Banking borders in EAC to disappear

Following the single tourist visa, a major deal between banking switch services in Uganda, Kenya, Rwanda and Tanzania is in the offing to unlock more value in the East African banking, finance and trade sectors.

Banking switch services allow a customer of one bank to access their account at ATM’s of another bank without opening an additional account.

Uganda currently has 5.3 million commercial bank accounts spread out in 27 licensed commercial banks. There are 13 banks on the Ugandan switch run by Interswitch East Africa.

“We are soon signing a Memorandum of Understanding with Kenya’s Kenswitch, Rwanda’s Rswitch, and Tanzania’s Umoja. Our goal is to expand to the entire African continent,” Olumuyiwa Asagba, the Interswitch boss said at the Serena Kampala Hotel last week.

“We want to be a catalyst for the East African intergration and the move towards having a cashless economy,” he added.

The addition of Centenary Bank to the Ugandan switch last week, has doubled the number of interconnected ATMs in the country to 280 from 146.

Fabian Kasi, the Centenary Bank boss, pointed out that the expanded ATM network makes banking more convenient.

He said this will lower banking costs and boost tourism and trade across East Africa.

Emmanuel Mutebile, the Bank of Uganda governor, noted that the switch service will further entrench electronic payments in Uganda and cut banking industry overhead costs currently at 7% of total banking assets (about sh1 trillion).

Cumulative commercial bank assets amounted to sh15.5 trillion at the end of December 2012. Mutebile noted that this level is unacceptably high and should be brought down by collaborative efforts.

“The adoption of IT solutions to the delivery of services will enable financial institutions to reduce spending on physical premises and on staff costs,” he said.

“The innovations are already delivering huge benefits for customers in terms of the speed, reliability and costs of making payments.”

Anthony Kituuka, the KCB head of corporate banking, said the move will be a major boost for banks without a regional branch network.

“The East African economy benefits when its citizens are able to move from one country to another and withdraw money in the local currency to pay for goods and services,” he said.