A report by the Oxford Business Group (OBG) has indicated that the growing trend of mobile money transactions in the country poses a significant threat the future of banks should the mobile money companies start applying for digital banking licences.
The report’s analysis of data from the Bank of Ghana said the largest share of mobile money deposits in Ghana rest with Fidelity Bank, which in 2017 held around GH¢583million, followed by Ecobank and CAL Bank, with GH¢470million and GH¢229 million respectively.
The analysis mean that if the mobile money companies eventually become digital banks— which the report strongly predicts will happen—banks will no longer be the custodians of the mobile money accounts, a situation the OBG says will be disruptive to traditional lenders.
“The current legislative framework requires telcos to place their deposits with commercial banks, but the volume of funds attracted by mobile operators has exposed a vulnerability in the banking system.
With billions of dollars in deposits, many market observers foresee MTN being the first of the domestic telcos to apply to the regulator for permission to establish itself as a digital bank – a move that could potentially be very disruptive to traditional lenders.
“The digital segment is one of the least predictable areas of the market. Navigating this space and defending revenue from disruptive technologies is likely to be a key challenge for Ghana’s banks in the coming years,” the report said.
The OBG report added that similar trends happening across the globe have birthed products such as online savings accounts, personal finance management tools, real-time alerts, home loans, investments, fee-free international transactions, person-to-person payments, currency exchange, linked debit and credit cards, cash withdrawals at ATMs, and insurance and consumer benefits such as cashback rewards on purchases—all of which have posed serious competition to the traditional banking systems of countries where these innovations have taken place.
The threat of mobile money transactions to the banking sector is further affirmed by the 2018 Summary of Economic and Financial data report of the Bank of Ghana, which shows that the rate of banks’ deposits dropped consecutively in the last three months of 2018.
The data show that growth rate dropped from 26.2 percent in September to 20.7 percent in October, and further dropped to 18.4 percent in November and to 17.4 percent December respectively. With the recent dip in confidence regarding the banking sector – evidenced by panic withdrawals after the central bank embarked on an aggressive reform of the industry – deposits are expected to drop further.
However, mobile money transactions have seen an astronomical jump since their introduction. Last year alone, they grew by 43.2 percent from the previous year, with transaction value hitting over GH¢233billion.
It has even overtaken cheques as the largest payment system in the country, as the value of cheque transactions last year was GH¢203 billion – a sure sign of the looming threats the OBG report has highlighted.