The digital era and financial services in Ghana

The Internet has changed the relationship between consumers and physical money, and reduced the importance of trading with physical money.

Ghana is transitioning from an internet economy to a digital consumer economy. We need to simplify people’s daily lives.

The customer’s personal behavior is virtualized and mobilized by smartphones. Customers now prefer to transact on their smartphones with technology companies providing more convenient financial services via mobile internet.

Consumers now conduct their financial transactions remotely through a variety of digital platforms: desktop computers, laptops, tablets, phones, and even watches and glasses. The company must rethink its distribution channels for loan products to reflect today’s digital consumer economy.

The Covid-19 pandemic and its impact on e-commerce has encouraged some international cooperation and further developed online purchasing and sourcing policies. The pandemic has made e-commerce an essential tool or solution, especially since online sales can support the small and medium-sized businesses that form the backbone of our economies.

This is expected to significantly boost the growth of digital payment methods in various economies. Globally, cardholder spending has been hit hard due to the pandemic.

As businesses expand contactless payment options to invite customers, contactless functionality has become a USP for businesses around the world. Due to these developments, banks around the world are expected to partner with mobile payment providers to expand their banking services.

Covid-19 and Global Policy Initiatives

The use of digital payment methods has improved after Covid-19.

The Covid-19 pandemic has spurred the adoption of digital payments in Singapore, especially after the launch of a common QR code standard.

London-based Rapyd, a global Fintech-as-a-service company, has announced a new solidarity program to help Singaporean businesses quickly accept online payments free of charge until June 2022.

Governments are taking the lead in introducing digital payment solutions. For example, in August 2021, Indian Prime Minister Narendra Modi launched the e-RUPI digital payment solution, a person- and purpose-specific digital payment solution. e-RUPI is a cashless and contactless instrument for digital payment.

Emerging economies and developing countries around the world have seen significant growth rates in the adoption of mobile payments, not only due to the ease of performing transactions or the penetration of smartphones, but also due to the financial inclusion features offered by technology.

The increase in international trade, the internationalization of production and cross-border e-commerce suggest that the demand for digital cross-border payments will continue to grow globally. Globally, financial institutions have adapted their systems and processes to protect payment systems from emerging threats.

Some of the financial institutions replaced their old systems, while others collaborated with FinTechs and mobile money operators to offer innovative products and services. There are regulatory reforms globally to create a favorable payment environment in many countries.

Some countries have launched policies such as the regulatory sandbox to foster FinTechs, while others have enacted new payments laws to engender competition and allow non-bank entities to play in the payments ecosystem. Regulatory technology (RegTech) solutions are also being implemented by some countries to improve their supervisory frameworks.

Digital banking emerged in Ghana around 2008 after the arrival of Nigerian banks who then developed web-based platforms to help businesses manage their revenue collections and payments seamlessly. In 2010, MTN, Vodafone, Airtel and Tigo dominated the e-money issuer ecosystem with their Mobile Money (MoMO) in conjunction with a number of banks.

MTN MoMo, Airtel Money, Tigo Cash and Vodafone Cash serve the consumer with their collection and withdrawal services. Since 2016, the Bank of Ghana has embarked on major policy reforms to ensure a secure digital industry in Ghana. Today, Ghana has five dedicated e-money issuers, 41 payment service providers (PSPs) and one payment and fintech service provider.

In 2019, the BoG facilitated the adoption of payment system art and services, which guides the payment system landscape and also enables non-bank entities to operate in the payment ecosystem. A cybersecurity directive has also been issued by the BOG for payment service providers. The directive provides a framework for PSPs to implement cybersecurity measures to protect digital payments.

An open application programming interface (API) system has also created opportunities for (FinTechs) to improve time to market for their products, reduce development costs, improve flexibility products and improve market competitiveness.

Over the years, FinTechs have received and continue to receive significant government support in ICT infrastructure. The Retail Payments Interoperability Project was completed and helped improve the overall efficiency of retail payments. Funds are transferred seamlessly from one mobile money platform to another.

Similarly, funds are transferred from the mobile money wallet to the bank account and vice versa. The E-Zwich payment system has been integrated with mobile money wallets, while a prototype agent registry has been developed for the payment ecosystem.

The payment card industry’s migration from magnetic stripe technology to Europay Mastercard Visa (EMV) chip and PIN technology was completed in the first quarter of 2018. Most bank cards and systems are compliant with the EMV standard. BOG approved QR and Near Field Communicator (NFC) codes.

Ghana has widespread QR codes; all schemes have their own QR codes, banks have their own Gh QR codes and GhiPPS has its own. Efforts to ensure the development of the FinTech industry resulted in the establishment of the Ghana Chamber of Technology as an umbrella body.

The chamber provides a forum for FinTechs to share their experiences and also serves as a single point of interaction with the Bank.

The digital sector has seen the development of innovative products and services in the payment ecosystem, leading to better access to microloans, insurance, savings, investments and pensions. Financial institutions, FinTechs, and mobile money operators are collaborating to introduce products that offer convenient ways to pay for consumers and bring the unbanked into the financial system.

Some of the services provided by FinTechs in collaboration with financial institutions in 2018 included digital savings, credit scoring, agency banking, electronic payments, integrated Know Your Customer (KYC) solution, investment, Pension and Insurance BoG approved 27 products and services for 16 financial institutions in 2018 compared to 38 products and services approved for 21 institutions in 2017.

The products approved were mainly inbound remittances, agency banking, mobile banking and mobile money retirement service. The completed National Financial Inclusion Development Strategy outlines the actions needed to accelerate the uptake and adoption of technological innovations in mobile phones to suit Ghana’s youthful population.

BoG has formulated a payment systems strategy to accelerate developments in the electronic payment space to help achieve the National Development Strategy target of increasing financial inclusion from the 2017 level of 58% to 75% by 2023. Several projects aimed at fostering financial inclusion include, Mobile Money Interoperability involving; interconnection of mobile money platforms and Ghana National Switch (gh-link)

Stephen V. Lee