A cashless economy is a system where financial transactions are conducted electronically instead of using physical money or cash. This can involve various methods such as credit/debit cards, mobile banking, digital wallets, online banking, mobile money and other forms of electronic payment.
Michael Nyitegeka, the Executive Director of Refactory, a pioneer training academy in Uganda, offering alternative industry-led skilling for the global technology industry explains the differences between cash and cashless economy.
“Cashless economy is very good because what it does is that if I need to pay for a good, I can order and pay for that good without necessary moving out of this place. In a cash economy, the medium of transaction is cash. So, the cashless economy gives you versatility that I can do a lot of things I wouldn’t have been able to do,” he explains.
Uganda has seen a significant surge in the adoption of mobile money as the primary method of payment, resulting in the remarkable expansion of the cashless economy.
According to the Uganda Communications Commission (UCC), mobile money accounts surged to 32.3 million in 2022, marking an increase of 900,000 accounts.
The transition to a cashless economy, particularly through mobile money, has greatly enhanced financial inclusion and offered substantial benefits to the average Ugandan. This is especially significant considering that millions of Ugandans are financially illiterate and have historically not had personal bank accounts.
The advent of mobile money has unlocked a vast range of opportunities for Ugandans to engage in digital transactions. Mobile money enables individuals to transfer funds and make payments without the need for physical cash, thereby transforming the landscape of financial transactions throughout the nation.
This service offers numerous functionalities, such as paying for goods and services, transferring money across different mobile networks and banks, settling bills, accessing credit, and much more.
A growing number of businesses, particularly those operating in the informal sector, have begun accepting mobile money as a method of payment. This shift has simplified the payment process for individuals, allowing them to make transactions without the necessity of carrying physical cash. Additionally, it has streamlined and expedited the payment process for businesses, making it considerably faster and more efficient for them to receive payments.
The rise of a cashless economy has significantly impacted the banking sector, ushering in a new era of financial transactions. Banks have increasingly embraced digital solutions, offering a variety of services that minimize the need for physical cash. This transformation includes the widespread adoption of online banking, mobile banking apps, and digital wallets, which allow customers to perform a range of financial activities such as transferring money, paying bills, and managing accounts from their smartphones or computers.
Additionally, the cashless economy has facilitated seamless transactions through the use of credit and debit cards, enabling consumers to make purchases both online and in physical stores without cash.
Threats
While a cashless economy provides numerous advantages, it also comes with several significant risks that need to be carefully evaluated. One major concern is the threat of cybersecurity. As more transactions are conducted digitally, the potential for hacking, data breaches, and various cyber-attacks increases, jeopardizing the security of personal and financial information.
The reliance on digital platforms for financial transactions makes individuals and businesses more vulnerable to cybercriminal activities. These threats can result in the unauthorized access to sensitive data, leading to identity theft, financial fraud, and other malicious activities.
Many financial institutions and telecom companies frequently fall victim to cybercriminals who steal money or sensitive information and demand ransom.
In 2023, a hacking cartel infiltrated the systems of two major Ugandan commercial banks, gaining access to customer data, including account details of high-profile clients. The attackers breached the banks’ systems, obtaining sensitive personal information such as names, identity card numbers, bank statements, deposit records, and credit histories.
The hackers demanded a ransom of USD 1 million. However, the banks, committed to safeguarding client data, refused to pay. Instead, they transitioned to a backup data center managed by Raxio in Namanve to secure the compromised information.
In 2018, Kampala Central Police Station (CPS) recorded a case involving unauthorized access and the theft of 2.6 billion shillings from Bionic Limited Systems, a company that operates a cloud-based mobile payment system. Concurrently, the Criminal Investigations Directorate (CID) of the Uganda Police Force in Kibuli recorded another case of unauthorized access and the theft of 802 million shillings reported by MTN Uganda.
Similarly, in 2019, dfcu Bank filed a case with the CID in Kibuli concerning unauthorized access and the theft of 383 million shillings. During the same period, Centenary Bank reported a case of unauthorized access and the theft of 800 million shillings at CPS.
In October 2022, Airtel fell victim to a cyber heist when hackers took control of a betting site used by bettors to place their wagers after crediting their accounts with Airtel Money. The hackers managed to complete transactions on 1,800 SIM cards in a scheme believed to have involved insiders.
It is evident that cyber-attacks on Ugandan commercial banks and telecom companies have clearly had extensive and damaging impacts on both the financial and telecommunications sectors.
These attacks have resulted in significant financial losses from stolen funds, data breaches, and fraud. The exposure of financial data belonging to customers and institutions has led to identity theft, causing enduring harm to individuals and reputational damage to businesses.
How to Stay Safe
Nyitegeka says cashless economy is safer than cash economy.
“Is it a safe thing? I will say, to a larger extent very safe. Its far much better than a cash economy. You have seen how many people have been robbed in town, robbed off their money,” he says.
Nyitegeka gives advice on what should be done to stay safe in a cashless economy.
“Software is like a building. You build and a thief will find a loophole and hit you from your loophole. In order to safeguard the loophole, you need to have a number of security checks and these security checks need to happen continuously. Otherwise, you will struggle. For entities that are into software development, one thing I would say is, it’s a continuous process. You can’t say now I have it. You continuously check and that is why companies have what they call continuous testing. So, you continuously test whether your software measures up to standard.”
To stay safe in a cashless economy, Nyitegeka advises individuals and businesses to use strong and unique passwords, enable Two-Factor Authentication (2FA) on all accounts that offer it, be wary of pishing scams by avoid clicking on links or downloading attachments from unknown or suspicious emails and messages, keep software updated by ensuring that all devices and applications used for financial transactions are up-to-date with the latest security updates, stay informed about common cyber threats and learn how to recognize and avoid them, use screen locks and encryption on all devices that access financial information, and immediately report any suspected fraudulent activity to the relevant financial institutions and authorities.
