FITSPA sounds warning over Airtel collections charges

July 6, 2019 in Business, Financial Services by Editor

FITSPA, Uganda’s Financial Technology Service Providers Association is locked in talks with Airtel over the latter’s proposal to introduce user charges on moneys collected by financial aggregators using its network.

In a June 13 letter to its cash collection partners, Airtel Uganda managing director Mr. V.G Somasekhar tells financial aggregators that the company would introduce a collection charge on the value the telco collects on their behalf through the Airtel platform.

Somasekhar says the charge which comes into force on July 13, will be value based and has been necessitated by the need to maintain service quality while remaining competitive.

Airtel proposes a collection charge equivalent t0 2.5pc of the value for transactions up to UGX 500 million, sliding to 2pc on values between UGX 501 million and 1 billion and 1.5pc on values beyond that.

So far the first in the local industry, Airtels’ move has shaken Fintechs’ with FITSPA Chair Peter Kawumi warning that it could roll-back the baby steps so far made towards digital payments.

“We are already in talks with Airtel about this, because the aggregators are essentially collecting money on behalf of the majors such as financial institutions. Charging them for adding value will cascade down through the market with grave implications for digital payments,” he told 256BN. 

The user charges so far charged by digital intermediaries are used to meet their operational costs. Kawumi says introducing a collection charge will see aggregators pass it on to the final consumer. That could take the market back to cash based payments.

Using the example of National Water which has a UGX 2500 fixed charge for payments made through digital platforms, Kawumi says factoring in Airtel’s 2.5pc charge could take the user fees to a point where a consumer might feel a cash payment represents a superior value proposition.

Until now, all telco’s have allowed different players to collect on their behalf without charge. Because the industry is still in its infancy, many aggregators lack the depth to absorb the new charges and are likely to pass them on to the consumer, Kawumi says.

“Airtel’s action changes the landscape and entire ecosystem. Higher charges could become a constraint to adoption of digital services. It is retrogressive and undermines the progress towards the transparency that digitisation of financial services was beginning to bring to our economy,” he adds.

He was optimistic that because both Airtel and the fintech fraternity were looking for profitability, the industry is trying to look at the possible impacts of Airtel’s proposed charges before they come into force on July 13.

Airtel, Uganda Communications Commission and the ministry for ICT were not immediately available to provide comment for this article.