BOU Prohibits Banks from Levying Additional Charges on e-Payments


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Ugandans who rely on swipe cards for payment of services have welcomed the directive by the Central Bank prohibiting the surcharging and the creation of minimum or maximum transaction amounts on such payments, saying it was long overdue.

Many say the decision is progressive and it will put a stop on the exploitation that they had been subjected to for a long time.

On Thursday, the Bank of Uganda issued a circular saying it had become aware of the practice of merchants surcharging and establishing minimum/maximum transaction amounts on electronic card payments in the Ugandan market.

The circular was issued to all Chief Executive Officers of commercial banks, credit institutions and microfinance deposit-taking institutions in Uganda.

Surcharging is the levying of additional charges/fees over and above the transactional charges/fees agreed with the service provider of a given electronic payment card.

In practice, some merchants add a surcharge and/or establish minimum or maximum transaction amounts as a condition for accepting electronic payment card methods.

Hannington Wasswa, the Acting Executive Director for Supervision at Bank of Uganda said the practice is unfair and unjustifiable adding that such business practices “are detrimental to the growth of electronic card payment systems” and they negatively impact the consumer’s perception of such methods of effecting payments.

“This undermines national efforts by the government of Uganda to promote non-cash payments and financial inclusion,” Wasswa said.

Accordingly, Bank of Uganda has prohibited with effect from September 15 this year, merchant surcharge at point of sale terminals and Automated Teller Machines (ATMs).

The regulator has also prohibited the establishment of a minimum or maximum transaction amount as a condition to accept electronic card payments.

In addition, all financial institutions supervised by the Central Bank which are connected to card payment switches where there exists a local/domestic/in-country settlement framework have been directed to have in place a harmonized or uniform domestic charge/tariff structure across all interoperable ATMs.

“Bank of Uganda will work with all industry stakeholders to employ a coordinated approach to protect consumers and eliminate the practice of merchant surcharge establishing minimum/maximum transaction amounts for electronic card payment”.

BOU says it will work towards harmonizing the domestic ATM charges on interoperable ATMs including consumer and merchant education campaigns.

Furthermore, a registry for “Do not operate” will be established to capture information on errant merchants identified for breaching directives by the regulator.

Banks and other financial institutions “must continuously monitor the activities of merchants, identify and immediately report any non-compliance with these directives to Bank of Uganda”.

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