Over the past one and a half years, the digitalization of financial services delivery has been one of the most vibrant areas of activity in Ghana’s economy. This has been attributed primarily to the circumstances created by the COVID 19 viral outbreak which has restricted physical contact among the populace.
But while the need to curb coronavirus infection has indeed accelerated the process of digitalization of financial services delivery it is by no means the trigger; the process started some two decades ago and has been particularly intense since the second half of the last decade. The response to COVID 19 has simply speeded up a process that was inevitable and already well underway.
Up to 1997 all financial transactions were executed by means of cash (or cheque) with no digital channels in use. But by 2016, digital channels were accounting for 1% of total transaction volumes and 37% of total transaction values; and by 2019 – the year before COVID 19 arrived in Ghana – they were accounting for 4% of transaction volumes and 39% of transaction values.
This growth was the result of a combination of global trends; state policy with regards to creating a cash-lite economy with greater financial inclusion; the establishment of a regulatory framework by the Bank of Ghana that promotes, encourages and facilitates the use of digital channels; the deployment of numerous digital payments platforms by various state owned and private enterprises in both the financial services and the ICT sectors; and the sheer convenience which those digital platforms offer the general public.
Here the single most revolutionary product has been the introduction of Mobile Money about a decade ago, first by MTN Ghana and subsequently followed by AirtelTigo and Vodafone. Instructively the banks – which have so far partnered the mobile telecoms network operators, by serving as custodians for the deposits that underpin the electronic wallets created by MoMo – are beginning to enter the competition, with GCB Bank having launched its own version, called G Money, a couple of years ago.
But arguably the most pivotal institution in Ghana’s digital payments revolution has been a wholly owned subsidiary of the BoG known as Ghana Interbank Payments and Settlements Systems, GhIPSS, established specifically by the central bank for that purpose. GhIPSS is behind most of the various nationwide digital payments platforms in Ghana today, such as Instant Pay, E-zwich, the Automated Clearing House and the National QR Code platform for merchant payments. GhIPSS also enabled interoperability between the three different MoMo platforms and linked the electronic wallets of their subscribers to their respective bank accounts.
An array of other digital payments platforms have also been created by a new genre of enterprise -financial technology firms – who are licensed by the BoG and work in collaboration with financial intermediation companies, such as banks, that provide the requisite delivery channels to customers.
Over the past decade, mobile money accounts have increased thirty-fold, to 44 million in June 2021. The volume of mobile money interoperability transactions have also increased twenty-four fold since its launch in 2018 to 10.3 million in June 2021, while GHIPSS Instant Pay volume of transactions has also increased significantly since 2016.
However, even with the giant strides made by Ghana towards creating a cash lite economy – and accompanying society – there is still lots of potential to go further.
For instance, in Norway, 96% of all payments are made digitally, and only 6% involve cash. 90.3% of the populace makes online payments and 80% do their person to person payments digitally. Over the past decade there has been an average annual decrease in cash withdrawals from bank accounts of 16.2%.
Similarly, in neighbouring Sweden, 91% of all payments are done digitally and 82% of the populace do their purchases online. Over the past decade the proportion of Swedes using cash for payments has fallen from 39% to 9%. Indeed over the past 13 years there has been an annual average reduction in cash withdrawals of 10% and an identical 10% increase in cash payments over the same period.
Ghana plans to follow suit however, its ambitions captured in its National Payments Policy which states that by 2024, “All Ghanaians will have access to a broad range of suitable and affordable digital financial services including payments, credit, savings, insurance and investments.”
The process towards achieving all this is well underway. For example, the emergent micro-insurance industry is primarily leveraging digital channels to distribute life insurance policies. Pioneered by MTN in collaboration with AFB (now Letshego Savings and Loans), retail loans are now readily available through customers mobile phones under several schemes. And in 2019, MTN became the first company to accept MoMo payments for purchase of shares in an Initial Public Offer.
Going forward, several strategies are being brought into play and importantly, the BoG itself is leqding the charge.
“To take advantage of the existing opportunities, the Bank of Ghana’s long-term strategy for the payment systems is to push for more collaboration among providers of financial digital products and electronic financial services” asserts central bank Governor, Dr Ernest Addison. “Under the current regime, our consolidation of ATM networks, introduction of the Cheque Codeline Clearing, Instant Pay services, the mobile money interoperability platform, and the Universal QR Code services were all part of the collaborative strategy aimed at eliminating fragmentation and duplication.
“These collaborative initiatives have provided open and fair access to a shared payment infrastructure for banks and non-banks. It also serves as a good example of a strategy of collaborative competition which has been shown to increase scale and widen the scope of mobile money operations. On several fronts, the Bank has worked with stakeholders to institute the sound regulatory frameworks that now guides the industry. These include issuance of the Branchless Banking Guidelines, Electronic Money Issuers Guidelines, and the passage of the Payment Systems and Services Act 2019 (Act 987). The Payment systems Advisory Committee, which includes all the key stakeholders in the payment ecosystem, continues to provide a shared platform for accelerating digital payments”
In similar fashion collaboration between market players themselves is crucial.
“The strong partnership that exists between banks and non-bank financial institutions for the provision of digital payments is expected to strengthen further, with the delivery of innovative value-added products and services to enhance financial digitization” says Dr Addison. “To sustain the process, market players should continue to harness customer data to develop targeted value-added products but the confines of the data protection act and regulations. Incumbents, for instance, have large volumes of data but the current legacy systems may inhibit their ability to glean insightful information from this data for product development. With more agile technological capabilities and artificial intelligence, new entrants into the industry could collaborate with incumbents to deploy new products and services based on existing data that could foster a more vibrant payment ecosystem and penetrate the unserved segment of the market.”
Eli Hunu, CEO of Mobile Money Limited, MTN Ghana’s dedicated subsidiary for its MoMo activities – and which not only pioneered the transformational MoMo payments platform in Ghana, but is still the overwhelmingly dominant player with a market share of over 90% – asserts that efforts should focus on the informal sector which is estimated to account for 70% of all payments in the country.
To this end he recommends several areas of focus. One is the deployment of more purpose built infrastructure for digital payments and the strengthening of existing payment platforms such as the Ghana QR Code. Another is the development of innovative that meet customers’ needs accompanied by well-defined commercials and incentives that offer a “win-win”: for all.
He also calls for increased internet access and smart phone penetration, intensified education and enlightenment of customers, driven by stakeholders and civil society as a whole, and crucially, efforts to engender more trust in digital payment platforms, this requiring higher firewalls, and more efficient complaint management systems.
Dr Addison agrees, emphasizing customer enlightenment, stakeholder collaboration and protection against fraud in particular “Banks and non-banks should collaborate and intensify efforts on education campaigns and awareness-building on issues of payment fraud and general use cases. The successful implementation of such consumer education programmes could impact positively on behavioural change and build confidence in digital payments and services. In addition, collaboration between agents and merchants should be strengthened to spur growth in digital payments, eliminate duplication of efforts and lower costs.”
He sums up Ghana’s task succinctly “We owe it to ourselves and future generations to scale up the delivery of digital payments to create greater value for society. “
