Interswitch Technology: Banking services rationalization

By Dr. Rachel Mindra Katoroogo

"The future is already here, it is just not very evenly distributed." William Gibson

Financial inclusion has been identified as an enabler for seven of the 17 Sustainable Development Goals and bounty shared prosperity.

As I have stated in my previous articles, Uganda among other countries globally have financial inclusion as a stated developmental goal despite the varying degrees of regulatory intervention.

Such interventions include, but are not limited to the use of technology as financial services enablers, development of the payment system with a focus on retail payment systems, financial infrastructure development, KYC, AMC/CFT requirements vis a vis transactional accounts.

In the finance space we recognise the efforts in narrowing of the financial inclusion gap that various stakeholders partake despite the unmet financing needs of individuals and enterprises in emerging markets.

A robust digital payment infrastructure for Uganda's financial and social intervention is important to provide reliability and security in the provision of financial services.

A week ago, as I walked to a supermarket in a shopping area well-endowed with several ATM machines, I was surprised to see a long queue of customers (and I mean very long queue...) waiting to most obviously withdraw some money from an ATM of Bank X.

This got me thinking about how much many of us (at all levels) actually knew about the interswitch system that is now available with membership of 13 of Uganda's 27 commercial banks.

In the past, a bank customer could only access banking services at their bank branch which has since changed due to technological developments in the financial services space.

Today, the story is purportedly different though to others adoption has delayed, lack of awareness among others or maybe the confidence in the relatively new systems is still an impediment to the use of such convenient service utilisation.

Actually, this is not supposed to be news... What is news is that interoperability of a bank branches is extending to interbank connectivity through the interswitch services.

Interswitch is an integrated payment and transaction processing company that provides technology integration, advisory services, transaction processing and payment infrastructure to individuals, government, banks and corporate organizations in short, they are a network for banks (Okwii, 2016). 

Interswitch technology is intended to provide bank customers with the ability to use any member ATMs and point of sales to either withdraw money or make payments which is a major component in defining and operationalizing financial inclusion.

The ability to access an ATM of any bank is many times better than deployment of independent but universal ATM points. 

The advancement and adoption of digital technologies and business models will enable institutions to achieve greater scale, penetrate new markets more swiftly, and understand their customers better.

Additionally, the importance of customer-centric design in the financial sector is key for us to think about as we look at the adoption and use of digital financial services and their interoperability.

Interswitch has been positioned to serve the interconnect point and infrastructural challenges that most developing countries like Uganda have for integrating and delivering electronic payment services to those unbanked and/or under banked.

As we re-evaluate the regional development policies and programmes especially in the deprived regions and segments, access to financial services should be a priority and is essential for sustainable development in Uganda.

The digital economy is rapidly developing across the globe as the largest driver of innovation, competition and growth.

Even though many people have been excluded from the formal financial system, tremendous opportunities are available for the digital economy to support financial inclusion in terms of access to and usage of quality financial services for sustainable economic development.

Writer is a senior lecturer at Makerere University Business School