5 December 2017

Rwanda to Go Cashless By 2024 - Are You On Board?

Photo: Steve Buissinne/Pixabay
Credit cards.
analysis

The central bank is currently conducting a countrywide sensitisation campaign to raise awareness among the business community, professional groups and general public about the benefits of embracing electronic payment (e-payment) facilities.

The drive is part of efforts to deepen use and access to e-payment systems like credit cards and e-wallets and hence fast-track the realisation of Rwanda's goal of being a cashless economy by 2024.

However, experts say the cost of transactions is still high which discourages many people from using e-payment services provided by banks, telecoms and businesses. This has forced the National Bank of Rwanda (BNR) to call on financial institutions and other concerned stakeholders to review their pricing models and align toward encouraging the uptake of digital payment solutions.

Addressing sector players during a cocktail dinner organised by the Rwanda Bankers Association (RBA) in Kigali on Friday, John Rwangombwa, the central bank governor, said reviewing downwards the user fees would help boost uptake and use of the e-payment solutions on the market.

"This will eventually attract more people to settle business transactions using digital services like mobile money and points of sale (POS)," he said, adding that the high charges associated with these innovations were pushing away people.

Besides, reducing charges, Rwangombwa said the sector need a pool of professionals and financial experts to support service providers and help fast-track the move toward a cashless economy as well as deepen financial inclusion.

"We need to power efficient and inclusive growth by encouraging the uptake of digital solutions," Rwangombwa said.

The central bank chief was optimistic that the economy will continue to post positive growth, providing bankers an opportunity to capture the untapped market.

He added that there were many reforms in the offing expected to be unveiled next year to make the sector more competitive.

The 2016 McKinsey Report estimated digital financial service to have potential of boosting annual GDP of all emerging economies, including Rwanda, by at least $3.7 trillion by 2025 or by 6 per cent above projected GDP.

No turning back

Financial sector players have no choice but to innovative and also adopt fintech tools to be more competitive, said Maurice Toroitich, the chairman of the Rwanda Bankers Association.

"Embracing fintech facilities like electronic payment systems is no longer a choice but a must. We must remain relevant to both our customers and ensure shareholders have a good return," Toroitich, who is also the BPR chief, said while speaking at the bankers' dinner.

Celestin Nsengiyaremye, a financial analyst in Kigali, said digitisation of the economy leads to significant change in the way banks determine their prices.

"It is, therefore, important to understand that electronic services increase savings. However, banks need to balance efficiency against the cross-selling opportunities branch networks bring," he said.

According to Nsengiyaremye, technological changes including availability of the Internet, digitisation of bank products will influence and attract users, thus increasing financial inclusion.

"All sector players should be working toward ensuring Rwandans access financial services easily to ensure inclusive growth," Nsengiyaremye said.

The potential can only be fully exploited through strong partnerships between financial institutions and telecommunication firms, according Lindy Larson, the Reach for Change Africa programmes manager.

Why charges are high

Kenneth Agutamba, the Bank of Kigali PR and communications officer, faulted the high cost on the commission fees charged on products telecom firms give financial institutions to facilitate services like MTN push&pull where a customer can move money from their bank account to their mobile money wallet and vice versa. "We agree with the governor and that's why at BK we don't charge anyone pulling money from their account to their mobile money wallet. This is aimed at promoting a cashless economy," he added.

He is, however, confident that increased competition will help drive down user fees. Some banks charge up to Rwf300 per transaction, which for many people is too high.

Agutamba attributed the low uptake rate to the challenge of lack of information by users, and called on banks to conduct sensitisation campaigns to raise awareness about these products, noting that the product education is very important.

Users speak out

Claudine Umurerwa, a retailer in Kigali, said high transactions charges are affecting uptake and usage of fintech solutions. "It is important to make these solutions more affordable for the ordinary Rwandan," she said.

That's why most people still see them as facilities as tools designed for the rich and the corporate class, she added.

Umurerwa said that there is also need to increase the number of points of sale and ATM across the country, saying they are still very low.

New drive to fast-track cashless economy

Last month, the central bank launched a cashless economy drive to create awareness among members of the private sector as part of the strategy to expedite the usage of electronic payment solutions.

Rwangombwa said the campaign seeks to encourage use e-payment systems among business community and help boost efforts towards achieving a cashless economy and deepen financial inclusion.

According to central bank estimates, business community is losing up to 6 per cent in transactions done using hard cash as opposed to only 2 per cent loss incurred when transacted electronically. The central bank's e-payments campaign continues in Muhanga and Huye districts in Southern Province this week.

More on potential of fintech tools

According to the Finscope report released last year, formal inclusion was at 68 per cent of which mobile money added to 23 per cent.

Experts believe that with more and more digital financial service products, economies like Rwanda will at least enjoy low cost of providing financial services by up to 90 per cent, enabling providers to serve lower income customers profitably.

It will equally attract an additional $4.2 trillion in new deposits into the financial system, as more people obtain access to accounts and shift their savings from informal mechanisms.

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