Digital payments should replace paper money – Visa country boss

A Visa card being used at a point of sale to do shopping, pay for a hotel room and pay utilities. Few Ugandans are using electronic cards to complete their transactions
PHOTO BY ERONIE KAMUKAMA

What you need to know:

Most Ugandans prefer using paper money to settle bills over electronic payment cards. Daily Monitor’s Eronie Kamukama spoke to Victor Ndlovu, VISA country director, on how customers can embrace these cards.

What is the uptake of VISA in Uganda?
Within a banked population of roughly 6 million people in the market, we have got about 1.5 million visa cards in the market. Data or numbers never lie and they tell us how our customers are transacting. Typically, if you look at cash transactions today, 99 per cent of all transactions are done via Automated Teller Machines (ATMs). So people get cash from the ATM and they go to a retail outlet to use that cash.

But we would like to see people using their card to fuel their car at retail stations, or at restaurants or pay electricity bills and book a hotel room.
We also want to see them do more e-commerce transactions. That is where we need to grow the business from a Visa stand point.

In a country where the Gross Domestic Product (GDP) is $25b (Shs93.8 trillion), we always measure the personal consumer expenditure which is what the typical household spends on electronic payments versus any other channel. We see 77 per cent of all transactions happening under that banner but of that - which is $19b (Shs71.2 trillion), only 1 per cent is happening electronically.

So, the opportunity is on the 99 per cent. So cash is our competition and we need to digitise it to displace it. By signing up banks, we are hoping to enable the ecosystems to grow electronic payments.

Why have electronic payments methods like VISA failed to take off?
There is a perception that the card is only an ATM card. So we need to start communicating the benefits of electronic payments. There is a cost to cash, if you lose it, it is gone. With electronic payments, you still have a rectifying plan.

What does it take for a bank to offer Visa services?
A bank needs a banking licence from the regulator which is Bank of Uganda. It needs to be a deposit taking institution. The rest is an administrative process that gets you into the Visa family.

Electronic transactions are perceived to be expensive. How do you intend to make this cost affordable?
There is a big misconception around pricing especially from a Visa standpoint. We are not involved in the final pricing to the consumer because we work with the financial institution which has a relationship with its client. The banks make that decision but what we advocate for is affordable services for the consumers so that they can participate in the ecosystem.

There are risks around electronic transactions. What have you encountered so far within the Ugandan market?
In all businesses, there are risks. The question is how do you manage it? Visa is paralleled about security. We invest millions of dollars to secure the network and we do that because we hold responsibility to our clients to make sure they are safe when they transact. We work with banks to provide them with risk-based solutions to make sure everything is managed within the transaction.

Within the transaction log, you are able to score a low, medium or high transaction risk based on the segments where that customer is transacting and also have risk scores and rules based on the individual’s persona and country. For Uganda, the risks have been very low. In Kenya, all the banks are at 100 per cent while here, 90 per cent of all banks have chip cards which means the fraud is going to go away. However, the fraud will migrate to the online platforms and we have the tools to manage that risk based on the data elements we see. We can identify the address, type of devices being used, look at countries where these transactions are taking place, the frequency at which the individual making the payment and zero in on their location.

We will be pushing e-commerce in a big way in Uganda because 40 per cent of all transactions are done on the e-commerce platform. So the appetite is there.

What is the future of electronic transaction channels like Visa?
It is bright and the question is how we create value for the consumer who has become more technologically savvy. As long as you solve for the consumer, you are able to provide the service that the consumer can uptake.
But some things need to be solved, like the functionality of the product and interoperability meaning we are able to connect one bank to another locally and internationally.