Banks record high increase in cases requiring compensation  

Banks blame the increase in customer complaints in the last three years to heightened digital adaptation.  Photo / File 

What you need to know:

  • Complaints that require customer compensation more than doubled in the year ended June 2023, signaling a rise in banking sector risks

Banks and other supervised financial institutions recorded a large increase in compensations related to customer complaints in the period ended June, signaling an increase in fraud related risks. 

In details contained in the Bank of Uganda 2022/23 Annual Report, customer complaints that required compensation more than doubled, increasing by at least 1,022. 

The report does not give the value of the compensation but indicates that at least 2,346 complaints resulted into financial compensations to customers, many of whom had filed complaints related to agent banking, loans, debit and credit cards, automated teller machines, and mobile money, among others. 

The number is more than double the 1,324 complaints, for which customers were compensated in the same period in the 2021/22 financial year. 

“184 complaints remained in progress, while 2,346 complaints involved financial compensation to customers,” the report reads in part, noting that there has been a sustained high return in the number of fraud-related complaints, which come at a time when financial institutions are pushing for the adaptation of digital banking.

During the period, the report notes, commercial banks and other supervised financial institutions received a total of 433,258 complaints, which was a large reduction from the 917,938 complaints filed in the same period ended June 2022. 

The report, which analyses financial markets, bank of Uganda performance and the economy at large, indicates that the mobile money and mobile banking category recorded the highest number of complaints, which comprised 40.1 percent of recorded cases.  

Complaints related to loan processing followed at 12.8 percent, while agent banking and debit cards contributed 9.8 percent and 6.9 percent, respectively.  

“There was a tremendous increase in mobile money / mobile banking complaints as compared to 29.3 percent for the period ending June 2022, partly explained by the rapid uptake in mobile money services … amid increased fraud and network disruptions,” the report reads in part. 

The report also indicates the high increase in loan processing complaints, which rose from 6.3 percent to 12.8 percent, noting that this could have resulted from the fact that many businesses and individuals are yet to recover from the impact of Covid-19, which has seen many supervised financial institutions customers grapple with foreclosure on their collateral. 

There has been rapid growth in the number of customer complaints, some of which are blamed on the increased uptake of digital financial services, heightened by Covid-19 related restrictions. 

For instance, during the year ended December 2020, the Bank of Uganda report indicates, supervised financial institutions recorded about 260,299 complaints, which almost doubled to 517,196 in the same period in 2021. 

Growing complaints 
Since 2020, Bank of Uganda data indicates, digital payment channels, among which include mobile money and mobile banking, agent and internet banking have been recording the largest number of complaints.