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FinTechs belonging to this area offer traditional banking services in a modern way, usually through online services or mobile applications as well as ancillary services – e.g. enabling customers to manage their giro- or custody-accounts online and in real time or offering e-wallet services. Keywords in this context are also API-Banking or Banking as a Service (BaaS)/ Bank as a Platform (BaaP).
API-Banking:
API stands for application programming interface and is offered to access data banks and to extract and insert information. API-Banking consequently means the access to data banks of banks to offer new and innovative banking applications.
Through these services FinTechs offer services with new functions, e.g. enabling customers to manage their accounts online and in real time.
BaaS – Bank as a Service/BaaP – Bank as a Platform:
The API-based Bank as a Service platform has a full banking licence, but merely serves as the back end for standalone independent FinTechs, which “use” the licence and the back end of the bank to offer new financial services, launch additional financial products or expand into additional markets.
Introduction
Attitude of the country towards online-banking services
The social and political climate towards online banking is very favourable, and currently, given the several advantages, the adoption rate is rising rapidly. On the other hand, the government has put in place some frameworks such as the National Financial Inclusion Framework 2018-2022, to leverage the potential of the FinTech sector to expand digital financial services.
One of the reservations is in respect to customers regarding online banking as an expensive service, because in order to use online banking, one needs to have a smartphone or a computer which not all customers can afford.
More so, some customers have lost funds from online banking and recovering has been hard because in situations where their own credentials were used in stealing such funds, the bank would not refund such a customer. This has made some customers shy away from online banking and stick to traditional banking which they consider safer.
Legal affairs
Obligations and requirements to provide online-banking services described above
The obligations and requirements to provide online banking are enforced by the Central Bank of Tanzania. The central bank licenses, regulates and supervises all banks and financial institutions. It also regulates payment systems. Every applicant of online banking service must comply mainly with National Payment System’s Act, 2015, Electronic Transaction Act, 2015, Anti- Money laundering Act 2019. Under these regulations, the applicant must submit a business plan, must disclose the source of funds, document polices for detecting and reporting money laundering activities, process flow and system architecture, among others.
Tanzania Communications Regulatory Authority (“TCRA”) issues and renews licenses. TCRA regulates communication services, for example telecom, broadcasting and postal. In regulating TCRA supports the central bank on the technology side. For example, for any FinTech services the applicant needs two licenses; one is issued by the central bank and another by TCRA. Once the applicant fulfils the requirements imposed by these regulators, they would legally run their online banking affairs.
Costs vary depending on the exact license.
Additional comments regarding the legal situation for online-banking services or what FinTech’s must be aware of in this business area
The advantages associated with internet banking would benefit both the customers and enhance the banks’ reputation. Bringing awareness ab