The Bank of Uganda's recent directive that requires mobile money agents to verify a customer's identity with a valid National Identity Card for withdrawals exceeding one million shillings has received mixed reactions.
While many welcome the move as a step towards curbing cybercrime, experts warn of potential challenges with identity verification.
The central bank's new regulations, which take immediate effect, mandate that all customers making transactions above one million shillings present valid National Identity Cards to mobile money agents during these transactions.
This policy shift is seen as a response to the growing incidents of online fraud and cybercrime involving mobile money platforms.
Over the past few years, the Bank of Uganda has observed a surge in mobile money-related scams and fraudulent activities.
Cybercriminals, often working in collusion with dishonest mobile money agents, have exploited the system to commit cybercrime. The new regulation aims to close these loopholes and ensure safer transactions.
Despite the apparent benefits, cybersecurity expert Emmanuel Chagara cautions against the potential risks associated with relying heavily on National Identity Cards for verification.
"While the central bank believes this will be a significant step in combating online frauds and scams, there's a risk of forgery with National Identity Cards," Chagara said.
He noted that the effectiveness of the new regulations would depend on the rigor of ID checks and the reliability of the national identification system.
The Bank of Uganda's 2020 Financial Capability Survey revealed that only 20% of Ugandans save their money in deposit-taking financial institutions, while 15 percent save on their phones using mobile money.
The survey also showed that 45 percent of Ugandans rely on Village Savings and Loans Associations, and another 45% use savings boxes at home. Given these statistics, the central bank's focus on mobile money regulation is crucial.
Chagara also highlighted the benefits of digital payments, stating that they often come with reduced transaction fees compared to traditional methods, which can be a cost-saving measure for many Ugandans.
However, he emphasized the importance of addressing the risk of ID forgery to ensure the success of the central bank's new policy.
As the new regulations take effect, the central bank and other stakeholders will need to monitor their impact closely, ensuring that they strike a balance between enhancing security and maintaining accessibility for the millions of Ugandans who rely on mobile money for their financial transactions.
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