As digital transformation continues to reshape the banking sector, the Managing Director of Absa Bank Uganda, Mumba Kalifungwa has said the future of banks in Uganda lies in technology.
Globally, experts in the banking industry have also indicated that the future of banking will look different, faced with changing consumer expectations, emerging technologies and new business models.
In an interview with this reporter recently, Mr Mumba said: “Technology is going to become key enabler for banks to provide financial services. This is not only in Uganda but across the global.”
The world of banking and financial services from around the world Uganda inclusive, has changed dramatically over the past few years following the rise technological innovation in banking and FinTech sector has changed the way banking software companies have been operating.
Mr Mumba said there is going to be more competition by FinTech companies in the provision of the digital financial services and partnership between banks and the technology companies.
Technology is facilitating the growth of digital deposits, so banks no longer need to rely as heavily on branches to accumulate deposits. This has leveled the playing field, enabling a host of digital players to compete for deposits.
In the recent years, many banks have strategically opted to increase what they are spending on technology, combine in-house teams in partnership with a FinTech company in order to be able to meet their customer’s expectation.
One prime example of banks’ successful spending on in-house technology is the development of mobile banking applications to help enhance the customer experience. Banks have also rolled out digital mobile applications, and small business and personal loan platforms.
So from quicker payments to better customer experiences, the banking industry is continuing to evolve.
Mr Mumba said what has happened in the last quarter banks in Uganda made electronic payments as of the key measures of providing financial services to the general public during this period of Covid-19 pandemic not only in Uganda but other countries as well.
“Use of online banking and mobile banking is going to increasing and more partnerships are going to be formed by the banks and the technology companies to drive electronic payments solution in the banking sector,” he said.
Many banks have chosen to partner with FinTech companies, partnerships with technological services providers enables banks to grow revenue in areas that banks lack lending expertise or scale, and post incremental income as a result.
Fintechs also benefit from a partnership because it diminishes the costs of customer acquisition, helps monetize innovations in financial services, and overcomes the barriers to expand services across state borders. In addition, a FinTech company benefits from gaining access to a more stable funding via a bank partnership and can use the bank’s network to help grow their customer base.
Following the current Covid-19 pandemic, Mr Mumba said the way of doing business is to change.
He advised the SMEs to manage their businesses properly by applying cost cutting management by avoiding spending on certain things, credit management and working capital.
“They should endeavor to hire professional advisors to help them have solution for their business growth,” he said.
As the banks continue to remain stimulus service providers, Mr Mumba said they would continue to provide finances to the private sector based on customers’ profiles, adding that credit extension by banks to private remains robust.
However, he advises that during this pandemic period the most important thing for banks to remain cautious and optimistic as well.
Speaking on measures that banks have in place to safe guard their business from being crushed by the current environment, Mr Mumba said each bank in Uganda has its own risk management modal and strategies on what it entails to risk appetite to certain sectors, customers and products.
“So I think each bank will look at business at an individual level based on case by case basis as they offer financial solutions to the business communities,” he said.
The Bank of Uganda, in its monetary policy statement of April 6, 2020 decided to grant exceptional permission to SFIs to restructure loans of corporate and individual customers including a moratorium on loan repayment for borrowers that have been affected by the pandemic, on a case by case basis at the discretion of the SFIs for up to 12 months, effective April 1st, 2020.
In relation to the above, Mr Mumba said one of the most important things that banks have done is to provide Credit Moratorium/Credit Relief to their customers. “Customers credit relief, loan restructure for their customers, wavier on certain transaction and deferrals are critical interventions that banks have done,” he said.
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