The Benefits of Sharing: Making Payments More Affordable

“a problem shared is a problem halved” British Idiom

Throughout history, men have rallied together to defend their communities; women have huddled into various community groups to help with cultivation and it has become common place in Kampala at least for people to call “wedding meetings” to solicit contributions from relatives friends and in-laws to cushion the burden of the so-expensive weddings that are today’s phenomenon

Today we have seen a lot of effort in the business sectors; first beginning with the Telecom companies when they outsourced their infrastructure to cut costs internally but in the end ensure small service providers can share in this expensive infrastructure.

In the financial services industry, many banks and financial institutions (more so microfinance organisations) with limited capital expenditure budgets have resorted to joining payment switches like Interswitch, VISA, MasterCard et al to ensure they have access to Automated Teller Machines (ATMs) and Point Of Sale (POS) infrastructure at a minimal cost that is usually passed onto the customers.

Interswitch has positioned itself as the national payments switch in order to process local cards, providing the most cost-effective solution for service providers with a retail focused technology driven business preposition. Adoption is still low even in this space

It’s time for Banks in Uganda to adopt the use of technology to facilitate access to financial services. For instance, here we are again, its school fees season and yet again parents and students from all walks of life will be lining up in banking halls across the country trying to pay school fees. This process requires that one withdraw money from one’s account walk to the bank where their school has its account and line up for hours on end to deposit.

How about we utilise all these new channels; the internet, ATMs, POS and mobile to cut this transaction time by over half!! Some questions arise;

• Do the banks mind these lines? Being a seasonal problem (it usually lasts three weeks to a month) are there any deliberate steps to create alternatives? There are none that I know of. Most payments are still restricted to the bank and the online and mobile channels are not rich enough as service providers are not being approached to embrace this wave.
• Do the schools understand the pain parents and students go through in paying these dues? If they did, have they taken steps to alleviate this pain? I have not seen a deliberate move on their part, and the parents are hesitant to make demands in this area as the cost will be passed onto them anyway
• Are there technologies that can make this process happen? Yes there are, and they are very affordable in most cases

And by sharing this technology across member banks, Interswitch has proved that:  

• Capital expenditure on technology infrastructure can be tremendously reduced, guaranteeing savings for financial institutions
• Though the ATM is built to dispense and receive cash, utility companies and other service providers can be allowed access to them, enabling people to pay bills, fees and fines 24X7. No new expenditure is required as the ATM will keep using the same power, same telecom link and the same security
• Cost savings mean that the institutions can then invest in innovation and expand the scope of their product offering creating more value for their customers
• The customers, having received this new experience are then able to conveniently utilise these services and in the end become more profitable to the financial institution, as they keep the cash in the sector
• Shared infrastructure increases the value of each unit of infrastructure as it increases the functionality without increasing the cost. That makes each piece of hardware/software more relevant to the business.

So when all is said and done, it helps to share. We have more value across the board and the ecosystem as a whole becomes better managed, more efficient and more relevant to the customers.