Bank of Uganda has signed a contract with fintech company Laboremus Uganda to develop a digital ID verification system to be used by all banks and other licensed financial service providers in the country.
To roll out the project, the Central Bank is partnering with Uganda Bankers’ Association (UBA) and Financial Sector Deepening Uganda (FSDU).
The system envisaged to function as a shared E-Gateway will be hosted at Bank of Uganda and will interface with and use NIRA’s existing records, as well as the National ID card system.
According to a brief on the initiative, the system will help banks verify the identity of existing and prospective clients in account opening and transaction processing among others.
It will also offer a secure, multifactor digital authentication that will be available to all companies in the financial services sector.
The development means licensed financial service providers can speed up identity authentication processes, cut costs of previous length manual processes and increase reach particularly to previously unserved and underserved customer segments especially people living in rural areas or in the diaspora.
It will be an important building block for enhancement of existing electronic channels like agent banking & other innovation within the financial services sector.
Speaking at the launch of the system, Tumubweinee Twinemanzi, the Executive Director Supervision Bank of Uganda said the new system will significantly enhance transparency in financial service delivery.
“The sustainable delivery of financial services significantly relies on the ease of uniquely identifying customers often referred to as Know Your Customer (KYC). The absence of a flexible, timely and cost effective means of verifying the identity of consumers of financial services has been a major and continuing constraint to financial inclusion and credit growth in Uganda,” Twinemanzi said.
He said manual processes for KYC are highly susceptible to fraud and impersonation, and this downside has negative implication for consumer confidence in the financial system.
The initiative will establish a centralized Application Programming Interface to enable a real-time and remote authentication of customer information in the Ugandan financial sector.
Under the arrangement, the BOU supervised financial institutions and other authorized service providers shall collect the pre-agreed personal information, which shall then be submitted to NIRA through the system hosted at BOU for authentication.
This information exchange between the NIRA and service providers shall be conducted over a secure electronic platform.
Twinemanzi said the initiative was to fulfill the planned rationale for the establishment of NIRA and the National ID system, to ensure that the National ID becomes and remains the key identifier for financial services consumers.
Laboremus Uganda, a specialist IT firm, was procured to design and build the solution.
Stakeholders in the initiative hold that digitizing the customer verification process will simplify customer acquisition, increasing the probability of reaching more customers with formal financial services.
They add that providers can also leverage these operational efficiencies to lower the costs of previously manual processes – these savings can be transferred to customers by making financial services more affordable.
The signing ceremony was also attended by Wilbrod Owor the UBA Executive Director, Bram van den Bosch the Managing Director of Laboremus Uganda and Rashmi Pillai the Executive Director of FSDU.