Bank of Uganda governor Emmanuel Tumusiime Mutebile has said new and emerging financial technologies offer both opportunities and risks to the banking sector.
In his remarks at the virtual Annual Bankers’ Conference on Tuesday, Mr Mutebile said this make it necessary for financial institutions to re-engineer their business models.
“The 4th Industrial Revolution (4IR) is set to fundamentally alter the financial sector landscape and we do not yet know just how far these technological innovations will unfold. The changing financial ecosystem has however introduced both opportunities and risks,” he said.
Mr Mutebile added while the transformation may polarize the market by excluding those segments with low levels of digital and financial literacy, the growing use of technology to capture, store and analyze data, consistent with the fourth industrial revolution, increases the risk of data misuse and privacy violations, the governor said.
“Non-equitable access to technology-enabled user devices may also increase the already significant digital divide. In addition, access to efficient, reliable and secure infrastructure may itself be a constraint to seamless consumption of financial services,” he added.
Mutebile also said the pace and dynamism of fintechs presents regulatory challenges.
“The fundamental question for any regulator is: How do we encourage financial innovation without compromising the safety of consumers in the marketplace? With the majority of the providers for these technologies not domiciled in the domestic jurisdiction, there are issues relating to enforcement of domestic regulatory frameworks. The key questions for policy makers is, therefore, how to position their economies to benefit from the 4IR while managing the challenges that it presents,” the governor said.
Mutebile said Uganda has implemented a number of initiatives to provide an enabling and regulatory environment for digital transformation.
He noted that Uganda’s government has set up a national taskforce on the fourth industrial revolution, which has formulated a draft strategy on policy interventions.
“The National Payments Act and implementing Regulations which, provides a regulatory environment for payments services, have been enacted,” he added.