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The digital economy: Opportunities and pitfalls

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Author: Karoli Ssemogerere. PHOTO/HANDOUT

Mid last year riots broke out in Nairobi. They created a communications emergency. In a communications emergency, operators must downgrade their internet traffic as demonstrators were using the internet to mobilise and cause chaos. 

The downgrade’s effect was felt as far away as Kampala. One of the most popular payment operators, pesa-pal, registered in Kenya with a big clientele of Kenyan businesses was completely down. So were many over-the-top applications. 

Social media is the biggest one, but this suite of applications includes work tools like Zoom, the online portal that is used for online meetings, and in the bigger world for nearly every facet of office work including conduct of court hearings, depositions, etc. 

My American correspondent lawyer quickly understood why we couldn’t hear each other and had to cancel a deposition. He had read the New York Times that there was trouble in Nairobi.

In December, Umeme, the electricity retail distributor switched to a new billing system with a new account system. Many fraudsters fleeced customers promising faster connections. But then there is a problem in the Umeme billing system itself, limited information about the bill itself. 

The online electronic fiscal receipt system, EFRIS produces bills different from the ones displayed in the online telecommunications portal. By the time this issue is resolved, money will be lost. 

It can be a shock as I did, when I walked into my local Umeme office in Entebbe, after one month of electricity consumption and no bill, and I was informed I had a “positive balance” in other words, no bill to pay. 

I protested with my Efris receipt showing a huge balance which I was wondering how I was going to pay, but the account executive simply sent me home. 

A month later, Umeme still cannot issue its bills on the 5th day of each month. In short, the new system has created another inefficiency whose effect will be felt in the long run. In the same month, December, I went to check on a small account I operate in Finance Trust Bank. 

I have an emotional connection to both Finance Trust Bank and Stanbic Bank. My mother served on both boards. But also, these are the only two banks with branches in Kalangala, my home district. 

What began as a routine cash withdrawal turned into a nightmare, insufficient funds on the account? Why, the bank had failed to credit two deposits on my account because of an error in the ordering of my name by the depositors. 

Banks have been routinely hit by fraud. It was an excruciating experience, but a long list continued, the bank could see the money, but required third-party verification from the depositors themselves. Why, because, ATM service failure, network failure, and then in short back to mobile money with its atrocious charges. 

A polite notice at the bank always tells you the ATM is temporarily down, but then you realise it's down every day, the ATMS incapable of recognising their own ATM cards. Diebold the machine maker must be called to account. Then the big fraud of the year that hit the Central Bank. 

Altered payment instructions resulting in a loss of $60 million in one heist. In the communications industry, there is a legal anachronism, whether the messages you receive on your phone are just messages or “money” or “recoverable money”. 

Money itself rarely moves at all; the end of the day comprises of settlement of all these ingoing and outgoing messages. Commercial banks lose a lot of money in digital frauds initiated in-house where recovery of the messages happens long after they have been converted to cash. 

Banks are sensitive to disclosing these losses afraid of negative publicity.In December, I visited Woods Inn in Mbarara, formerly Riheka Inn owned by the family of the late Boniface Byanyima. I represented Mzee Byanyima in the purchase more than 10 years ago from his old student Sir Richard Henry Kaijuka, just before the advent of the digital age. 

Mzee Byanyima in his 90s was at an age where his bank was concerned he could not append his signature to banking instructions. 

Shortly before midnight, he did append his signature to a big cash transfer to his former student. Ever the teacher, Mzee picked up his phone to call the counter-party, “Nasharura!” I have paid. 

For a minute there was an impression that cash vans were in the compound taking money to Mr Kaijuka.So, in the digital age, I wonder how a false message could unravel such a transaction. 

In the digital economy, are opportunities and also big pitfalls. 

Banks are sensitive to disclosing these losses, afraid of negative publicity.

Mr Karoli Ssemogerere is an Attorney-At-Law and an Advocate. [email protected]