The introduction of mobile money in Uganda in 2019 had various banks start to panic as people resorted to this new and easier way of accessing and transferring their money. Mobile money services and operations posed a direct threat to the services of the bank because they were more accessible, available, cheap, and easy to use.
Research done at Makerere University shows that Ugandan commercial banks experienced both a decline in profitability and liquidity in recent years and this to some extent was attributed to the growth in the use of mobile money services. In response to this, and in an attempt to revive themselves, commercial banks introduced mobile and agent banking. The main goal of this was to counter the pressure induced by mobile money thus introducing mobile banking to allow consumers access to banking services from anywhere.
So the question remains, as these two financial giants battle it out, which is the preferable option for the everyday Ugandan at the bottom of the economic chain? Which is better between the two in terms of cost, convenience, and availability? Before we answer that question, which we will, let’s first understand the two.
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What is Mobile Money?
Introduced in March 2009 by a software developer called Ronald Egesa, mobile money is an electronic wallet service. Its availability in most countries allows users to store send and receive money by simply using their mobile phones. A Mobile money account is similar to a bank account. You get to deposit, withdraw, transfer, pay utility bills, and check your balance using the financial platform. In Uganda,
What is mobile banking?
Mobile banking is a service provided by a bank or a financial institution where their customers can make financial transactions over a mobile device. It’s more like eased banking where, instead of making a physical appearance in the bank and queuing to transfer money, pay bills and check your account balance, you simply use your phone for all this. It is simpler and more convenient to access bank services over your mobile phone.
And now, let us try to see which of these two have the upper hand in the listed categories:
Accessibility
Today, almost all telecommunication companies offer mobile money services to their customers, the most commonly used and known being MTN Uganda and Airtel. Other telecommunication companies like Uganda Telecom and Lyca mobile do offer these services as well. The number of people with mobile money accounts in the county grows every day. According to the UCC statistics, over 30 million mobile money customers were registered as of 2021.
With almost all banks in Uganda offering mobile banking services or in the process of trying to set up mobile banking, banking has been made easier. For example, Stanbic bank, Centenary bank, UBA, Barclay’s bank, Bank of Africa, Post Bank, Equity Bank, DFCU, and Housing Finance all offer mobile banking services. To ease access, certain banks have created applications where you can access and view your bank details with features that enable you to transfer money directly to your mobile money number and even withdraw it from a registered banking agent. The distribution of Mobile banking agents is still low, which means accessing services is hard compared to mobile money. However, you can do a bank-to-wallet transaction and then withdraw money using any mobile money agent.
So which of the two is more accessible? Well as of January 2020, there were up to 13 million bank accounts with 11,000 banking agents in Uganda and 30 million mobile money accounts, and 315,895 mobile money agents. This goes a long way to show that mobile money is more accessible than mobile banking.
Transaction Costs
Mobile Money and Mobile banking registration are Free. However, for both financial services you need one important requirement to proceed. For mobile money, you will buy a sim card at UGX 3,000, and for Mobile banking, you with have to open an account with the designated bank with an initial deposit of UGX 5,000 (which might vary depending on the bank). Now that you have registered for any of the listed financial services, be rest sure that you won’t have to clear monthly payments while using mobile money, however, banks will charge you monthly for mobile banking services.
Unlike self-deposits, other transactions like withdrawals, sending money, bank-to-wallet transactions, wallet-to-bank transactions, and making payments are chargeable plus taxed by the Government as well. The transaction rates for both Mobile money and mobile banking are pretty similar however in some instances, one service might shadow the other. For example, mobile money withdrawal rates using an agent range between UGX 300 to 20,000 depending on the withdrawal tier (UGX 500 to UGX 5,000,000).
The rates of Mobile banking vary from bank to bank. Some banks charge more than others and vice versa. Below are links to documents showing the tariff guides for some prominent banks in Uganda.
Because transactional costs vary from bank to bank, it is hard to make a comparison between mobile money and banking when it comes to operational costs. However, evidently, mobile banking is relatively cheaper compared to most mobile money.
Initiation / Connectivity
Registering for mobile money is free, all you need is a sim card, your national ID, and a passport photograph. It also does not charge a subscription fee. You are only charged when transacting, that is withdrawing and sending money which I believe is fair considering the taxes are low and favorable. Withdraw and money transaction charges are dependent on the money being transferred or withdrawn and taxes on bills are standard. This makes mobile money more favorable and fair.
The process of registering for mobile banking however, is more tedious. You need the following to register for mobile banking.
- An account with the desired Bank
- Registration on the bank’s banking platform.
- Connected mobile phone.
- Mobile banking PIN to access their Bank account
- Enough Account/Wallet balance
- Network coverage
You are further required to visit your bank and fill out a form. Definitely too much work.
Reliability
You have probably seen or heard telecommunication network adverts on your radio or tv encouraging you to use your mobile money to pay off most of your bills for example your electricity bill, water bill, school fees, medical bills, online shopping and you can also do daily transactions like pay for goods or even transport fare with mobile money. This is the beauty with mobile money, it can bail you out of a tough situation, irrespective of whether you have internet access, a smartphone, or a bank account.
Similar to mobile money, mobile banking offers services like payment of school fees, taxes, electricity bills, water bills, and Tv bills among many others. Mobile banking charges a yearly subscription fee to its users dependent on the bank or financial institution you are using. Even though it is on the rise, there are fewer mobile banking agents as compared to those of mobile money making it less convenient and reliable.
Mobile banking can also be slow on some days due to bad network or online traffic for example on days when parents are banking school fees. With fewer mobile banking agents, some banks may have one mobile banking agent in an area or non, especially in remote areas making it less favorable especially if you are far from town.
Security
You have probably been called by a random number asking you to send them money or refund money mistakenly sent in form of a scam. If someone has your pin number and sim card, they can access your mobile money account. However mobile banking apps, in addition to a pin number, offer other forms of security depending on the smartphone you are using. Some will ask for fingerprint or Face iD access for iPhones. This makes mobile banking the more secure of the two.
Money management
Which of these two platforms can help you manage your money better? Which of these is more likely to facilitate your trek to brokenness?
Mobile money can work well if you have the self-control to save money without easily using it to load credit or buy unnecessary things. Unlike most e-wallet options, there are very many service providers for mobile money so you can easily deposit and withdraw cash at your convenience. Since most of the population has mobile money and there is a mobile money agent almost everywhere around you, money transfer is easier and therefore mobile money can facilitate poor financial management. It is tough to fight the temptation to buy more data or voice bundles when you have some cash on mobile money.
While mobile banking’s susceptibility to poor internet and fewer banking agents can be a bad thing, it isn’t the case always. See you are encouraged to save more and spend less lavishly if you can’t access your money all the time. Mobile banking apps also charge you for checking your balance which is a saving catalyst. So for this particular case, Mobile banking is preferable
In conclusion
Mobile money is in many ways similar to Mobile banking. This goes for the good and bad similarities. However, they are distinctly different in terms of mode of operation. For example in recent years, mobile money agents have been evenly distributed throughout the country and this made Mobile money preferable in terms of accessibility. Nevertheless, commercial banks have responded to this by introducing agent banking with agents all over the country.
Not every Ugandan has a bank account but a vast majority of Ugandans own phones. When it comes to factors like convenience and accessibility, factors that affect an average Ugandan deep in a rural area, one could argue that mobile money is the better of the two.