Fintech start-ups deserve favourable policies to thrive, says Kawooya

Financial inclusion is increasingly becoming a fixture that is difficult to ignore. In an interview, the chief executive officer of HiPipo, Innocent Kawooya, explains to Daily Monitor’s Ismail Musa Ladu, why tech industry players should put aside their differences and focus on the bigger picture. The HiPipo chief executive officer is also pushing for favourable policies that will deepen uptake of financial inclusion.

Everybody seems to be talking about financial inclusion these days. What is the “hullabaloo” about it?
Well, you refer to it as hullabaloo – meaning some noise around it, but there is so much to it than you can imagine.  For starters, financial inclusion refers to creating financial products and services with value to customers, especially the vulnerable and other excluded groups. I believe the women fall in one of these categories. So digital financial service providers world over are building sustainable business models to deliver affordable financial services to low-income users en mass.

To build an economy that includes and benefits everyone, we must build interoperable solutions. These will positively transform societies, trigger the empowerment of all persons and communities, and assist in the attainment of United Nations Sustainable Development Goals.

Speaking of impacting lives, what innovations have shaped Uganda’s financial inclusion journey since independence now that we are talking about six years of self-rule?
We are an evolving society. We have moved from barter trade to cash and now, we are in a cash-lite economy—whereby there is reduction in the high usage/volume of cash, thanks to the use of available electronic payment channels. When you look at the role of the Bank of Uganda (BoU) when it was established in 1966 compared to today, you will realise so much has evolved.

Today,  BoU supervises about 26 commercial banks and several non-deposit-taking institutions. Microfinance institutions and Saccos have soared. Users leverage interoperable debit and credit ATMs.

Importantly perhaps, since its introduction in 2009, mobile money has increased the percentage of adult Ugandans with access to formal financial services from 28 per cent to 60 per cent. Today,  fintech drives all payment methods in Uganda, be it cash, cheques, cards, mobile payments, or Electronic bank transfers. You can now borrow without collateral from a Fintech or bank. The impact of Artificial Intelligence, Machine Learning, Augmented Reality, Quick Response, cloud computing, Mojaloop, and Level One Project-aligned Open Application Programming Interface has also increased.

How then can financial inclusion be leveraged for the benefit of everybody—the economy?
Digital Financial Services (DFS) support sustainable and inclusive growth through the delivery of affordable, innovative financial products to low-income users.
We need to prioritise gender-based innovation and research by ensuring the creation of enabling regulation for DFS. Many business opportunities will unfold as the post-Covid-19 pandemic reshapes our future. With technology being a champion, players such as Women in Fintech should be enabled to innovate and create solutions that serve everyone.

What is the current state of Uganda’s financial technology industry?
The Fintech industry is growing into a sound, secure, competitive, and universal ecosystem that is essential for sustainable and inclusive growth.
Uganda has over the years used Information and Communication Technology (ICT) to expand the reach of financial solutions. We are winning by giving rich and middle-income users access to digital financial tools. We are still slow at ensuring the onboarding of low-income consumers and vulnerable groups that are excluded by the traditional banking network.

There are unending cases of cybercrime and technology failures in financial technology. What needs to be done to ensure financial technology products are safe and secure for all?
We need to create security supplements for these emerging innovations. For instance, we are advocating for the provision and creation of a regulator sandbox platform. This helps to evaluate emerging tools and technologies to solve data/infrastructure localisation government regulations and directives. The approach ensures that the solutions we bring to the market are safe and secure for all users.
We also need to strengthen the leadership of projects integrators, and select experts to support the effectiveness of the innovations space. The ecosystem should include regulation/legal experts, financial experts, technical experts, security experts and DFSP champions, donors etc. They bring the experience of designing and assuring strategic digital payments systems. This would ensure the payments solutions built for fintechs, banks, and businesses, support secure real-time local and cross-border payments.

Additionally, we need to establish support teams with specialist knowledge in cryptography, and security architecture. Knowledge of technical security assurance domains like risk identification, data protection, identity, posture and vulnerability management, logging, and threat detection, has to be harnessed.

Big industry players seem to be paying for the blood of the start-ups and many other small industry players. How can these (over 100 players in the industry) co-exist or pull in one direction?
Advanced Threat Actors, like nation-state-sponsored groups, criminal organisations, etc., dominate the threat landscape for DFS when players keep working in silos. Fintechs, big or small, must collaborate on creating favourable rules and rails.

These foster secure interoperable digital payments infrastructure. On the other hand, stakeholders can compete on accounts and applications. Initiatives like the 40 Days 40 Fintechs are already helping in creating an enabling level playing field for all.
We must collaborate to develop affordable national and regional payment hubs given their value in lowering digital real-time transactions. Therefore, stakeholders such as DFSPs, donors, banks, non-banks, Fintechs, and regulators should play an active role.

Has the National Payments Services (NPS) Act, 2020 made the industry better or worse or is the law pro-big firms and anti-start-ups?
The NPS Act is building trust and streamlining innovation activities. While we must applaud the Act, it is equally important that regulation is enabling and fit for purpose. Some policies are too restrictive with considerably heavy red tape and fees involved in acquiring licensing.

Reducing licensing fees will cater for start-ups that should set off from a no-fees tier until they build a viable product. By making regulations favourable for start-ups, we breed ground to employ thousands, increase the tax base, and build a bigger Fintech ecosystem.

There is this Digital and Financial Inclusion Summit I am hearing about, why do we need one now? 

Over 90per cent of merchant payments in Uganda are still transacted using cash. Cash remains a dominant payment instrument because of the limited reach of the digital payments infrastructure.

The disjointed payments ecosystem keeps the costs of financial products and services high. So yes, it is relevant especially at this particular point in time. This is because the Digital and Financial Inclusion Summit convenes organisations eager to serve in digital innovation, financial inclusion, FinTech innovation, and cybersecurity. Stakeholders meet to discuss the building of interoperable, digital payment systems that enable delivery of seamless, affordable financial services.

Participants constitute banks, governments, merchants, mobile network operators, providers, and technology companies – connecting low-income users with the emerging digital economy.

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