BOG to regulate Fintech operations

The Bank of Ghana has stated that Fintechs will come under its regulations in the near future to ensure credibility and stability in the financial sector and avoid systematic risks on cyber security and data issues.

Representing the Central Bank at Citi Business Festival’s Fintech Summit hosted by the Citinewsroom, Setor Amediku said based on the assessment, a new bill has been drafted which is currently before parliament.

Setor revealed that the central bank has carried out on the search and has established that there are currently 71 Fintechs operating within the banking sector.

He added that when the bill is passed by parliament there are some minimum requirements that the Fintechs will be expected to have met to be licensed.

“We need to regulate the environment so they will be disciplined. So, I want to assure you that at the Central Bank we are concerned about the stability of the financial system and we will ensure that when parliament passes the bill into ACT, there will be minimum corporate governance on money laundering issues and data protection”, said Setor Amediku.

At the event, Kofi Dadzie of Rancard, a Fintech organisation, was of the opinion that the Fintech industry has the potential of offering far lower lending rates as low as 12%, in an era where interest rates in Ghana’s banking sector are well beyond 20%.

According to him, the rise of financial technology has been propelled by issues such as poor market penetration and bureaucracy of the banking sector which has limited financial inclusion -an issue he believes Fintechs now exist to resolve through ease of access and convenience via digital transactions and innovation.

Kofi Dadzie, during his presentation on the viability of Fintechs said: “The truth is that we only barely scratch the surface of what is possible. And all that we’re currently experiencing is the disruption of the disruptors. What we’ve always seen is about moving money, what we haven’t seen is true disruption.”

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“While the traditional banks are offering loans at twenty-four or twenty-five to 26 percent for the same value, some Fintechs can extend that money to you for 12%. That would be disruption. Because we’re disrupting the business model in such a way that it’s embraced by the very people who have previously experienced it,” he revealed.

However, Setor Amediku objected to this assertion stating that the decision to give out loans at an interest rate lower than what the traditional banks offer was not a simple matter as stated by Kofi Dadzie.

He explained that Fintechs must first of all be supervised by the Central Bank in order to regulate its activities especially in the area of lending.

“We see technology impact on even the way the monetary policy is conducted. Lending is a regulated activity in every jurisdiction. We cannot see the emergence of institutions where everybody can just end up in lending. Then the whole financial system will collapse,” Setor Amediku added.

He noted that BOG’s main focus is to ensure stability in the financial system because the Fintechs linked to the banks could create systemic risks such as cyber security and data issues.

“So, at the Central Bank, we saw the need to change the whole regulatory environment because we see that with technology, there is the need for the Central Bank to change its approach to supervision” said Setor.

He also stated that: “Whatever interest rate decision you are taking will not have any impact because what it means now is that we have 58% of our people who are formerly included and per as our national inclusion strategy documents that we work with the Ministry of Finance and the World Bank, our target is that by 2023 we should move Ghana by 75% financial inclusion.”

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Also present at the event was the Chief Executive Officer of the Ghana Interbank Payment and Settlement Systems (GHIPSS), Archie Hesse, who noted that his outfit cannot succeed in the absence of Fintechs.

According to him, the future of Fintechs will thrive if there are more partnerships within the financial ecosystem.

He also said that financial inclusion is another point that will play a major role in ensuring that the economy of the country grows.

Archie Hesse noted that Fintechs and other financial institutions should be able to provide services not only in the area of transactions but also in the area of transforming other sectors in the country.

He said: “It is not just about the provision of financial services. I will like to see a future where the Fintechs and everybody in that space will come up with solutions that actually touch other aspects of people’s lives not just payments solution.”

“How can we use that to transform the health system so people can go to hospitals and pay or even the educational system. So, there must be a transformational aspect of the financial service or otherwise we will just provide more and more bank accounts,” he added.

Archie Hesse again said that the various Fintech companies in the country who are specialising in the downstream systems and service apps are actually supporting the banks as well by virtue of how they operate.

He therefore suggested that the Central Bank should provide all Fintechs with various APIs to be able to allow them connect to the GHIPSS system so that they can have access to all the various accounts whether the funds reside in mobile money or ezwich or in the bank accounts.

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