Shared agent banking service providers grow by 53 percent

The number of shared agent banking service providers has doubled, according to Bank of Uganda. 

Speaking during the Financial Stability Symposium, Mr Andrew Kawere, the Bank of Uganda deputy director national payment systems, said service providers under shared agent banking increased in both value and volume, growing by 53.6 percent during the period ended November. 

The shared agent platform, provided under Agent Banking Company, creates a convergence through which at least 22 banks provide formal banking service. 

The platform seeks to take banking services closer to the people while reducing operation and administrative costs for financial institutions.

During his presentation, Mr Kawere said, the growth in agent banking represented a nominal increase of 9,225, the fastest since the shared platform was launched. 

During the period, Bank of Uganda indicated that service providers under shared agent banking increased from 11,262 to 20,487, an indication of increased access and availability of banking services to customers. 

Mr Kawere also indicated that deposits under the shared agent banking platform increased by 77.2 percent. 

The Agent Banking Company indicates that there are about 22 banks registered under the shared agent banking platform, transacting more than Shs200b per day. 

Bank of Uganda also indicated that the number of licensed payment service providers has grown to 21 as of November 1 with nine of these licensed under large fund service providers while six are classified as medium funds transfer providers. 

In the small class license category three payment service providers are licensed while two are licensed under the third party category. 

Mr Kawere also indicated that while Fintechs have eased financial inclusion, they remain highly susceptible to digital risk, among which include fraud and cyber-attacks. 

“We continue to engage the sector on strengthening risk management [by] focusing on operational risk and related exposures, financial literacy – with a bias towards digital literacy,” he said, noting that overall customer funds remain safe while all payment system providers remain well capitalized and operational risk exposures are expected to stabilise in the medium term.  

Emerging threats to payment systems providers, he said, were driven by lapses in operational risk management, cyber security, digital fraud and an increase in identity theft and sim swaps. 

Bank of Uganda has in the past five years heightened adoption of e-payment, emphasizing safety, efficiency, accessibility and inclusive to promote social economic transformation.

This has led to increased adoption of digital financial services, which has seen money held in trust account under payment service providers grow from Shs1.14 trillion to Shs1.67 trillion as of November 1. 

Digital risks 

Mr Kawere also indicated that while Fintechs have eased financial inclusion, they remain highly susceptible to digital risks, among which include fraud and cyber-attacks due to lapses in operational risk management.  

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