Infrastructure behind Uganda’s digital payments future
Uganda already operates systems capable of settling large-value payments, but many of these still move through payment and clearing arrangements that operate within defined processing windows rather than instant settlement.
Dennis Otatiina. (Courtesy)
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OPINION
By Dennis Otatiina
Recently, Bank of Uganda (BOU) announced that from next January, over-the-counter cash withdrawals will no longer be unlimited. It is a narrow-sounding administrative change, but it sits on top of something much bigger: a long-running effort to make electronic payments in Uganda sufficiently reliable, accessible and trusted that nobody feels the need to insist on cash to begin with.
Cash withdrawal limits are not unique to Uganda. Central banks and financial regulators often use them to encourage formal financial transactions, reduce the costs and risk associated with handling large volumes of cash, improve transparency within the financial system and strengthen efforts to combat money laundering and other financial crimes.
Whether those objectives are achieved or not depends largely on whether digital alternatives are reliable enough for businesses and consumers to adopt with confidence.
What did BOU announce?
From next January, customers withdrawing cash over bank counters will face new limits. Individual customers will be subject to daily and weekly caps, while business accounts will be subject to higher limits.
In practical terms, banks and their customers have six months to adjust their payment habits before the limits take effect. The restrictions only apply to physical cash withdrawn over the counter. Electronic payments such as Real-Time Gross Settlement, Electronic Funds Transfers and mobile money remain unaffected. As such, this is not a restriction on how much of your money you can move. Rather, it is a limit on how much of it you can withdraw and receive as paper currency.
The changes form part of BOU’s broader drive to accelerate the adoption of digital payments. According to BOU National E-Payments Strategy (2021-2026), electronic money transactions increased by 28% in value in the financial year ending June 2025, while active mobile money accounts reached approximately 36.7 million by early this year, as stated by the finance ministry in the 2026/2027 budget speech. In that sense, the central bank is less driving a transition to digital payments and more formalising and reinforcing a shift that is already happening.
Why Uganda heavily runs on cash
A large part of the answer is trust or, more precisely, certainty.
Uganda already operates systems capable of settling large-value payments, but many of these still move through payment and clearing arrangements that operate within defined processing windows rather than instant settlement. Although those systems work, the distinction matters for businesses that need immediate confirmation of payment before releasing goods or services. A 24-hour or even longer processing window deters businesses from accepting payments by online transfer.
Urban legends are told of shrewd traders who take advantage of these processing time lags to acquire goods on a Friday, transfer funds to the seller on the same day, knowing that their accounts will only be debited after the weekend. This allows them time to sale the goods over the weekend and then fund the account before settlement. In the meantime, the seller of the goods is out of stock and cash until the settlement occurs.
For many businesses and traders, cash remains attractive for a simple reason; settlement is immediate and final. There is no dependence on network availability, banking schedules or payment-processing infrastructure. Digital payments, by contrast, rely on multiple institutions and technical systems working together behind the scenes. As the payments infrastructure improves, reducing the perceived gap between being paid and knowing with certainty that payment has been completed, remains one of the key challenges policymakers are trying to solve. This is where the National Payments Switch comes into play.
What is National Payment Switch?
These manage and control the operation and clearing of card payment transactions according to card scheme rules. The card schemes are responsible for passing card transaction details from the point-of-sale machine to the bank that issued the card and for passing payments back to the entity that issued the point-of-sale machine which in turn pays the merchant.
At present, Uganda’s payment ecosystem remains fragmented. Banks, mobile money operators, card schemes and payment service providers operate across multiple technical connections and bilateral arrangements. This lack of interconnection leads to settlement delays and high merchant fees.
A National Payment Switch is designed to provide that common infrastructure; a singular platform through which banks, telecom companies, fintech and payment providers can connect and exchange transaction details more efficiently and securely. Instead of every institution building separate connections to every other institution, each participant connects once to the Switch. The result should be a more interoperable system capable of supporting faster, and more direct, movement of money across Uganda’s financial sector.
What would this look like in practice?
Take cash access as an example. One of the ambitions behind national payment switches around the world is the idea that consumers should not have to think about which institution owns the infrastructure they are using. In mature interoperable systems, the barriers between banks, wallets and payment providers become far less visible because transactions move across shared rails rather than isolated networks.
For Uganda, the precise services that will ultimately be available through the National Payment Switch have not yet been publicly detailed. However, Bank of Uganda has been clear about the broader objective: connecting banks, mobile money operators, fintechs and payment service providers into a single ecosystem capable of supporting more seamless digital payments across the country.
To understand why that matters, consider how access works today. When you use a bank card at an ATM, the machine must be able to communicate with the institution that issued your card to verify your identity, confirm sufficient funds are available and authorise the transaction. That communication is only possible where the relevant institutions are connected through compatible payment networks and commercial arrangements.
Where those connections do not exist, the transaction cannot be completed, even though the money is sitting in your account. The same principle applies to mobile money. If you hold funds in a mobile money wallet, your ability to access cash through an ATM depends on whether your mobile money provider has an arrangement with that particular bank or payment network.
One of the long-term ambitions of the National Payment Switch is to reduce those dependencies by allowing participating institutions to communicate through shared infrastructure rather than multiple separate bilateral connections.
It is a small convenience with a bigger point behind it: access to your own money should belong to you, not to whichever business arrangement your telecom happens to have struck with a particular bank. The easier and more reliable it becomes to turn an electronic balance into cash on demand, the less reason anyone must insist on being paid in notes in the first place.
Why does a middleman like Visa or Interswitch need to be involved at all?
Uganda’s banks already exchange funds through existing clearing and settlement infrastructure, but the issue lies elsewhere: many retail payments still depend on a mix of settlementtn schemes, payment processors and bilateral arrangements to achieve interoperability between institutions. This is where networks such as Visa, Mastercard and Interswitch enter the picture. They provide the routing, messaging and transaction-processing systems that allow different financial institutions to recognise one another, verify transactions and exchange payment instructions securely and at scale.
At an ATM, the process is largely invisible to the customer, so the machine still needs a trusted network capable of confirming that an account exists with sufficient funds available and the transaction is authentic. At the point of sale, similar systems allow merchants and customers from different financial institutions to transact with confidence, and those networks perform an important coordination role that makes electronic payments possible.
A national switch aims to simplify some of those domestic connections by creating a shared infrastructure through which participating institutions can communicate and transact. Rather than relying on multiple separate routes purely for domestic interoperability, institutions could connect through a common platform designed specifically for Uganda’s payment ecosystem. A domestic switch does not automatically eliminate transaction fees, but it can reduce costs associated with routing domestic transactions through multiple external networks.
Exactly how any savings would be passed on to customers depends on the governance model, pricing framework and commercial arrangements ultimately adopted for the Switch.
The Switch would be for Uganda - it is intended to connect domestic institutions to one another for transactions that originate and end within Uganda. The moment a payment crosses a border, for instance - a Ugandan card used abroad, or a foreign-issued card used in Uganda - international networks continue to play a crucial role. The more accurate way to think about the National Payment Switch is not as a replacement for international processors, but as a system that takes over some domestic payment conversations that are currently dependent on external networks. International payment conversations would remain international.
Have other countries done this?
Several have, and their examples provide useful reference points.
Kenya’s model treats the switch primarily as industry-owned infrastructure, built and funded by the banks that use it. Nigeria’s model combines industry participation with direct central-bank ownership and oversight.
Both systems are well established and process significant transaction volumes every day. They represent the two real choices in front of Uganda: a switch owned and run purely by the banks as shared, not-for-profit infrastructure, or one where Bank of Uganda takes a direct ownership stake alongside the institutions it regulates. As it stands, the exact ownership structure for Uganda remains unclear.
However, public statements from Bank of Uganda consistently present the National Payment Switch as strategic financial infrastructure designed to improve efficiency, interoperability and inclusion. The final governance and ownership arrangements have not yet been publicly announced.
When will the Switch commence?
Bank of Uganda has been discussing a national payment switch since at least 2022, and a formal procurement process commenced in 2023, attracting more than twenty bidders. That process was subsequently cancelled and has not yet resulted in implementation. Bank of Uganda has indicated that stakeholder alignment remains ongoing, but no revised implementation timeline has been published.
Placed side by side, the asymmetry is difficult to ignore. The withdrawal limits have a firm implementation date of 1 January 2027, while the National Payment Switch does not. Whether the Switch is operational by the time those limits take effect remains an open question.
What should businesses and individuals do between now and January 2027?
In several jurisdictions where cash payments are frowned upon, the shift followed the same route Uganda looks to be heading down. Reduce the over-the-counter cash withdrawal limits, introduce a national payment switch then reduce the limits even further.
For businesses, this is not a distant policy discussion. The countdown has already begun. Firms should assess how dependent they remain on physical cash, particularly for large-value transactions, supplier payments and day-to-day operational activity. Where that dependence is significant, the prudent approach is to begin migrating toward electronic alternatives well before the deadline rather than waiting until late 2026.
Bank of Uganda has also indicated that exceptions may be considered in certain circumstances, subject to appropriate justification and enhanced due diligence. For individuals, the practical implications are simpler but no less real. Becoming comfortable with bank transfers and other electronic payment channels will likely make everyday financial life easier as Uganda continues its transition toward a more digital payments environment.
If that happens, businesses may find that cash ceases to be their default not because it has been prohibited, but because electronic payments become the easier, more certain and more efficient option.
We must keep an eye on the National Payment Switch itself. If successfully implemented, it has the potential to become one of the most important pieces of financial infrastructure Uganda has built in decades - not because most people will ever see it, but because they will no longer notice the barriers it was designed to remove.
The writer is a partner of Dentons Advocates, a law firm