Fintech is losing the battle against cash because of Merchants

David Okwii
9 min readFeb 11, 2019
momopay at Chili’s restaurant

This is what happened to me last week. I had taken my car for serving at one of garages in Kampala CBD. I needed to replace my shocks — all of them. The bill was around Ugx 1.6m($435) which as a hefty amount. I asked the sales agent if they accepted Visa payments to which she responded “No”.

“You guys make big bills, but you don’t accept Visa payments? How I am supposed to be carrying Ugx 1.6m in my pockets?” I frantically asked in disbelief.

“we only accept cash and maybe mobile money” she responded.

I paused abit now that she had given me the mobile money option. Obviously, I didn’t have Ugx 1.6m on my mobile money wallet, but I knew I could transfer it from my bank to my phone number in an instant. Now it was a question of charges. I did the math. First, sending that amount from Mobile money number to the sales agent was a reasonable Ugx 2,000. That’s less than a dollar. But the lady demanded that I had to factor in withdrawal charges plus taxes which threw me off balance. That would cost me another Ugx 22,000 ($6) plus 0.5% (Ugx 8,000 or $2.1) on withdrawal charges. In total, I was going to incur Ugx 32,000 ($8.7) in just charges!

Payeasy payment option at Chilis Acacia Mall

On the contrary, should I have used my stanbic bank visa-enabled ATM card, the charges are Free!

But I couldn’t use mobile money because of charges or Visa because it wasn’t supported by the merchant — and we shall get to that in a bit. My only option was now cash.

I had to find the nearest stanbic bank ATM within a radius of 1km and there were plenty. I finally did get the cash in batches of Ugx 800,000 from the ATM, but I had lost more than 1 hour of my time. Cash is inconveniencing, but at least it’s “cheap” for users if you count the value of your time.

The adoption of cashless payments hangs on three players; the end users who pay the bill, the merchants who accept payments and the financial institutions or 3rd party aggregators or Fintech companies who process the payments.

QR code mastercard payments at kenjoy supermarket Bukoto

End users like myself are looking for convenience mixed reasonable costs. Merchants care about cash flow and business efficiency while Fintech companies are looking to offer the best experience on both sides via cashless mechanisms.

Allan Rwakatungu is the CEO of Xente, an online and mobile shop with flexible payment options that enables users buy everyday items (Pay bills, recharge airtime, event tickets and more) using mobile money or bank cards and event credit. He had this to say;

“Chief. We are on a war against cash :). The issue is the solutions we build have to be 10x better than cash. Our strategy at Xente Group is this…..value for consumer and value for business. For consumer , not just convenience but flexibility (get credit if your a little short or need more) and loyalty (cashback). In your scenario , if you not only avoided bank visits and forms but also could have gotten credit to make that transaction + deal and discount you might push the business hard to accept cashless payments.

For business..efficiency. Good business people understand that lower costs business win. They may worry about 3% merchant fees and maybe real time settlement which are valid concerns but once they understand cost of cash like leakage , transportation to and fro from bank, how hard it is to do accountability and audits and that it absolutely does not scale…they convert. It’s a battle not a war the long run cash shall lose”

I agree with Allan that “in the long run cash shall lose”. It’s not a question of if, but when and most importantly how.

So far, Fintech has managed to create value to the end user as Allan has elaborated in how Xente is doing it. But they have failed to extend the same value to the merchants. As a result we there’s a deadlock of sorts mostly created by merchants like my garage or Frank’s Landlady who are not willing to accept cashless options.

“ My landlady absolutely refuses bank transfers or even mobile money payments. I have to go to my bank and make an over the counter withdrawal because it’s beyond my ATM limit. Then I go to her bank and deposit the money and then I have to write the months on a receipt and send her the picture on WhatsApp” ~ Frank Odongkara, Software Engineer.

Agaba Gad who’s worked as PayLeo Manager at True African (U) Ltd and now a Senior Engagement Manager at Cellulant offers a good explanation for this.

“I have been privileged to be on both sides of the coin and let me explain just a little.


  1. Cash is simple. When you have it, you buy whatever you want and this is 99% accepted in our Uganda. No one gains more or loses more.


2. Often times the business owner wants to offer a couple of solutions regarding payment options to their clients. But he faces a challenge of not being a priority to the service providers because they think by focusing on the client they will drive demand of these options. Considering customer is king, the business owner will heed to the demands but guess what they always get it wrong.

2.1 Mobile money collections option. When a business is approached to sign up for offering this as an available option to his customers, he is faced with Momopay of mtn*165*3#, tradlance *252#, yo pay *217#, payleo *210#, payeasy of DTB, Apay of Top Finance bank , and Airtels’ solution that is on the way as well etc. All preach the value proposition of; you can now collect mobile money from those that don’t have cash but at a cost of 2%(The money they will collect on your behalf shall be paid to you less 2%). What does this mean financially. You are allowing many people to pay via cashless but you are hurting the business owner by taking his profit from them and by not adding value to him in the name of convenience for the customer. If you want to understand what I'm saying think about this solution in the shoes of a fuel station to whom 2% makes a huge difference because he’s selling volumes.

Second problem, there is no cashless provider who is willing to pay you the money they collected today to your bank account. What they offer is that they will pay your funds once a week. This means that on top of retaining the 2% they will also hold onto your money for 7 days which means that operations in your business are at stake. Please don’t forget that after they release your funds after 7 days it will take 1 day if your business and the merchant solution provider are in the same bank and 2–3 days if it’s a separate bank. Now let’s be realistic, which business wants to receive their money every 10 days.

2.2 card payment options(Visa MasterCard)

card payment options at Kenjoy supermarket Bukoto

Let’s start with cards Pos machine.
Have you been to a restaurant and found yourself stuck without money, you call for a pos machine it’s brought you, swipe, transaction approved and bingo you sign and leave.
That POS machine has a private APN card (for the layman it’s sim card with internet and linked to a leased line and all these are supplied by the bank provider. Usually they are labeled Barclays, equity, stanbic, etc).
When the bank approaches the business owner, they mention how they will help you collect money from all visa and MasterCard holders and then the fine print starts. For you to have this POS machine here you will have to buy the pos (300$)and also pay a monthly maintenance fee of approximately 35$ (this is the cost the last time I checked) then the story goes the monthly 35$ is to be paid to ensure it has internet and it’s working well. Then they also tell you that they will hold 3.5% of what you collect through the pos machine.

What they don’t tell you is this. When Fraud, double transactions or failed transactions actually go through, what will happen to you. I have come to note that these banks and card companies protect customers more than the business owners. So after person x has paid via card they expect you to have a signed copy by the client however if client ever denies the signature you will not be paid as a business. They will pay you less than the amount in contention and will send it back to customer . Please note that customers have learnt all these loopholes and they actually use them to their advantage. What does this do to the business, they lose a fairground battle and by the time they compute how much they have lost in this cat and mouse game, they drop the service. The next time you come back to pay as a customer they tell you it’s either cash or cash.

Stanbic bank’s Flexipay at Pharmacy on Acacia place

As for Card payments via e-commerce, this one I think my brother Allan Rwakatungu can testify; you have to be brave to go for this option. For starters there are a million stolen card details on the internet and with a few hundred dollars you can buy people’s details and use them for transacting on e commerce sites that use cards. So to put it into perspective this is what happens. You put visa and MasterCard on your site and you can receive cashless payments and then offer services. This service doesn’t have people meeting. So all these thugs spend their days on websites using stolen cards to purchase services. Especially services which don’t involve delivering physical products for fear of tracking them. Imagine you sell online airtime, a guy will buy airtime through visa on your website and he will receive it instantly and use it. Now at the end of the week when the client wants to get his money that has been collected, it is held back. Reason people whose cards have been used to buy the airtime complain that amounts were deducted off their accounts without their knowledge. Again customer who has reported is indeed refunded by visa and visa then holds the issuing banks money and the issuing bank also holds the airtime business funds and says that to get their money they should prove the owner of the card actually bought. Now remember there was no physical interaction and in the end the airtime business loses money in chargebacks and the 3.5% charge for being helped to collect money etc.

Now with the 3 scenarios given above the business was never protected but the customer was.

Now as I end this long write up allow me pause a question; do you think cashless payment uptake will survive by pushing value proposition to the paying customer instead of the business owner???

My take is until the business owner is not burdened with high commission fees and holding their money for along time and protected from fraud paying customers, cashless payment uptake has a huge uphill task to overcome.”

So there you have it; Gad said it all. The only way to solve this kitchen and egg scenario is to incentivise the business owner. Solve the supply side first and then drum up the demand by asking users to go cashless. The business owner must be protected from fraud, assured of one-day settlements and his profits assured.



David Okwii

Transforming Africa into a country, one line of code at a time. Dev blog