The latest payments platforms report released by the Bank of Ghana, covering the first half of 2021 has disclosed that mobile money transactions has retained its place as the most preferred mode of transferring money, ahead of cheques. Indeed the gap between mobile money and cheques continues to grow, measured by both number of transactions and value of transactions. However the growth of this transformational genre of digital payments – started in 2010 by MTN Ghana – after more than a decade of continuous phenomenal growth in both value and volumes of transactions may be about to face its first major challenge as the BoG moves closer and closer to its issuance of a Central Bank Digital Currency (CBCD) with its pilot stage scheduled during the last quarter of this year,
According to the latest data from the BOG, the value of mobile money transactions in January 2021, February 2021, March 2021, April 2021, May 2021 and June 2021 were estimated at GH¢67.1 billion, GH¢67.9 billion, GH¢82.3 billion, GH¢83.8 billion, GH¢86.5 and GH¢89.1 billion respectively
The monthly values of cheque transactions during this period were GH¢17.0 billion,GH ¢15.5 billion, GH¢18.3 billion, GH¢17.5 billion, GH¢15.7 billion and GH¢17.9 billion in January 2021, February 2021, March 2021, April 2021, May 2021 and June 2021 respectively.
Instructively the value of MoMo transactions continued to rise by the month indicated continued steady growth whereas the value of transactions executed by cheques suggested that growth is stuttering. The highest value was regarded in March, the second highest was in June and the third highest was in April.
The BOG believes that the significant use of mobile money for financial transactions indicates that gradually a time will say that most Ghanaians will largely prefer using their mobile money accounts for deposits or funds transfer at the retail level rather than resorting to the banking system.
Indeed MoMo is becoming a major medium for retail lending and merchant credit purchases which is why a new directive from the central bank demands that such transactions be captured in credit reporting to credit reference bureaus from now on.
Already the biggest MoMo service provider, MTN Ghana was believed to have the intention to migrate into a full fledged digital bank over the coming years although has been completely debunked by it CEO, Selorm Adedevoh.
Ironically though, the bright future which the BoG sees for MoMo may be dimmed somewhat by the digital currency which the central bank is about to introduce, called the e-cedi.
The Bank of Ghana has partnered with Giesecke+Devrient (G+D) to pilot a general purpose Central Bank Digital Currency (retail CBDC) in Ghana. G+D is providing the technology and developing the solution adapted to Ghana’s requirements, which will be tested in a trial phase with banks, payment service providers, merchants, consumers and other relevant stakeholders.
To this end, the Bank of Ghana has signed an agreement with G+D to implement a pilot CBDC project as a precursor to the issuance of a digital form of the national currency, the Cedi.
The digital Cedi, or ‘e-Cedi’, is intended to complement and serve as a digital alternative to physical cash, thus driving the Ghanaian cashlite agenda through promotion of diverse digital payments, while ensuring a secure and robust payment infrastructure in Ghana.
It also aims to facilitate payments without a bank account, contract, or smartphone, by so doing boosting the use of digital services and financial inclusion amongst all demographic groups.
The project will be divided into three phases: design, implementation and pilot. In the design phase, all framework parameters for the CBDC pilot will be specified and defined.
These include economic, regulatory and technical requirements of the country as well as the definition of the parameters for the test phase. In accordance with these individual requirements, G+D’s CBDC solution would be adapted for the Ghanaian context in the second phase.
In the pilot phase, a user group of diverse demographic and socio-economic backgrounds will test the solution in the field using different channels and form factors such as mobile apps and smart cards.
Over the course of the pilot project, a study will be conducted on the acceptance of the e-Cedi from the end users’ perspective.
In addition, the IT security of the infrastructure, impact of the project on monetary policy and payment system, and the legal implications will be evaluated. Insights from pilot user experiences would provide Bank of Ghana and G+D with valuable lessons for a nationwide rollout of the e-Cedi.
Dr. Ernest Addison, Governor of Bank of Ghana, has stated that “CBDC presents a great opportunity to build a robust, inclusive, competitive and sustainable financial sector, led by the central bank. From all indications, the concept has a significant role to play in the future of financial service delivery globally. This project is a significant step towards positioning Ghana to take full advantage of this emerging concept.”
“Central banks around the world are exploring the introduction of digital money as legal tender. The Ghanaian government is one of the first African countries now entering a pilot phase. We are proud to support Ghana with our technology and expertise,” emphasizes Dr. Wolfram Seidemann, CEO of the Giesecke+Devrient Currency Technology business sector.
The conventional wisdom is that the impending e-cedi will compete with MoMo as a digital payments platform. However Selorm Adedevoh believes that the e-cedi, leveraging on block chain technology will appeal to a higher market segment than MoMo which is widely used at the grassroots level. He asserts that the e-cedi will be used primarily by enterprises, institutions and high networth institutions for business transactions including international trade transactions.
Whether the e-cedi takes major market share away from MoMo or creates what would primarily a new market of digital payments users, it will greatly enhance Ghana’s vision of the digitalization of financial payments in the country.
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” 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.”
Combating fraud will also be crucial. This problem has significantly affected the appetite for MoMo, indeed enough to persuade the three networks that offer the service to collaborate to curb it.
The Ghana Chamber of Telecommunications has begun the rollout of a mobile money transaction securitization that will block mobile money fraudsters across all telecommunications platforms.
This has been revealed by the Chief Executive of MTN Ghana, Selorm Adadevoh, who explains:
“So we have come together as a Chamber to say ‘how do we intensify or increase the barriers to fraud?’ And blocking the device across all networks is for us one step to achieve that. This is one of the activities we are currently focused on, and we have implemented it through the chamber,” he said.
Mobile money fraudsters, according to the MTN boss will now have their numbers and device blocked across all networks.
Statistics from the cybercrime unit of the Ghana Police Service showed over 300 reported cases in 2019.
Telcos, especially industry leader, MTN, Ghana, have been responding – introducing the requirement of identity as a pre-condition for a customer to withdraw money from a mobile money wallet.
All mobile money agents will have to select the ID type and enter the ID card number presented by the customer before completing the transaction.
Dr. Addison, who is the primary driver of digitalization of financial payments, 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. “