Uganda: Open Software to Cut Transactional Costs

7 July 2017

Money Transfer

Kampala — Digital financial service providers want telecommunication companies and banks to open up their software such that they can transact on their platforms.

The software - Application Programming Interface (APIs) - allows software programmes to talk to one another to enable the delivery of a given service.

Mr Richard Ndahiro, the United Nations Capital Development Fund (UNCDF) digital finance expert, while addressing journalists during an API workshop at Sheraton on Tuesday, said APIs connect third parties - developers and financial services to established payment platforms enabling delivery of innovative services that address needs of customers.

This means that the costs of transactions such as paying utility bills will reduce as a result of bypassing aggregators who have been selling the APIs to digital service providers at a fee.

Mr Vincent Mwende, a coffee farmer in Kapchorwa, was introduced to PAYG solar as part of the UNCDF works in digitising agrovalue chains.

He was able to buy solar lighting in his home because he could pay for the solar in installments overtime, making it affordable to acquire the home solar system. Delivering such a service is made possible by integrating the services of a solar company and a telecom company using mobile money. The integration is technically enabled by APIs.

Mr Ron Web, the director financial services Safaricom Limited, said opening up the APIs in Kenya has allowed many other developers to easily use Safaricom as a payment enabler, allowing their customers to easily use and pay for their services at minimal fees.

In Uganda today, many service providers such as pay TV service providers and Umeme have had to integrate the mobile money payment platform into their services. But for their customers to pay using mobile money, these utility service providers have had to go through a third party aggregator who buys the API from the telecom and later sells it to them at a fee hence charging a transactional fee to enable the payment.

Mr Ndahiro explained that when you pay for your Umeme, the additional Shs1,000 that you are usually charged is a service fee which goes to the third party aggregator for facilitating the transaction.

With the Open APIs, he explains that this will allow the service providers to directly access the API from the telecom companies; thereby eliminating a third party and eventually lowering the costs of the transaction.

"By lowering the barriers to access key APIs, PSPs open up the innovation space for external developer talent to propose new solutions to the market. The benefits of this are immense for stakeholder solutions, more usage and revenue," he said.

Whereas the concept of Open APIs has been around for a while in East Africa, in Uganda it remains quite a new concept and business model for industry players.

Source: The Monitor