Leveraging on FinTech Post COVID-19: …. the Ghanaian Paradigm



The recent disruptions in the global economy as a result of COVID-19 has made calls for integrating technology in every aspect of our business and social life most prominent than ever. The 2008 financial crisis led to the introduction of Financial Technology (FinTech), which has gradually penetrated the financial sector, particularly in the Western, European and Asian countries.

Some countries including Kenya, Nigeria, South Africa and Ghana, embraced FinTech, to a certain extent, in their business cycles. According to data from Disrupt Africa, over 300 FinTech companies in Africa are presently active. However, a lot more needs to be done to achieve universal financial inclusion, while taking advantage of this unprecedented global recession and technological digitization to propel economic development and financial inclusion. Nonetheless, FinTech, serves as the way to go in achieving this feat and there has never been no better time to leverage massively on the disruptions to our economies.

Schueffel (2016) defined FinTech as, “a new financial industry that applies technology to improve financial activities.” Largely, this implies FinTech comprises of companies or representatives of companies that combine financial services with modern, innovative technologies. These definitions provide the background in understanding the disruptive nature of FinTech companies to traditional business models. Thus, the relevance to rethink the entire ecosystem being introduced into the business and economic landscape. As a rule, new participants in the market offer internet-based and application-oriented products, where they aim to attract customers with products and services that are more user-friendly, efficient, transparent and automated than those currently available.

Just like any other innovation, FinTech companies present certain risk levels; (i) their vulnerability to major shocks per their business operating models, which have the tendency of affecting other equal financial industry firms or players; (ii) unavailability of reliable data and information for industry regulators to serve as a tool for monitoring and constraining technologically innovative firms; and finally, (iii) the FinTech industry ignites a problem of collective action, which diminishes and prevents industry relationship and cooperation among firms in the market (Magnusson, 2018).

In as much as these risks exists, it must be noted that the 2008 financial crisis led to distrust in the banking system. Another issue is the introduction of high speed internet and broadband services. Most importantly as identified by the Centre of Excellence on Emerging Development Perspectives is the fact that, “the potential of digital financial services in providing secure, low-cost, and contactless financial tools has become even more apparent during the crisis. But there’s a catch, the reliance is on the ‘convenience’ that digital finance provides and not necessarily on the unicorn startups that have driven the rise of FinTech.” These reasons largely had a direct effect on disrupting the current financial business models in place. As these processes become the norm, it is expedient to note that a lot more clients would turn to FinTech, which eventually becomes a haven for their financial transactions. Governments, banks and financial institutions must leverage on these changing dynamics to collaborate with FinTech companies and startups.

Digital Transformations in the Ghanaian Economy

Ghana has been a beacon to other African countries in various sectors and this is also predominantly revealed in the country’s effort to ensure a user-friendly and financially inclusive digital services ecosystem. The recent introduction of three policies geared towards rapid economic growth and development is intended to accelerate financial inclusion and the digital payments ecosystem. The World Bank reported in 2015 that only 58 percent of Ghana’s adult population had access to formal financial services. It is however envisaged that this would increase to 85 percent by 2023, noting the pace of digital financial services channel being created. The index further reported that Ghana’s strides in achieving an integrated financial services inclusion is above the 2017 sub-Sahara African level of 43 percent.

Data from the Financial Inclusion Insights (FII) reveal that 48 percent of Ghanaian adults had financial accounts, of which 34 percent had bank accounts, 20 percent had mobile money accounts and only 8 percent had Non-Bank Financial Institution (NBFI) accounts in 2015. With regards to access to finance, men still lead with 62 percent as compared to their female counterparts of 57 percent. However, the ratio of financial access is relatively increasing for women as compared to men, which is rather at a slower pace. Hence, more women are predominantly getting more access to financial resources. This development, as indicated by the World Bank’s Consultative Group to Assist the Poor (CGAP) is deservedly as a result of the increase in mobile financial services, which contributes nearly as much access to formal financial services as commercial banks.

Mobile money operations in Ghana have witnessed a total of GH¢981.6 million transaction volume by the end 2017. In the same vein, the total value of transactions constituted GH¢155.8 billion signaling growth rates of 78.4 percent and 98.5 percent respectively, over the previous year’s transaction volume of GH¢550.2 million and total value of transactions of GH¢78,508.90. In addition, the total number of active registered accounts of 13,120,367 in 2015 increased to 23,947,437 in 2017 (Bank of Ghana).

The central bank of Ghana reveals that the banking sector had undergone a major restructuring between 2017 and 2018 which led to the consolidation of nine banks. Also, the merger of three banks, the voluntary winding up of one bank, and the downgrading of another to a savings and loans bank, has led to a total of 23 universal banks currently operating in Ghana. As a result, state ownership of banks have increased tremendously, with the ownership of four major banks, two of which are among the three largest in the country.

The recent creation of the FinTech and Innovation Office at the Bank of Ghana, to primarily encourage broader strategy to entrench cash-lite, electronic-payments digitization in the country is prominently a step in the right direction to ensure licensing and oversight of dedicated electronic money issuers (mobile money operators), payment service providers (PSPs), closed loop payment products, payment support solutions and other emerging forms of payment delivered by non-bank entities.

The forward thinking strategy and the introduction of the policies serves as a guide for banks and other financial institutions to begin developing partnerships with FinTech startups and companies, as there are over 70 FinTech companies presently operating in the country. That process would certainly serve as a way for these institutions to identify their innovative needs and prevent their business operations and models from being excluded as the digital transformation is achieved.

Government and private businesses must begin a rigorous sensitization and information dissemination process to garner support from the masses and educate the general public on the importance of digital transformation in these times of COVID-19. Also, the public must engage in the innovative process of creating a central bank digital currency (CBDC) of the Ghanaian cedi. These efforts would consolidate stakeholder and public interest in the efforts being made by government to achieve financial inclusion at all levels of the economic landscape.

Regulatory measures should be hastened and strengthened to catch up with the disruptive speed of FinTech operations, else challenges such as money laundering, data governance, privacy and protection, cybersecurity and other technical vulnerabilities are prone to distort the entire architecture currently being introduced to achieve government’s digital transformation agenda.


The author is an Economist and Fintech Expert and CEO, Arkel Consult & Management Services (ACMS) Limited (Based in the Caribbean and Ghana)

Email: [email protected]

Contact: +233 241 339037

LinkedIn URL: https://www.linkedin.com/in/martin-awagah-kwame/

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