Fintech, the contraction of the words financial and technology, refers to the innovation that is disrupting traditional financial methods in the delivery of financial services. In Ghana, the payment space is composed primarily of companies that provide financial services to customers and merchants, which are not limited to sending and receiving money alone.
On a larger scale, Africa is uniquely served by a variety of fintech solutions that are not present anywhere else in the world. The introduction of mobile money in Ghana by MTN in 2009 served as an opportunity to introduce simple fintech services to both the banked and unbanked. However, these services and technologies are still in their infancy, a clear indication that there is tremendous room for growth in coming years with the central goal of supporting customer’s daily needs.
Despite limited bank penetration across Africa, about 30% in Ghana, due to a low product-market fit for customers, banks have a lot of potential to grow as well, offer new banking solutions and ensure that transactions are secure, ensuring collections for merchants across collection channels. Following the Coronavirus pandemic, many banks are working at adding more technological solutions to meet the ever growing needs of their customers, individuals and merchants. Banks in Ghana, Nigeria and South Africa are leading this digital transformation in Africa with the help of Financial Technology Companies. Fintechs complement banks and other institutions in their quest to digitally transform Africa.
In the 14th century, when banks were introduced in Europe, they started as merchant banking solutions for world explorers and travellers who were going around the world and bringing back treasures from other lands. These treasures needed to be put in a safe place while their owners were away. The treasures which included, but were not limited to, gold and precious stones were used as exchange currency in order for local merchants to borrow money to buy goods and pay back the bank with interest. This innovation allowed early bank benefactors to give their money to the banks, grow the banks capitalisation, and then gain additional interest by the time they returned from their travels. Banks were the perfect product fit at the time.
Mobile money’s innovation in the late 2010’s had a similar story where stored value was used to operate simple transactions leveraging mobile technology. With a penetration of over 100% in Ghana and many other countries in Africa, mobile phones serve as a bedrock of mobile exchanges. 8 out of 10 people can accept digital money in the form of mobile money anywhere in Ghana. In the cities and villages away from the capital, mobile money is the primary way to send and receive money digitally, making the technology a good product fit for the African market. In 2019, pre COVID pandemic, the Ghanaian market had a transaction value of US$ 46.9 Billion according to the IMARC Group.
Though adoption of the bank, mobile money and e-commerce took time, the trio now represent an important evolution for civilisation. When banking began in Ghana, customers frequently visited their banks to withdraw their money and verify that it was still intact in their bank account. It took time to show that keeping money in the bank was secure. It will be the same for digital transactions secured by fintech companies.
In this present digitalisation, merchants can monitor collections, send money across channels securely and reduce the movement of cash to prevent mishandling. Fintech is being used to support the growing needs of the market by providing solutions that offer convenience. One of our fintech solutions at DreamOval for example, is that we are enabling direct remittance termination to bank accounts and mobile money. This means that people don’t need to leave their homes or offices to receive remittances from their loved ones abroad. By working with most of the banks, customers use our technologies everyday not knowing that we are bringing significant value for their benefit and the benefits of our financial partners.
Customers want convenience, security and reliability. Technology companies specialised in financial services, such as DreamOval Limited, work with several financial partners to ensure that customers and merchants get additional value. The beauty of financial technology in Ghana is that we provide these technologies to other countries, financial institutions and large merchants. By doing this, we enhance financial services and offer solutions that are made for their customers, and this is made in Africa.
Written by Charles Kollo
Senior Vice President ( DreamOval)