UBA bans extra charges on electronic card payments

Wednesday July 29 2020

Merchants, according to UBA must not charge a

Merchants, according to UBA must not charge a customer over and above the value of a transaction. Photo | File  

By MARTIN LUTHER OKETCH

Uganda Bankers Association (UBA) has launched a campaign - Pay with your card at no extra cost – in which it will seek to promote increased use of digital and electronic cards payments.

The campaign, which was launched yesterday in Kampala, is part of the larger plan by UBA to drive Bank of Uganda’s agenda to achieve a cashless economy.

According to UBA, as of December 2019, there were 15 million bank accounts. However, only two million of these hold electronic cards, which limits payments through digital channels.
Uganda, according to the 2019 Bank of Uganda annual report for the year ended June, is still a largely cash economy.

In the period cash payments rose to above the annual average of Shs423b to Shs544b. The growth represented an increase of 20 per cent from Shs455b recorded in the year ended June 2018.
However, the Central Bank did not provide data on how many transactions are conducted through electronic card payments.

The Central Bank had set 2022 as the year in which Uganda would have achieved a cashless economy. However, Dr Adam Mugume, the Bank of Uganda executive director research, told Daily Monitor recently that whereas it was true that they are seeking to replace cash payments with electronic or digital payments, it will take some time before this is achieved.

However, the Central Bank continues to put in place measures to increase digital payments.
In August last year, in a circular to all financial institutions, Bank of Uganda noted that extra levies and establishing minimum or maximum transaction amounts on electronic card payments was frustrating the agenda to achieve a cashless economy.

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The campaign, conducted under the partnership of UBA, Visa and MasterCard, will also seek to provide connectivity and necessary infrastructure for increased use of electronic payments as a way of providing avenues to a cashless economy.

UBA further pointed out that digital payments have emerged as an important tool for advancing financial inclusion because they lower the cost of providing financial services to poor people and increase the safety and convenience of payments.

During the launch, Mr Wilbrod Owor, the UBA chief executive director, said merchants operating points of sale machines must stop levying extra fees on electronic payments to enable the country realises a cashless economy.

“In August last year, Bank of Uganda issued a directive that prohibits merchant surcharging at [points of sale] terminal and fixing minimum or maximum transaction amounts on electronic payment cards. This was in a bid to drive the growth and uptake of digital finance services,” he said, noting that charges over and above the transaction must be stopped.

Points of sale, which are usually stationed in places such as supermarkets or petrol stations, among others, are operated by third parties on behalf of banking and financial institution.
It is important, Mr Owor said, to move towards a cashless economy as it will eliminate risks of carrying paper notes.

Ms Salma Ingabire, the Visa country manager, said surcharging has an adverse impact on electronic payments growth and ultimately on financial inclusion. “We believe that consumers who choose to pay with payment cards should not be penalised,” she said, noting that levying extra fees unfairly shifts the cost of doing business to consumers.

Mr Frank Molla, director, MasterCard East Africa Growth Markets country director, said the practice frustrates financial institutions and card schemes providers to facilitate convenient payment and access services
Growth of digital technology, he said, presents people with access to innovative, affordable solutions that must be flexible, safe and convenient.

Benefits
The campaign, which will run for six months, initially starting in the central region for three months, is expected to go a long way in increasing awareness on the benefits of card payments as well as ensuring that Ugandans transact at no extra cost while using digital payments.

Through the campaign, UBA will educate consumers on the no surcharging rule where card holders should not be compelled to pay additional fees for using their electronic cards to pay for a service.

Cashless economy
The campaign, which was launched yesterday in Kampala, is part of the larger plan by UBA to drive Bank of Uganda agenda to achieve a cashless economy.

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