East Africa States Seek to Unlock Stalemate Over ATM Link
East Africa's banking customers could soon gain access to cheaper ATM withdrawal charges after regional governments moved to review financial laws to enable an integrated regional banking switch.
The switch connecting Kenya, Uganda, Rwanda and Tanzania banking systems, which was expected to go live in 2015, has been held back due to failure by the regional finance ministers to agree on how to review and align banking legislations in their respective countries. On Tuesday, however representatives of East Africa Community (EAC) regional member states kicked off a meeting in Mombasa to unlock the stalemate that will see the implementation of study recommendations for interoperability of card switches and cross-border payments.
The Kenya Bankers Association (KBA) Chief Executive Habil Olaka said the initiative between the four switches would enhance financial inclusion in the EAC. Mr Olaka added the initiative would bring financial benefits and impact the financial sector across the region by promoting cross-border payments using debit/credit cards within the EAC banking sector. "Because of the shared infrastructure it brings the cost of transacting down," said Mr Olaka.
"The cost of transacting through the network will go down and that will be felt through a consumer who uses the platform." Its implementation is based on recommendations of a 2014 study by Ernst &Young (Uganda) which was financed by the World Bank to the tune of $14 million. The project was launched in May 2014 by the governors of the region's central banks, to ensure real time gross settlement of transactions with payments carried out using any currency of the EAC.
It had earlier emerged that while all logistical and technical aspects to enable the implementation had been concluded, lack of regional laws and policies to operationalise the system had hampered the move. It is said the fee charged on ATM withdrawals from different banks across the region will drop from $2.5 to about $0.8 per transaction when the interoperability of card switches project goes live in Kenya, Uganda, Rwanda and Tanzania.
The countries have already linked their card switches to their RTGS systems. Under this arrangement, regional Central Banks will take over the responsibility of determining and setting foreign exchange conversion rates, thus ensuring that customers face minimum foreign exchange losses associated with cross-border payments. For instance, a Ugandan with a DFCU bank ATM card travelling to Kenya will be able to withdraw money from Equity Bank of Kenya at $0.8 per transaction and at an exchange rate set by the CBK.
Source: All Africa