As a regional phenomenon, the digital revolution has disrupted many Ugandan industries, including retail, telecommunications and consumer goods. Financial services is not an exception with proliferation mobile money payment platforms.MTN Money is the market leader with more than a half of Ugandans using the service when it comes to mobile money based transactions.For many emerging economy like Uganda, this as a huge opportunity. The success of pioneering digital players, such as MTN Money, now defunct Warid Money(nowadays trading under Airtel money) have proven that it is possible to become a market leader through digital innovation.Today in Uganda, there are many indications that people are ready for digital banks.The country is one of the largest users of social media in East and Central Africa and more than 40 percent of middle-class and affluent consumers are already actively seeking information online before making purchases. Furthermore, Uganda’s current Internet penetration is around 15 percent in urban areas, 6 per cent in rural areas and growing.
Furthermore, e-commerce penetration is at 2.2 percent, compared with 0 percent in 2009.Uganda affluent and young, in particular, are ready and eager to adopt a digital proposition. Of these sections of society, 31 percent Ugandans want an online-only model and a mere 9 percent prefer to bank through their branch. Indeed, in today’s Ugandan market, the expectations of retail-banking customers are increasingly complex. Customers naturally want a bank that protects their assets and helps them achieve their financial goals, but they also want regular and convenient interactions, total reliability, simple ways of doing things, and adaptability when life circumstances change.Yet financial institutions of all types are still adjusting to the digital and data revolutions. Building a completely new digital bank might prove difficult for many Ugandan institutions at the moment, given the growth of the incumbent businesses. It might be difficult to marshal support for a future digital bank that might not generate significant returns in the short term.What Ugandan banks can do to overcome this is that they should consider a two-pronged approach.
One is to build a dedicated, independent venture to focus on creating a disruptive digital proposition for a selected segment of the market.They also need to move towards digitizing their current business models.To put it simply,Ugandan banks need to become more “bionic” which means blending digital technology and a human touch.It’s what retail banks like Centenary bank, Pride Microfinance, Crane Bank among others must do if they are to meet customer expectations. Offering just one or the other is no longer enough and they must provide digital functionality for speed and convenience, as well as thoughtful human interaction when the customer wishes it.Leading retail banks in Africa are at varying stages of becoming bionic, and the transformational roadmap differs for each one, therefore Uganda shouldn’t not be left behind.The prize will be significant for the winners in Ugandan banking sector, who could see returns on equity improve by eight to 14 percentage points according to a recent study.