services to low-income users en masse.

To build an economy that includes and benefits everyone, we need to build interoperable solutions. These will positively transform society, trigger the strengthening of all people and local communities and contribute to achieving the UN’s sustainability goals.

Speaking of impacting lives, what innovations have shaped Uganda’s economic inclusion journey since independence now that we are talking about six years of self-governance?
We are a developing society. We have moved from barter to cash, and now we are in a cash-lite economy – where there is a reduction in the high use/volume of cash, thanks to the use of available electronic payment channels. When you look at the role of the Bank of Uganda (BoU) when it was established in 1966 compared to today, you will realize that so much has evolved.

Today, BoU supervises around 26 commercial banks and several non-deposit-taking institutions. Microfinance institutions and Saccos have risen. Users leverage interoperable debit and credit ATMs.

Importantly, perhaps, since its introduction in 2009, mobile money has increased the proportion of Ugandan adults with access to formal financial services from 28 percent to 60 percent. Today, fintech powers all payment methods in Uganda, be it cash, cheques, cards, mobile payments or electronic bank transfers. You can now borrow without collateral from a Fintech or bank. The impact of artificial intelligence, machine learning, augmented reality, rapid response, cloud computing, Mojaloop and the Level One Project-aligned open application programming interface have also increased.

So how can financial inclusion be used to the benefit of everyone – the economy?
Digital Financial Services (DFS) supports sustainable and inclusive growth through the delivery of affordable, innovative financial products to low-income consumers.
We must prioritize gender-based innovation and research by ensuring the establishment of possible regulation for DFS. Many business opportunities will unfold as the post-Covid-19 pandemic reshapes our future. With technology as a champion, players like Women in Fintech should be empowered to innovate and create solutions that serve everyone.

What is the state of Uganda’s fintech industry?
The fintech industry is growing into a healthy, secure, competitive and universal ecosystem that is essential for sustainable and inclusive growth.
Over the years, Uganda has used information and communication technology (ICT) to expand the reach of financial solutions. We win by giving rich and middle-income users access to digital financial tools. We are still slow to ensure the onboarding of low-income consumers and vulnerable groups who are excluded from the traditional banking network.

There are endless cases of cybercrime and technology failure in financial technology. What needs to be done to ensure that financial technology products are safe and secure for everyone?
We need to make safety allowances for these new innovations. For example, we advocate for the delivery and establishment of a regulatory sandbox platform. This helps evaluate new tools and technologies to resolve data/infrastructure localization from government regulations and directives. The approach ensures that the solutions we bring to the market are safe and secure for all users.
We also need to strengthen the leadership of project integrators, and select experts to support the efficiency of the innovation area. The ecosystem should include regulatory/legal experts, financial experts, technical experts, security experts and DFSP advocates, donors etc. They provide experience in designing and securing strategic digital payment systems. This will ensure that the payment solutions built for fintechs, banks and businesses support secure real-time local and cross-border payments.

In addition, we need to establish support teams with specialist knowledge in cryptography and security architecture. Knowledge of technical security insured domains such as risk identification, data protection, identity, attitude and vulnerability management, logging and threat detection must be utilised.

Big industry players seem to be paying for the blood of the start-ups and many other small industry players. How can these (over 100 players in the industry) exist side by side or pull in one direction?
Advanced threat actors, such as nation-state sponsored groups, criminal organizations, etc., dominate the threat landscape for DFS as players continue to operate in silos. Fintechs, large and small, must work together to create favorable rules and rails.

These promote secure interoperable digital payment infrastructure. On the other hand, stakeholders can compete on accounts and applications. Initiatives such as 40 Days 40 Fintechs are already helping to create a level playing field for all.
We must work together to develop affordable national and regional payment hubs given their value in reducing real-time digital transactions. Therefore, stakeholders such as DFSPs, donors, banks, non-banks, Fintechs and regulators should play an active role.

Has the National Payments Services (NPS) Act, 2020 made the industry better or worse, or is the law pro-big firms and anti-start-ups?
The NPS Act builds trust and streamlines innovation activities. Although we must applaud the law, it is equally important that regulation is enabling and fit for purpose. Some policies are too restrictive with significant red tape and fees involved in acquiring licensing.

Reducing license fees will take into account start-ups that should move from a no-fee level until they build a viable product. By making regulations favorable to start-ups, fertile ground to employ thousands, increase the tax base and build a larger Fintech ecosystem.

It’s this digital and financial inclusion summit I’m hearing about, why do we need one now?

Over 90 percent of merchant payments in Uganda are still made with cash. Cash remains a dominant payment instrument due to the limited reach of the digital payment infrastructure.

The disjointed payment ecosystem keeps the cost of financial products and services high. So yes, it is relevant especially at this particular time. This is because the Digital and Financial Inclusion Summit convenes organizations eager to serve in digital innovation, financial inclusion, FinTech innovation and cyber security. Stakeholders meet to discuss building interoperable, digital payment systems that enable the delivery of seamless, affordable financial services.

Participants include banks, governments, merchants, mobile network operators, suppliers and technology companies – connecting low-income users with the emerging digital economy.