Mobile money interoperability to enhance ‘cash-lite’ agenda

The recent launch of Ghana’s long-awaited mobile money interoperability platform is expected to deepen financial inclusion and further the central bank’s ‘cash-lite’ agenda.

Developed by Ghana Interbank Payment and Settlement Systems (GHIPSS), a fully-owned subsidiary of the Bank of Ghana (BoG), the platform was launched on May 10 and allows mobile phone users to send funds across mobile money networks.

This means that users are now able to transfer funds directly between wallets supplied by different companies, as well as bank accounts and e-zwich cards. The latter is a national smart and switch-card system that links the payments platforms of all licenced banks and non-bank financial institutions.

There was a relatively strong take-up of mobile-to-mobile transfer after the interoperability launch, with 23,000 transactions valued at GH¢1.8m (US$387.2m) conducted over the first five days of the service being in operation. By comparison, the five-day average value of all mobile money transactions last year was roughly GH¢2.1bn (US$451.8m).

Providing a platform for mobile money growth and new payment streams

The potential for interoperability to extend the reach of financial inclusion and reduce cash payments is significant, with the penetration rate for mobile money accounts in Ghana showing strong growth in recent years.

The country’s estimated 29.3m citizens between them hold some 25.3m mobile money accounts – well up on the 8.2m users registered in 2013 – as per data from the BoG. With just over 11m mobile phone subscriptions, this indicates that each mobile-owning Ghanaian has more than two accounts.

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The growing popularity of mobile payment systems was also evidenced by a rise in transactions values last year, when they almost doubled to GH¢155.8bn (US$33.5bn), up from GH¢78.5bn (US$16.9bn) in 2016.  Meanwhile, Kenya – which is considered as having the most well-established mobile money network – registered KSh6.3trn (US$62.4bn) in mobile payments; its population is around 20m greater than Ghana’s.

The BoG’s financial inclusion targets could be further supported by reforms proposed by the central bank.  Ernest Addison, Governor of the BoG, announced on May 16 that the Bank had submitted a draft Payment Systems and Services bill to Cabinet, aimed at strengthening the regulatory environment and providing additional support for emerging digital financial services.

For example, the rollout and acceptance of emerging methods of payment – such as pre-paid cards and credit cards – will be encouraged under the planned reform. The draft law also contains measures “to promote innovation in the design of new, secure electronic money products and payment services, and increase competition in the electronic money business,” Addison said.

BoG looks to spur innovation and competition

Significantly, the draft law will also make provision for non-banks to “establish, own and manage electronic money businesses in the form of a separate entity to be supervised by the BoG”, with Addison stating that it welcomes a “more competitive landscape…as the number of non-bank e-money issuers increases”.

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While this could mean conventional banks will have to innovate to broaden their customer bases, some stakeholders have tried to play down suggestions that their deeper penetration into the money market will erode traditional banks’ business base and earning capacity.

“We are just creating easy access for customers to transfer money from their bank accounts to their wallets and vice versa,” Matinson Obeng-Adjei, director of Vodafone Cash-the company’s mobile money transfer platform, told media in early May. “I do not think it is an attempt to take over the role of banks; it is a complementary service.”

Indeed, the new interoperability platform should help conventional lenders take advantage of the more than 143,000 mobile money agents to reach the unbanked population, although some sector players such as Henry Oroh, the CEO of Zenith Bank, argue that a “banking phobia” still exists.

“In spite of this, confidence is returning,” he told OBG. “And new or re-engineered technology such as mobile banking is helping change the culture and encourage savings and/or deposits accounts.”

This Ghana economic update was produced by Oxford Business Group

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