FSD UgandaFive Years of the Fintech Association, a Case for Robust Industry Associations
By Brenda Banura
Congratulations to the Financial Technologies Service Providers Association (FITSPA) on reaching another milestone, a celebration of five years of stewardship in the financial technology (fintech) industry.
Prior to the birth of FITSPA – the fintech association, the digital financial solutions sector in Uganda was in a frenzy propelled by the significant takeoff, of mobile money. Mobile money subscribers had dramatically grown from 0.6m in 2009, the year of introduction, to 23.3m by 2017. Usage of mobile money had evolved from money transfers to include payments, savings, credit, and cross-bank transfers making it a fully-fledged digital payments ecosystem.
The regulatory framework
These innovations happened in an environment that lacked a robust legal and regulatory framework except for mobile money guidelines, which were not comprehensive for the increasingly complex financial system.
The government was keen on formalising this sector, but there was no credible industry body to work with to make this possible. Unlike other sectors like banking, insurance and microfinance, the fintech community did not have an association that could engage government and other major stakeholders to further the interests of the digital payments ecosystem. There was need for formalisation for the industry to thrive.
FSD Uganda’s role in FITSPA’s set up
For the Financial Sector Deepening (FSD) Uganda, the establishment of FITSPA was important because technology comes with affordability and efficiency. These aspects play a significant role in increasing financial inclusion. Financial technology makes it affordable to reach the underbanked in remote rural areas efficiently, in addition to smoothening the value and supply chain.
To kick start the step-up, FSD Uganda played a convening role bringing all fintechs together to build consensus around forming an association. FSD Uganda then funded legal support to set up, register and offer guidance on how to build a strong association.
This is in addition to supporting the association in developing an industry code of conduct to improve the integrity of the FinTech industry and ultimately increase customer, regulator, and investor confidence.
FSD Uganda also introduced FITSPA to regulators and advocated for the association to have a seat at the table.
In July 2017, FITSPA was launched to give fintechs a voice to lobby for appropriate regulation and a platform to engage with regulators. True to its founding objectives, in 2020, the National Payment Systems (NPS) Act was passed.
After the setup of FITSPA, FSD Uganda provided hands-on support to FITSPA members to operationalise the NPS Act in preparation for the license application. To aid this process, a Compliance Toolkit that would assist its members in implementing the provisions of the NPS regulations was developed.
To date, FSD Uganda continues to provide guidance and influence in all matters geared towards supporting growth aimed at increasing financial inclusion while navigating the dynamics of developing useful financial digital solutions.
As it celebrates its fifth anniversary, FITSPA has grown by leaps and bounds. The process has been long, and challenging but, in the end, worthy because of the benefits of industry associations that were made evident along FITSPA’s journey.
Dividends of associations
Associations enhance the credibility of the members. Until the payment aggregators came together under FITSPA, the industry had little credibility. FITSPA opened the door to solid partnerships within government, private sector, and the international community. FITSPA has now built meaningful partnerships with key stakeholders like the Central Bank, Uganda Bankers’ Association, Private Sector Foundation, the Uganda Institute of Banking and Financial Services, and National Information Technology Authority Uganda. The association has also succeeded in raising funds for further development of the Fintech Ecosystem in Uganda. So far FTSPA has received funding from aBi Finance, International Trade Centre, and the Bill and Melinda Gates foundation. The association is also the founder member of the African Fintech Network and even went on to host the Africa Fintech Festival in 2019.
Related to enhancing credibility, associations also ensure accountability. The industry through their association can agree on a set of standards against which every member would be evaluated and sanctioned in the event of a breach. FITSPA’s code of conduct and the National Payment Systems policy, legal and regulatory framework in place are benchmarks for this.
Visibility and brand value are other benefits of associations especially to the small players. They leverage the platform of the association to tap into the networks of the industry and showcase their services at the lowest possible cost. Irrespective of the size and market share, all members of the association will have visibility at all the association events, publications and platforms. Being a member of FITSPA will open doors previously impossible to open because the small FITSPA members can leverage the FITSPA brand and networks.
Associations provide a platform to access opportunities previously unimaginable especially for the small players. FITSPA has been able to mobilise funding and technical support that has and will continue to benefit its members especially the small members. For example, FITSPA was able to secure technical support from FSDU to develop a toolkit for preparing its members to understand the policies and apply for licenses under the National Payments Systems Act. The members supported each other and today, 15 fintechs have been licensed by the central bank, most of them being FITSPA members. Many other members have started the process to obtain licenses. For some of the small members, this is not a service they would have easily accessed outside the FITSPA membership.
Five years ago, today’s fintech milestones would be a dream if fintechs big or small had attempted to achieve them solely. But together so much has been achieved and more is yet to come. Like FITSPA, FSD Uganda in its role as a market facilitator has and will continue to support the growth and development of industry associations. Notable examples of such associations include the Uganda Bankers Association (UBA), the Uganda Insurers Association(UIA), and the Association of Microfinance Institutions of Uganda(AMFIU) all key players in the increase of meaningful financial inclusion.
