Remarks by Michael Atingi-Ego, Deputy Governor of the Bank of Uganda, at the Sixth Annual Bankers Conference in Kampala on 14 August 2023.
The Annual Bankers Conference has become a key event on the Uganda Bankers Association’s calendar since its inception in 2017. It brings together national, regional, and global regulators, practitioners, and experts to deliberate on trends and dynamics driving sustainability strategies in banking and finance.
Trends and innovations in the fintech space, changing the face of banking and financial services
Michael Atingi-Ego – Remarks to the Sixth Annual Bankers Conference
Serena Hotel, Kampala: 14 August 2023
Good morning to you all. I thank the UBA for inviting me to share a few remarks at its flagship Annual Bankers Conference.
It is an honour to open a bankers’ conference with two distinguished female leaders: Dr Aminah Zawedde, an outstanding digital transformation expert and public servant, and Ms Sarah Arapta, Chief Executive of Citibank Uganda and Chairperson of the UBA.
Prominent female leadership deserves to trend, be “normalised,” and disrupt the banking industry like financial technology (FinTech) does.
Ladies and gentlemen, I am pleased to participate in raising the curtain for the opening session, the main act of which will be the keynote address by Mr. Ali on a most timely and topical theme, “Trends and Innovations in the FinTech space changing the face of Banking and Financial Services.”
As we look forward to the keynote, shall we consider these three statements: “bankers’ hours,” “People need banking, not banks”; and “Silicon Valley is coming”?
Urban Dictionary defines “bankers’ hours” as “working or being open for the shortest and most inconvenient amount of time (around 10 am to 4 pm). Also includes a long lunch break and every possible holiday off.” No wonder “bank holiday” became synonymous with “public holiday.”
Banks used to have limited operating hours due to several factors. First, the manual and time-consuming processes of dealing with cheques, deposits, and transfers necessitated shorter hours for paperwork.
Second, since banks traditionally catered to business clients that operated during the day, aligning their hours was practical. Lastly, security concerns led banks to minimise vault access time by restricting hours.
In saying that “People need banking, not banks,” Bill Gates dismissed brick-and-mortar retail banks as “dinosaurs” that would be “bypassed” because people need the services that banks provide, such as storing money, making payments, and obtaining loans, but do not necessarily need to use traditional banks to get these services.
Stoking industry paranoia and evoking the David versus Goliath bible story of an underdog defeating a seemingly unbeatable opponent, JPMorgan Chase’s CEO, Jamie Dimon, warned in a June 2015 letter to the bank’s shareholders that digitalisation would upend business models and facilitate greater competition for banking incumbents by prophesying, “Silicon Valley is coming.”
Today, bankers’ hours are a relic of the past. FinTech companies provide banking services more innovatively, efficiently, and often at lower fees. To avoid obsolescence, traditional banks have embraced digitalisation and are promoting branchless banking. I dare say that this trend will continue as technology evolves to offer more innovative ways of providing banking and financial services more conveniently, affordably, and, hopefully, universally inclusive.
Technology-enabled innovation is transforming financial services by producing new business models, applications, processes, or products that enrich people’s access to safe and secure storage of money; easier and quicker payments; loans; effective financial management; and other financial products and services, including investment and insurance.
FinTech is improving financial inclusion. Mobile money has enabled millions of people who previously had no access to formal financial services to send and receive money, make payments, and save.
FinTech has transformed payment systems, making them more efficient and accessible, such as through digital wallets and mobile payments.
FinTech, through data analytics, artificial intelligence, and machine learning, is facilitating rich insights into consumer behaviour, risk metrics, and financial and economic trends.
These FinTech trends shaping the evolution of banking and financial services within our operating environment also influence central banking. Indeed, the Bank of Uganda (BoU) has prioritised several related initiatives in its Strategic Plan for 2022 — 2027.
We are developing the capacity to leverage big data analytics to improve financial and economic modelling and forecasting for monetary policy and market operations, as well as adopting technologies for real-time banking regulation and supervision. We are also working with the UBA on a strategy to promote e-payments for a cash-lite economy.
However, as more financial transactions move to digital platforms and online, our reliance on IT infrastructure grows, and so do the related IT and cyber security vulnerabilities. Cybersecurity and IT security, therefore, become increasingly important because the new convenience comes with increasing risks, as cyber criminals exploit vulnerabilities in digital systems to breach defences and gain unauthorised access to valuable data, which is the “new oil.”
Cyber-attacks targeting banks pose risks to individual institutions by disrupting critical financial operations, compromising transaction processing, access to customer accounts, or performing essential functions. This can diminish public confidence in the banking system, especially if disruptions affect multiple banks or persist for a long time. The potential impact of cyber risks on the financial system invites a sector-wide approach to cyber security because “a chain is only as strong as the weakest link.”
Seeking to promote the safe operation and adoption of digital/electronic payment channels, which are crucial for advancing financial inclusion and the growth of the payments industry, the BoU has instituted cyber security guidelines, along with guidance on the minimum requirements for conducting system audits and vulnerability assessments, to be implemented by payment service providers.
In line with its mandate under the National Payment Systems Act 2020, the BoU promotes FinTech innovation through the Regulatory Sandbox, ensuring that the new products and solutions do not lead to financial instability or consumer harm.
These developments point to the requirement for the banking and financial sector to reskill and retool human resources and ethically leverage fourth-industrial revolution technologies (big data analytics, artificial intelligence, machine learning, etc.) while minimising the inherent risks. As an example, BOU has started capacity building and retooling initiatives for forex bureaus and money remittance operators.
As I tuck the curtain away to clear the stage, I wish to applaud the members of UBA for the virtuous collaboration with telcos and FinTech startups aiming to democratise access to digital financial services and serve our people who are still at the bottom of the economic pyramid.
The FinTech revolution is transforming the financial landscape. It is a force that demands thoughtful consideration and proactive risk management. The trends and innovations are not isolated occurrences but interconnected threads weaving the fabric of the future of financial services. While they offer immense growth opportunities, they also present challenges, including data privacy concerns, regulatory complexities, cyber risk, and AML and CFT risks. Therefore, as financial professionals, we are responsible for embracing these changes, adapting our strategy, and ensuring that these innovations are harnessed to create a more inclusive, efficient, and secure financial future for all.
The BoU is committed to ensuring a smooth and orderly embrace of innovations to enhance financial inclusion, strengthen our operational and policy frameworks, and foster a resilient financial sector that supports Uganda’s socioeconomic transformation by increasing the economy’s monetisation.
Ladies and gentlemen, I cannot leave without pointing out that the BoU has effectively supported the resilience of the economy, which is steadily recovering from the external shocks that have hit Uganda in recent years. Suffice it to say that inflation has been successfully tamed, with the latest outturns below 5 per cent. The exchange rate has been stable and performing better than in peer economies, save for the recent hiccup. The supervised financial institutions are strong, sound, durable, and profitable.
Macroeconomic stability is a trend we have a strong reputation for delivering, and we are committed to sustaining it sustainably into the future. Indeed, it is the very reason why the BoU exists.
Let me conclude by thanking the UBA for convening the Annual Bankers Conference to consider and design effective responses to the forces disrupting and shaping the evolution of banking and financial services in our country.
Thank you for listening to me, and I wish you all a fruitful Annual Bankers Conference for 2023.
God Bless!
