Ugandans are paying way too much to use their cards at different Automated Teller Machines with commercial banks blaming the issue of foreign switch providers and the cost of moving money.
The switch service providers, including Visa, China Union Pay and MasterCard enable one to use an ATM that is not of their bank to access their cash.
The interconnection cost involved is so high that at times it costs up 10,000 shillings for a single transaction on a different ATM that doesn’t belong to your bank.
Uganda Bankers Association executive director Wilbrod Owor acknowledged the high costs and said the central bank had instructed them to review their tariffs to see how they can revise charges downwards.
Owor told reporters that the high costs were especially high when one used a switch card – debit or credit – by foreign companies. This means people using such cards as Visa, China Union Pay and MasterCard are charged higher than those using say Interswitch.
Consequently, one pays between 7,000 and 15,000 shillings for a transaction using Visa or MasterCard of a bank
different from where you hold your account– way too high for an ordinary person.
These enablers charge a percentage for the transaction to go through. Owor said they were reviewing costs to see what can be brought down.
UBA says it is trying to negotiate with service providers and its members to see how they can share costs with aim of bringing charges down for the final users.
One of the areas are to ensure that all banks are on the local switch provider – that is Interswitch – to cut off costs that come with having a foreign provider.
Paul Kawumi, the Interswitch Uganda CEO, said they are ready to enable the reduction of transaction costs on ATMs.
According to Owor, banks are looking into how they can reduce the cost of moving money from one place to another. Banks transport money using different security companies but it is costly when each bank has to move its own cash. It costs at least Shs 1,000 to withdraw or check the balance from an ATM of a bank where you hold an account.
Industry players say instead of a bank transporting just its own cash from say Kampala to Masindi, it can use excess cash at the rival bank in Masindi and then it can be paid in Kampala.
Patrick Mweheire, the outgoing chief executive of Stanbic, said a while ago that Stanbic was already doing this with Centenary bank in some places.