Banking in Ghana has been traditionally brick and mortar for some years until competition and customer sophistication drove banks to roll out innovations such as online banking services and other platforms for clients to transact business with ease. Most banks have evolved from the regular internet/online banking to collaborating with telecommunication service providers (telcos) to launch mobile apps to enable clients to conveniently manage their funds and transactions from their mobile money wallets to their bank accounts and vice versa.
The emergence of Covid-19 pandemic and its impact on service delivery in many industries including banking has led to the need for banks to liaise with fintech (financial technology) solution providers now more than ever to make transactions safer and more convenient for their clients. This article provides an overview on the history of fintech, effects of Covid-19 on the traditional ways of doing business, opportunities amid Covid-19 and the need for innovation. It would also touch briefly on government’s policy on digital financial services, collaboration required between banks and fintech firms, and the way forward in banking post Covid-19.
History of Fintech
The term “fintech”, which was coined from combination of the two words, “financial technology” is the term used to describe new technology that improves and automates the delivery and use of financial services. Fintech first emerged in the 21st Century as the technology applied by back-end systems of established financial institutions. The scope of fintech solutions has seen some significant changes as a result of a major shift towards more consumer-oriented services. Fintech now includes different sectors and industries such as education, transportation, retail banking, fundraising and nonprofit, and investment management.
Essentially, fintech is utilized to help companies, business owners and consumers better manage their financial operations, processes, and daily lives by utilizing specialized software and algorithms on computers and, increasingly, smartphones. Fintech also involves the development and use of crypto-currencies such as bitcoin.
Effects of Covid-19 on traditional ways of doing business
The Covid-19 pandemic took the world by surprise and with millions having been infected and over half a million deaths recorded globally. One of the major means of spreading the pandemic is through direct physical contact with infected persons or indirect contact with surfaces in the immediate environment or that may have been used by the infected persons. Governments globally are following recommendations from the World Health Organization to implement social and physical distancing to mitigate the spread of the virus.
These recommendations have affected economic activities globally as schools, sports, hotels, religious institutions and the aviation industry have had to be closed down. In addition, borders and airports have also been closed. The sudden halt in such vibrant economic activities have led to a decline in global economic projections. Countries across the globe have revised their projections for economic growth downwards and have put some stimulus packages in place. For example, the United States of America (USA) has reviewed the Fed rate by 150 basis points in order to revive its economy. The Bank of Ghana reviewed its Monetary Policy Rate downwards by 150 basis points in March to mitigate the effects of the pandemic on the Ghanaian economy. Many banks and financial service providers have activated their business continuity plans to keep their businesses afloat in these uncertain times. The legislation of compulsory wearing of facemasks to public areas has made it relatively easier for people to go out with some level of confidence albeit with a much greater awareness of safety precautions.
Opportunities amid Covid-19 and the need for innovation
Telcos have seen a surge in the use of data during this period. As a result of the demand, major players in the industry like MTN have increased the price of their TurboNet from GH¢300 to GH¢500. This has not deterred customers as it has virtually become a necessity in households; for example, students who are at home need to connect to the internet to log into and continue their classes online. Generally, there is way more activity online as churches as also live streaming their services to keep interacting with their members, businesses are running more online ads and professionals are organizing engagements such as webinars to educate interested parties.
Physical Interactions are fading out
Meeting apps like Zoom and Microsoft Teams have gained some prominence in Ghana. In view of the foregoing, banks have had to promote the use contactless solutions such as online banking, USSD codes, banking apps, etc. to give clients the comfort to transact from home or at any location, while avoiding the need for physical visits to their branches. Banks and financial service providers have also significantly increased their engagement on social media platforms to address customer needs and queries.
Currently, over eighty percent (80%) of the 23 banks in Ghana have mobile banking apps that offer their customers the luxury to bank from the comfort of their homes and do basic banking transactions like cheque book requests, check balances, transfers and payments. This is because the banking sector no longer operates in a silo. Customers are sophisticated and are in dire need of digitized solutions that need to be done in real-time and save them money.
Covid-19 and the dire need for fintech
Challenges create the conducive atmosphere for innovation and this pandemic has created a unique opportunity for the financial sector in Ghana. Although many activities and businesses have come to a standstill, innovation has soared in collaboration with technology to create solutions that would allow businesses and individuals to stay afloat. The hardest hit are the businesses that thrived on physical human interaction especially the ones without digital channels for transactions and payments.
Prior to the pandemic, several businesses were slow to adopt digital payment solutions and preferred the use of cash. Of course, this was not so much of an issue as most customers were still comfortable handling cash. With the paranoia and the safety precautions that have accompanied the pandemic, less and less customers are keen on handling cash for payments. As a result, some of these businesses have started adopting mobile money and fintech solutions for their payments. For the customer, this means safer and more convenient transactions and interactions while maintaining social distancing protocols.
For the past few years, the banking industry in Ghana has been going through its own digital revolution. The emergence and growing popularity of fintech companies has played a role in steering the traditional banks in the direction of technological advancement with innovation being their true-north. As already mentioned, most retail banks in Ghana have rolled out a mobile banking app that allows users to manage their finances, make payments and transfers and many other features. Some of these apps, such as Stanchart’s SC Mobile, even allows users to perform transactions like changing one’s debit card PIN via the app and even purchase treasury bills and bonds. USSD versions of some of these mobile banking applications have been made available to enable users with feature phones access their bank accounts. In this era of a new normal, the use of these applications is sure to increase, if not already.
Government policy on Digital Financial Services
The Government of Ghana has launched a Digital Financial Services policy which seeks to increase financial inclusion from the current rate of 58% to 85% by the year 2023. This audacious target, if met, would catapult the country closer to its destination of being a cash-lite society. In addition, there is the objective of creating a digital ecosystem that would boost social development, the private sector, and the economy in general. There are also steps to setting up an inclusive digital payment system to give users better access to financial services. There is no better time to pursue the Financial Inclusion and Digital Transformation agenda in the country, as they have become essential to the daily lives of the average citizen.
Collaboration required between Banks and Fintech Firms
Fintechs and banks in Ghana now have a more obvious reason to collaborate to meet the mutual objective of making financial transactions easier for customers and making financial inclusion in this economy a reality. As mobile money has become the most popular option for retail transactions, we are likely to see banks and fintech integrate their platforms to deliver more innovative and cost-effective solutions for customers. For example, several small and medium-sized businesses have begun migrating their businesses onto digital channels such as e-commerce websites and social media platforms. Digital marketing finally has the spotlight and attention it deserves in Ghana, and this has created the need for convenient financial solutions to enable seamless transactions between buyers and sellers online. The need to adjust to the digital space has proven to several people how much convenience was being missed out on with the traditional methods, and it is hard to imagine people reverting to the old ways of transacting business after this experience. By being compelled to perform transactions online, both customers and business owners have realized how much easier life can be.
Increased in collaboration to deal with risks associated with fintech transactions
The rapid evolution taking place within banking and fintech will be accompanied by risks. It would be interesting to see how the banks and fintech collaborate to deliver solutions to businesses to enable them to process their transactions with ease. We are expecting to see solutions that would allow easy and seamless integrations that would focus on convenience for customers. It is important to note that these solutions must ensure the maximum security of customer data and funds. With the increase in scamming attempts through mobile money and debit cards, cyber-security must be of utmost importance to ensure that our advancement towards digital and financial inclusion would not be a traumatic one for citizens. The Bank of Ghana and regulators are now faced with the challenge of implementing policies that would protect the funds of citizens and businesses while encouraging and embracing the spirit of innovation and competition. We look forward to revised policies that would enable fintech companies to thrive while the collaborations between them and the banks are favored.
We envision a ‘Ghana beyond Covid-19’ where there will be minimal or no need to go to banking halls to perform basic transactions. We envision a society that would view the use of cash for payments and transactions as outmoded. Mobile banking applications by banks would roll out innovative features in collaboration with the fintech that would see users being able to purchase diverse investment instruments with ease and perform real-time international transfers. We look forward to more P2P (peer-to-peer) and B2B (business-to-business) applications that would enable interoperability and transfer of funds between mobile networks with negligible or even zero fees. The country might not be ready for blockchain technology just yet as we are still taking steps towards digital transformation. However, this can happen in the very near future as we embrace the new normal. The future of banking and finance is here and we are looking forward to seeing this revolution unfold before our eyes.
Disclaimer: The views expressed are personal views and do not represent that of the media house or institutions the writers work for.
About the Authors
Sophia Kafui Teye; BSc, MBA, GSE Cert. and CA Ghana (Student Member)
Author of the underlisted books; Start Right: A Guide to Financial Investments in Ghana; Overcoming Infertility: What to do When Childbirth Delays; Contemporary Parenting; Stepping up Your Life
Email Address: [email protected] Cell: +233-242-913-562
Derrick Crentsil; Digital Marketing Consultant
CEO, La Lune Digital Ltd (Digital Marketing Consultancy based in Accra)
Email Address: [email protected] Cell: +233-242-618-552