The Next Stage of Uganda’s Digital Economy Will Be Powered by Open Application Programming Interfaces (APIs)
Today the vast majority of the applications used in Uganda are still private
and the Application Programming Interfaces (APIs) are only available to
third parties at exorbitant costs
KAMPALA, Uganda, January 17, 2020/ --
While about 18 million Ugandans are now able to access services via the
internet, only a fraction of the 18 million are able to bank, pay school fees or utility bills, order transport, search for location, learn, or
perform a variety of other basic day-to-day needs; online. Why is that?
Among other hinderances, the answer lies in the capacity of different
mobile platforms to connect with multiple service providers and allow
transactions to take place. Today the vast majority of the applications
used in Uganda are still private and the Application Programming
Interfaces (APIs) are only available to third parties at exorbitant
costs. This not only makes the services expensive but also limits
innovation by third party developers.
But what are these costly APIs? Just like we talk to each other to make
things happen, so do software programs. Software programs need to
communicate to perform the various tasks that we want them to perform.
For that matter, the importance of an API as an enabler for an open
digital payments ecosystem and an inclusive digital economy cannot be
overstated. It is that connection that allows software programs to
‘talk’ to one another, interpreting what information is being given and
what actions the software wants the other to perform.
For instance, for a ride hailing service like safeboda or Uber to
operate, it has to know the location of its rider and that of the
customer. This is made possible by accessing and using a “location API”, say that of Google maps. Without having access to the location API,
Safeboda or Uber as a business / service would not exist.
Similarly, for a business to sell its products and services online
(without any direct contact with the buyer), they would need to find
means of being paid online (digitally) too. The most common payment
option in Uganda today is mobile money. Therefore, for a business to be
able to accept / request for a mobile money payment from a customer, it
needs to access and use the mobile money API from the telecom.
In Uganda, the concept of open APIs is still in its nascent stage and
only a handful of players in the industry appreciate its potential
impact in accelerating the growth of the digital economy. It is of
utmost importance for example, that digital financial services (DFS)
providers such as banks, Telcos and FinTechs come on board to open their APIs to third parties, to enable digital payments that power the
digital economy in which we operate.
UNCDF pushes industry players to open their APIs
During a workshop on ‘OPEN APIs/ OPEN DATA in the Digital Economy’ held
in Kampala last November, the United Nations Capital development Fund
(UNCDF) stressed how fast tracking interoperability between companies
will contribute to the growth of the digital economy in Uganda. Convened by the UNCDF and facilitated by Aiaze Mitha, an international expert in DFS and open payments ecosystems, the workshop gathered over 70
participants from Fintech, Startups,Telecos and government institutions
that are now reflecting on the benefits of open APIs.
“Third party partnership programmes are the standard model for growth
employed by large enterprises across all industries. Companies testify
to the significant benefits including accelerated growth, higher brand
awareness, increased revenue and presence in new markets,” Mitha says.
In Uganda, only 28% (5.2million) of the adult population use formal
financial services (defined as banks, Microfinance Deposit Taking
Institutions and Savings and Credit Cooperative Organizations). On the
other hand, according to Bank of Uganda, the number of registered mobile money subscribers by July 2017 was 22.9 million. These numbers
demonstrate that increasingly, customers are looking for quicker and
more convenient processes.
Unfortunately, traditional financial service providers are limited in
their ability to innovate and deliver advanced customer experiences.
According to Mitha, tomorrow’s financial services providers (FSPs) will
need to be radically different to compete in the digital finance space.
Opening their systems will allow for more willing and talented
companies, particularly startups to innovate for the customers of these
FSPs – thus improving the value proposition of the latter with new
services.
What this means for customers
“UNCDF is committed to working with public and private sector partners
to build an Inclusive Digital Economy that leaves no Ugandan behind in
this digital era”, Chris Lukolyo, Digital Country Lead for UNCDF says.
From asking for and making social contributions, making utility
payments, online shopping, to accessing critical services like education and the much-needed health care, digital technologies can and have
improved the livelihoods of humanity. When it is easier and cheaper for
developers to test new ideas, customers get a range of services to
choose from and make payments from their bank or mobile money accounts
in real time. By fueling innovation, open APIs therefore provide
customers with a wider choice of innovative services and solutions to
meet their various needs. This also comes with increased flexibility and transparency in how customers transact.
While DFS providers could invest more in innovation, usually low-income
communities are not a priority. Yet, with access to affordable digital
solutions, these communities represent a wide customer base that can
accelerate the business growth of the sector. Open APIs for instance can provide access to precious data that would be otherwise daunting to
find for communities without access to formal banking services. Often,
these communities have no data on their income; no credit history; no
history of payments. Technology is making it easy to digitize this
information. When systems are able to speak to each other, this data can be available to financial services providers and eventually give
currently underserved customers access to services like credit and
insurance.
Next steps
UNCDF is holding one on one discussions with various insitutions in the
industry particularly telecom companies, banks and Fintechs on how to
work towards opening their APIs.
UNCDF has helped build the rails of the digital economy in Uganda with
its programmes on financial inclusion since 2014. The agency is
currently implementing a programme focused on building an incusive
digital economy in Uganda. To ensure that no one is left behind in the
digital era, UNCDF is working with a selection of partners ready to
address underserved markets in particular women, youth, refugees and
smallholder farmers.
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