In a remarkable turn of events, banks and other closely monitored financial institutions have witnessed a staggering surge in compensations tied to customer grievances, a clear indicator of elevated risks linked to fraudulent activities.
The recently published Bank of Uganda 2022/23 Annual Report revealed that customer complaints necessitating compensation had more than doubled, surging by a staggering 1,022 cases.
While the report does not provide specific monetary figures for these compensations, it does divulge that no less than 2,346 complaints resulted in financial recompense to affected customers.
The complaints spanned a spectrum of issues, encompassing agent banking, loans, debit and credit cards, automated teller machines, and mobile money, among others.
Notably, this figure stands in stark contrast to the 1,324 cases compensated during the same period in the preceding 2021/22 financial year. Furthermore, 184 complaints remained unresolved, while a substantial 2,346 complaints led to financial reimbursements for affected customers.
This trend signals a persistent upswing in the number of complaints associated with fraudulent activities, occurring at a time when financial institutions are pushing for greater adoption of digital banking.
During this period, the report notes that commercial banks and other closely monitored financial institutions collectively received a total of 433,258 complaints, a significant reduction from the 917,938 complaints reported in the preceding year ending June 2022.
The report, an extensive analysis of financial markets, the performance of the Bank of Uganda, and the overall state of the economy, underscores that the category of mobile money and mobile banking dominated the list of complaints, accounting for a substantial 40.1% of the total cases.
Following closely were complaints related to loan processing at 12.8 % with agent banking and debit cards contributing 9.8 per cent and 6.9 %, respectively.
The surge in mobile money and mobile banking complaints, which leapt from 29.3% for the period ending June 2022, can be partially attributed to the rapid uptake of mobile money services amid growing instances of fraud and network disruptions, as mentioned in the report.
Furthermore, the report spotlights the remarkable rise in complaints related to loan processing, increasing from 6.3 % to 12.8 %, potentially due to the lingering impacts of the COVID-19 pandemic on businesses and individuals, leading to many customers of closely monitored financial institutions facing foreclosure on their collateral.
The ongoing growth in customer complaints, some of which are exacerbated by the proliferation of digital financial services accelerated by COVID-19 restrictions, represents a challenge that the banking sector must address.
Bank of Uganda’s data reveals that since 2020, digital payment channels, including mobile money, mobile banking, agent banking, and internet banking, have consistently seen a surge in customer complaints, indicative of the industry’s evolving landscape.