Digital age and the state of financial services


By Constance GBEDZO

The internet has changed the relationship between consumers and physical money, and whittled down the importance of trading with physical money. Ghana is shifting from the internet economy to a Digital Consumer Economy. There is need to simplify people’s daily lives. Client’s personal behavior is being virtualized and mobilized by smartphones.

Customers now prefer to conduct transactions on their smartphone devices with technology companies providing more convenient financial services using mobile internet. Consumers now transact their financial business remotely through a variety of digital platforms: desktops, laptops, tablets, phones and even watches and glasses. Financial Institutions need to redesign their loan products delivery channels to reflect the present digital consumer economy.

The COVID-19 pandemic and its impact on e-commerce has encouraged a degree of international co-operation and further develop policies for online purchases and supply. The pandemic has made e-commerce an essential tool or solution, especially since e-commerce sales can support small and medium businesses that form the backbone of our economies.

This is expected to substantially spur the growth of digital payment methods across various economies. Globally, cardholder spending has been hit severely due to the pandemic. With businesses expanding contactless payment options to invite customers, the contactless feature is observed to have become a USP for businesses across the globe. Owing to such developments, banks globally are expected to partner with mobile payment providers to expand their banking services.

At Commodities Investments Ghana Ltd, we see digitization of the Ghanaian as market driven rather than supply driven. This implies that we need to quicken action in providing the requisite ICT infrastructure across the country, digitally link the economy to the global marketplace, reduce the frequency of downtime being experienced, and ensure efficiency in service delivery across board.

The increases in international trade, internationalization of production, and cross-border e-commerce therefore suggest that demand for digital cross-border payments will continue to grow globally. Globally, financial institutions adapted their systems and processes to safeguard payment systems from emerging threats. Some of the financial institutions replaced their legacy systems, while others collaborated with FinTechs and mobile money operators to offer innovative products and services.

Emerging economies and developing countries worldwide have observed prominent growth rates in the adoption of mobile payments, not only due to the ease of performing transactions or penetration of smartphones but also because of the financial inclusion features offered by such technologies.

There are regulatory reforms globally to create enabling payment environment in many countries. Some countries-initiated policies such as regulatory sandbox to nurture FinTechs, while others enacted new payment laws to engender competition and permit non-bank entities to play in the payment ecosystem. Regulatory Technology (RegTech) solutions are also being implemented by some countries, like Ghana, to enhance their supervisory frameworks.

COVID-19 and global policy initiatives

The use of digital payment methods has improved post-COVID-19. COVID-19 pandemic has encouraged the adoption of digital payments in Singapore, especially after the launch of a common QR code standard.  London-based Rapyd, a global FinTech as a Service company, announced a new Solidarity Programme to help Singaporean businesses quickly accept payments online with no fees until June 2022.

Governments are taking the initiative to introduce digital payment solutions. For instance, in August 2021, India has launched the digital payment solution e-RUPI, a person and purpose-specific digital payment solution. e-RUPI is a cashless and contactless instrument for digital payment.

The digital milestone of Ghana

Digital banking emerged in Ghana around 2008 after the arrival of the Nigerian Banks who had then developed web-based platforms to assist businesses to manage their revenue collections and payments seamlessly. By 2010 MTN, Vodafone, Airtel and TiGO dominated the Electronic Money Issuer ecosystem with their Mobile Money (MoMO) in collaboration with a number of banks. MTN MOMO, Airtel Money, Tigo Cash and Vodafone Cash serve the consumer with their cash-in and cash-out services.

Since 2016, Bank of Ghana (BOG) has been playing major policy reforms to ensure secured digital industry in Ghana. Today, Ghana has five (5) Dedicated Electronic Money Issuers, forty-one (41) Payment Service Provider (PSPs) and one (1) Payment and Financial Technology Service Provider.

In 2019, the BOG facilitated the passage of the Payment System and Services Art, which guides the payments system landscape and also permits non-bank entities to operate in the payment ecosystem.

A cyber security directive was also issued by BOG to payment service providers. The directive provides a framework for PSPs to implement cyber security measures to safeguard digital payments. An Open Application Programming Interface (API) system also created opportunities for FinTechs to improve their products’ time to market, reduce development cost, enhance product flexibility and improve market competitiveness.

FinTechs, over the years, received and continue to receive significant Government support in ICT infrastructure. The retail payments interoperability project was completed and helped to enhance the overall efficiency of retail payments. Funds are transferred seamlessly from one mobile money platform to another. Similarly, funds are transferred from mobile money wallet to bank account and vice versa.

The E-Zwich payment system was integrated with mobile money wallets, while a prototype agent registry was developed for the payment ecosystem.

Migration of the payment card industry from magnetic stripe technology to Europay Mastercard Visa (EMV) chip and PIN technology was completed in the first quarter of 2018. Today, most banks’ cards and systems are EMV compliant.

BOG approved QR Codes and Near Field Communicator (NFC). Ghana has widespread QR Codes; all Schemes have their own QR Codes, Banks have their proprietary Gh QR Codes, and GhiPPS has its own.

Efforts at ensuring development of the FinTech industry culminated in the establishment of the Ghana Chamber of Technology as its umbrella body. The chamber provides a forum for FinTechs to share experiences and also serves as a single point of interaction with the Bank. The digital sector saw development of innovative products and services in the payment ecosystem, leading to improved access to micro loans, insurance, savings, investments, and pensions.

Financial institutions, FinTechs and mobile money operators collaborates to introduce products that provides convenient means of payment for consumers and brings the unbanked into the financial system.

FinTechs provides various support services to financial institutions and made payments transparent, convenient and efficient for consumers. Some of the services that are provided by FinTechs in collaboration with financial institutions in 2018 included digital savings, credit scoring, agency banking, electronic payments, integrated Know Your Customer (KYC) solution, investment, pension and insurance, etc.

BOG approved many financial products and services for a number of financial institutions between 2017 and now. The approved products were mainly in-bound remittances, agency banking, mobile banking services and mobile money pension service.

The completed National Financial Inclusion Development Strategy outlines the necessary actions required to increase the pace of adoption and take up of technological innovations in mobile phones to suit the youthful population of Ghana.

BOG has formulated payments systems strategy to fast track developments in the electronic payment space to help achieve the national development strategy’s objective of increasing financial inclusion from the 2017 level of 58 per cent to 75 per cent in 2023. We need to have some updates on this target.

Several projects geared towards fostering financial inclusion include, Mobile Money Interoperability involving; interconnection of the mobile money platforms and the Ghana National Switch (gh-link system), which makes it possible for customers to send mobile money across networks and from mobile money wallet to bank account and vice versa, and interconnection of Mobile Money ecosystem and E-Zwich (Ghana’s biometric smart card system) payment platform.

The launch of the Qwikloan and Fido loan product provided opportunity for ordinary Ghanaians to conveniently access short term loans ranging from GH¢25 to GH¢1000 using MTN Mobile Money platform.

The Agent Registry project, meant to serve as database for all financial service agent points, was upgraded to provide additional information for stakeholders, and the ADB bank/Moneygram partnership with termination of inward remittances from over 200 countries to beneficiary’s bank accounts.

Today, USSD usage has become common with dedicated USSD codes by Banks and Fintechs. Increasing patronage of card payment services and the proliferation of Point of Sale Terminals (PoS) at retail shops plays pivotal part in the digital financial services industry as opposed cash payment.

The swift reaction from BOG to assume its supervisory role by creating the new Payment Systems office and issuance of the Electronic Money Issuer Guidelines to guide the digital financial services ecosystem, and the resultant Payment Systems and Services Act 2019, go a long to ensure that Credit, liquidity, operational, legal and settlement risks in the payment systems are well contained.

Today, there are many   web acquiring platforms which demonstrate the importance attached to the e-commerce services as convenient shopping means. This was sustained through Banks enabling the delivery of payment gateways to e-commerce service providers. The modes of payment focused on cards and mobile money payments.

Today, this service has gained root and continues to be offered by some Fintech companies aside traditional Banks. The Fintech space in Ghana has developed into a major ecosystem with many players offering various services to customers.

The Digital Financial Services industry is still growing with many opportunities to be exploited by players in different human endeavours. In order to survive, the players need to evolve, invest in technology and talent development.

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