While about 18 million Ugandans are now able to access services via the internet, only a fraction of the 18 million are able to bank, pay school fees or utility bills, order transport, search for location, learn, or perform a variety of other basic day-to-day needs; online. Why is that?
Among other hinderances, the answer lies in the capacity of different mobile platforms to connect with multiple service providers and allow transactions to take place. Today the vast majority of the applications used in Uganda are still private and the Application Programming Interfaces (APIs) are only available to third parties at exorbitant costs. This not only makes the services expensive but also limits innovation by third party developers.
But what are these costly APIs? Just like we talk to each other to make things happen, so do software programs. Software programs need to communicate to perform the various tasks that we want them to perform. For that matter, the importance of an API as an enabler for an open digital payments ecosystem and an inclusive digital economy cannot be overstated. It is that connection that allows software programs to ‘talk’ to one another, interpreting what information is being given and what actions the software wants the other to perform.
For instance, for a ride hailing service like safeboda or Uber to operate, it has to know the location of its rider and that of the customer. This is made possible by accessing and using a “location API”, say that of Google maps. Without having access to the location API, Safeboda or Uber as a business / service would not exist.
Similarly, for a business to sell its products and services online (without any direct contact with the buyer), they would need to find means of being paid online (digitally) too. The most common payment option in Uganda today is mobile money. Therefore, for a business to be able to accept / request for a mobile money payment from a customer, it needs to access and use the mobile money API from the telecom.
In Uganda, the concept of open APIs is still in its nascent stage and only a handful of players in the industry appreciate its potential impact in accelerating the growth of the digital economy. It is of utmost importance for example, that digital financial services (DFS) providers such as banks, telcos and finTechs come on board to open their APIs to third parties, to enable digital payments that power the digital economy in which we operate.
UNCDF pushes industry players to open their APIs
During a workshop on ‘OPEN APIs/ OPEN DATA in the Digital Economy’ held in Kampala last November, the United Nations Capital development Fund (UNCDF) stressed how fast tracking interoperability between companies will contribute to the growth of the digital economy in Uganda. Convened by the UNCDF and facilitated by Aiaze Mitha, an international expert in DFS and open payments ecosystems, the workshop gathered over 70 participants from Fintech, Startups,Telecos and government institutions that are now reflecting on the benefits of open APIs.
“Third party partnership programmes are the standard model for growth employed by large enterprises across all industries. Companies testify to the significant benefits including accelerated growth, higher brand awareness, increased revenue and presence in new markets,” Mitha says.
In Uganda, only 28% (5.2million) of the adult population use formal financial services (defined as banks, Microfinance Deposit Taking Institutions and Savings and Credit Cooperative Organizations). On the other hand, according to Bank of Uganda, the number of registered mobile money subscribers by July 2017 was 22.9 million. These numbers demonstrate that increasingly, customers are looking for quicker and more convenient processes.
Unfortunately, traditional financial service providers are limited in their ability to innovate and deliver advanced customer experiences. According to Mitha, tomorrow’s financial services providers (FSPs) will need to be radically different to compete in the digital finance space. Opening their systems will allow for more willing and talented companies, particularly startups to innovate for the customers of these FSPs – thus improving the value proposition of the latter with new services.
What this means for customers
“UNCDF is committed to working with public and private sector partners to build an Inclusive Digital Economy that leaves no Ugandan behind in this digital era”, Chris Lukolyo, Digital Country Lead for UNCDF says.
From asking for and making social contributions, making utility payments, online shopping, to accessing critical services like education and the much-needed health care, digital technologies can and have improved the livelihoods of humanity. When it is easier and cheaper for developers to test new ideas, customers get a range of services to choose from and make payments from their bank or mobile money accounts in real time. By fueling innovation, open APIs therefore provide customers with a wider choice of innovative services and solutions to meet their various needs. This also comes with increased flexibility and transparency in how customers transact.
While DFS providers could invest more in innovation, usually low-income communities are not a priority. Yet, with access to affordable digital solutions, these communities represent a wide customer base that can accelerate the business growth of the sector. Open APIs for instance can provide access to precious data that would be otherwise daunting to find for communities without access to formal banking services. Often, these communities have no data on their income; no credit history; no history of payments. Technology is making it easy to digitize this information. When systems are able to speak to each other, this data can be available to financial services providers and eventually give currently underserved customers access to services like credit and insurance.
UNCDF is holding one on one discussions with various insitutions in the industry particularly telecom companies, banks and Fintechs on how to work towards opening their APIs.
UNCDF has helped build the rails of the digital economy in Uganda with its programmes on financial inclusion since 2014. The agency is currently implementing a programme focused on building an incusive digital economy in Uganda. To ensure that no one is left behind in the digital era, UNCDF is working with a selection of partners ready to address underserved markets in particular women, youth, refugees and smallholder farmers.