Digital Payments in Uganda: Barriers of Internet Access and Network Challenges

Digital Payments in Uganda: Barriers of Internet Access and Network Challenges

November 30, 2024 Catherine Williams - Chief Editor Business

Ugandans face three main barriers to using digital payments: limited Internet access, poor mobile networks, and inadequate customer service. These issues hinder the growth of digital payments in Uganda, despite their importance across Africa.

Currently, about 61% of Ugandans use digital money, primarily through feature phones. Most users buy airtime or save money but do not frequently pay for goods and services or transfer money to friends and family.

A recent study by AfricaNenda, the Economic Commission for Africa, and the World Bank highlights that other African countries are embracing digital payments, which supports financial inclusion and trade. Users in these countries prefer mobile-based solutions, which provide better reliability and functionality.

In Uganda, over 75% of users access digital payments via USSD codes, enabling transactions even in areas with poor mobile connectivity. However, this reliance on basic technology restricts their use to airtime purchases, unlike other African nations that are moving toward more comprehensive digital payment systems.

Mobile network coverage in Uganda is around 31%, and Internet access is about 30%, both significantly lower than in neighboring Kenya. A lack of Internet connectivity is a major barrier for many Ugandans. If digital payments require Internet access, users often encounter difficulties or cannot use the service at all.

The study suggests that digital payments for goods and services are more common in countries like Algeria and Mauritius, while airtime purchases remain popular in Uganda and a few other nations.

Uganda’s digital payment system mainly relies on mobile money, managed by local telecom companies. Unlike Kenya, Rwanda, and Tanzania, it does not have an instant payment solution linked to traditional bank accounts.

In Africa, the number of instant payment systems has increased from 26 to 31 in two years. However, challenges persist. Cost remains a significant barrier for about 17% of potential users. Other barriers include data privacy concerns, a lack of trust, and insufficient knowledge about these payment solutions.