Financial Institutions have been urged to embrace the use of Electronic Know Your Customer (E-KYC) Project.
Speaking during the meeting held to discuss the progress of E-KYC on Thursday at Golden Tulip Hotel Kampala, the Executive Director of Uganda Bankers Association, Wilbrod Humphreys Owor said the project in banking is very important in account opening or authenticating transactions.
He revealed that Uganda is still a heavy cash-driven economy and with the introduction of digital solutions, financial institutions must adopt them as a way of embracing the journey to the digital economy or cashless economy.
“I don’t need to emphasize the importance of digital identity and the means to authenticate or verify because this is what we do in the banking sector. I think most importantly is how digital can help us drive the future. Nevertheless, the journey has been very interesting since today we have 25 Supervised Financial Institutions (SFIs) connected and the few others soon will join,” Mr Owor said.
“Let’s embrace E-KYC. Nothing can be perfect, I know there are issues about connectivity and they will be dealt with but we should also know that there will never be a perfect system and I believe NIRA and NITA-U are working around the clock to see that such issues are solved.”
The Executive Director of Financial Sector Deepening (FSD) Uganda, Rashmi Pillai also commented that real-time identification ( Electronic KYC) is a fundamental trail on which the entire financial sector rest.
She added that once the financial institutions get the idea of individuals and businesses and a better understanding of how they participate in the financial sector ie How they spend their money on school fees, health insurance and housing etc, such data trails will help the financial sector to build and customize the unique identifier (National Identity Card) thus deepening financial inclusion in the country.
“We hope to see FINTECH, SACCOS and MFIs all whom are providing majority financial services be able to access KYC, especially Electronic KYC where there is a direct connection with NITA-U. Once we can achieve this we would have truly contributed to the government of Uganda’s Parish Development Model,” Ms Pillai emphasized.
Dr Tumubweine Twinemanzi, the Executive Director of Supervision at Bank of Uganda also noted that the Central Bank has taken critical strikes towards supporting digital transformation in Uganda in line with the government of Uganda’s National Development Plan III, the national financial Inclusion strategy and sector development strategy.
“By developing reliable, secure and easy to use E-KYC flamework, Uganda can user in a wave of innovative solutions built on the back of a secured platform. A digital E-KYC flamework is therefore critical for the financial sector because it enables faster onboarding of new clients, increases the penetration of formal banking and saving services and build reliable data trails.”
Dr Twinemanzi further stated that Bank of Uganda is also devoted to developing a payment ecosystem that is cost-effective and efficient for the financial service providers and customers on which provision of innovative products suitable to meet the customers would ride.
The initiative to develop an E-KYC platform was launched in 2019 for all supervised financial institutions (SFIs) to connect to the NIRA database and transmit verification requests securely.
In light of this, Financial Sector Deepening (FSD) Uganda, Uganda Bankers’ Association (UBA) and Bank of Uganda with technical support from Laboremus embarked on the development of a technical infrastructure enabling the supervised financial institutions (SFIs) purposely to; Update records of their customers with the National Identification Number.
Electronically validate the identity of their customers using their National Identity Number (NIN) for new account opening and transaction validations.
The project commenced in November 2019, and currently, there are 25 SFIs connected to the system successfully. Electronic – KYC is a critical foundational component for Uganda’s banking and financial industry towards building a robust digital economy ecosystem in line with NDP III objectives.
As of now, the 25 SFIs are able to; Onboard new clients using their bank systems. Validate or authenticate transactions remotely without the reliance on the physical presentation of identity information. Undertake updating of their existing customers’ KYC information reliably.
As a digital authentication platform, the E-KYC system can be integrated with other databases like Uganda Registration Services Bureau (URSB), the lands registry, the movable assets registry, Credit Reference Bureaus (CRBs) and, as such, enable advanced background checks for multiple purposes.
According to the Bank of Uganda, FSD Uganda and UBA, there has been significant progress with the project, with SFIs using the system to open new accounts as well as verify account details. However, there is still room for more enhancement through collaborations with other stakeholders and institutions, ultimately contributing to better customer experience and improvements in financial inclusion numbers.
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