The Ghana’s financial sector has undergone a significant transformation due to advancements in digital technology.
Recently, financial sector providers like banks have recognized that embracing digital change is both crucial and necessary. This shift has greatly affected various aspects of financial services sector, including customer interaction and operational procedures.
Digital transformation (DT) involves the integration of various FinTech solutions to automate, improve, and digitalize processes while enhancing data security.
In financial services sector, digital transformation entails the extensive incorporation of digital technology, data analysis, and a focus on customer needs to fundamentally alter traditional banking practices and services.
Financial service providers including banks now typically provide comprehensive services via mobile phones, tablets, and other internet-connected devices. The use of technologies like artificial intelligence, blockchain, cloud services, and mobile apps has led to better operational efficiency, increased customer satisfaction, and sustained competitiveness in the financial market.
Today in Ghana, financial service providers offer services that are accessible 24/7 without the need for paper, physical branches, or signatures, allowing customers to conduct financial transactions at any time, even on bank holidays.
The history of financial inclusion in Ghana has been digitalization. The digital finance revolution which started in the early 2000s has shown that the future of financial inclusion is digital. Digital financial services in Ghana’s financial sector began in 1997 with the introduction of Sika Card by the then Social Security Bank allowing cashless transactions.
In 2007, Bank of Ghana, established the Ghana Interbank Payments and Settlement System (GHIPSS) to bring all the various aspects of the payments system infrastructure (the national switch, smartcard, cheque clearing, central securities depository, real time gross settlement and automated clearing house) under a single entity. In 2008 the Bank of Ghana launched the ‘e-Zwich system, an interoperable payment system for banks and savings and loans companies.
The e-Zwich was a bio-metric smart card payment system. The Bank of Ghana has completed its Central Bank Digital Currency (CBDC) pilot project in a sandbox environment. The pilot project tested the feasibility of the issuance and acceptance of a digital form of the Ghana Cedi called the e-Cedi.
This was in line with the commitment made by the Bank in November 2019 to explore CBDC in furtherance of Ghana’s digital transformation agenda. Significantly, the e-Cedi is expected to drive financial inclusion, serve as a digital complement to cash and enhance the overall efficiency of payments. In Digital technology has made it possible for unbanked adults to open a bank account using their mobile phone without visiting a bank branch. In the future, more financial services will be embedded into digital devices, or mobile phones, to enable people perform basic transactions such as buying and selling on e-commerce platforms.
Also, in the future, Fintech players will increase their alliance with banks in order to find an easier way for unbanked adults to access digital payments and financial services such as personal loans and mortgage loans which can help them improve their welfare and livelihoods.
Three major forces will change financial inclusion in the future. They are 1) technological developments, 2) the growing demand for personalized financial services, and 3) the need to make profit from consumer data.
At the heart of innovations churned out by fintech companies and financial institutions are payment services; and at the forefront of financial inclusion in Ghana is the mobile money revolution, which became operational in the country in the last decade and has paved way for other innovative payment solutions. Services like MTN Mobile Money have propelled the nation to the forefront of mobile banking adoption.
These platforms allow users to perform financial transactions using basic mobile phones, transcending geographic barriers and enabling rural populations to access banking services with ease.
The Bank of Ghana’s economic and financial data report indicates that as of December 2024, there were 59.7 million registered mobile money accounts in Ghana, highlighting the widespread adoption and impact of mobile money services in the country.
This represents a significant portion of the population, with approximately 59.7% of individuals aged 15 and older actively using mobile money services. This widespread usage underscores the vital role mobile money plays in everyday transactions and financial inclusion in Ghana.
According to Bank of Ghana report (2025) an overview of the country’s evolving digital finance landscape, over 97% of digital transaction volumes and 72% of transaction value are now processed through mobile money platforms, while traditional bank digital channels account for less than 1% of volume.
According to that report more than four million Ghanaians have accessed unsecured mobile loans, often beyond the reach of traditional financial institutions.
- The key drivers that are reshaping Ghana’s digital financial landscape
- Mobile Money:
At the heart of innovations churned out by fintech companies and financial institutions are payment services; and at the forefront of financial inclusion in Ghana is the mobile money revolution, which became operational in the country in the last decade and has paved way for other innovative payment solutions.
Services like MTN Mobile Money have propelled the nation to the forefront of mobile banking adoption. These platforms allow users to perform financial transactions using basic mobile phones, transcending geographic barriers and enabling rural populations to access banking services with ease.
The Bank of Ghana’s economic and financial data report indicates that as of December 2024, there were 59.7 million registered mobile money accounts in Ghana, highlighting the widespread adoption and impact of mobile money services in the country. This represents a significant portion of the population, with approximately 59.7% of individuals aged 15 and older actively using mobile money services. This widespread usage underscores the vital role mobile money plays in everyday transactions and financial inclusion in Ghana.
- Digital Payment Solutions:
Equally, digital payment platforms like ZeePay, Slydepay and ExpressPay have emerged as game-changers in Ghana, providing users with secure and convenient ways to make payments and conduct transactions.
These platforms offer flexible payment options for utility bills and online shopping to peer-to-peer transfers. Their user-friendly interfaces have made them essential tools for promoting cashless transactions, not only in Ghana but across the globe.
- Peer-to-Peer Lending Platforms:
Peer-to-Peer lending platforms are reshaping the lending landscapes, particularly for small businesses and entrepreneurs in Ghana. One of the most compelling outcomes of this innovation is the democratisation of access to credit.
Small businesses and entrepreneurs, who often face challenges in obtaining loans from traditional banks due to stringent eligibility criteria and other mandatory processes, can now benefit from a more inclusive lending environment. By connecting borrowers directly with investors, these platforms streamline lending processes and bridge the gap between borrowers and lenders.
- Biometric Identification Systems:
Innovations in biometric identification are revolutionising access to financial services. In Ghana, introduction of the Ghana Card – a biometric identification system – is enabling individuals to verify their identity securely and access financial services more easily. Biometric technology enhances security, reduces fraud and simplifies authentication processes, particularly in regions where traditional identification methods may be lacking.
- Challenges and benefits of the digital era for financial regulation in Ghana
Globally, regulators and supervisors are facing an enormous challenge: how to deal with digital innovation in financial sector space. There four main short-term challenges are establishing level playing field, data privacy, creating regulatory sandboxes and guaranteeing cyber-security.
A level playing field should ensure fair competition between banks and the rest of the providers of financial services (such as fintech startups and the “techfins,” the digital giants). On the other hand, sandboxes seem to be a feasible alternative for allowing institutions to try out new digital value propositions with real customers in a secure testing environment.
And in third place, cyber-security, where international cooperation is essential, because of the economic or geopolitical impact of online attacks. A lack of cybersecurity can create a lack of confidence in the safety and security of digital technologies – even though these offer substantial benefits – and by extension, in the stability of the financial system. Data privacy challenges abound but there are remedies.
Data privacy exposures, commonly referred to as data security incidents, are critical business concerns. Data incidents can result in consumer identity theft, profiling, censorship, surveillance, harassment, discrimination, exploitation and fraud. Without appropriate data privacy as well as conduct and prudential regulation and supervision, these risks can increase the likelihood of consumer harm, erode market integrity, adversely impact financial safety and soundness, and may potentially, threaten financial stability.
Importantly, a higher likelihood of such risks can erode trust in digital financial services and inhibit the generation and sharing of data by individuals and firms, which is the foundation on which the process of fintech innovation is built, thereby constraining efficiencies and inclusive growth.
As regards efficiency, the benefits of digital transformation are noted in automation, disintermediation with technologies such as blockchain, greater flexibility and scalability of technological infrastructures, growing competition and lower costs.
For financial stability, the digital era poses the challenge of managing the new technological risks, the relationship with new suppliers, the increased pressure on the profitability of banks and growing volatility. At the same time, these transformations have clearly positive impacts, as they promote a more diverse ecosystem and new tools arise to manage the risks.
From the point of view of consumer protection, the new technologies suppose a tremendous improvement, since they put the consumer at the center of decisions, improve control and traceability of the interactions with customers, and give them greater independence. On the other hand, theyº pose new security risks and data protection issues, especially insofar as the new players enter the market with rules that are more lax.
As for the integrity of the sector (especially as it relates to the struggle against money laundering), digital disruption supposes a better system for following and analyzing transactions. But it also raises doubts about issues such as virtual currencies and payment systems, apart from the digital authentication of customers
- The need for a Regulatory Paradigm Shift in the Digital Financial Landscape
A regulatory paradigm shift entails moving away from the current rigid, rule-based approaches towards more principles-based, risk-focused, and technology-neutral frameworks. This involves on principle-based regulation where it focuses on outcomes and objectives rather than on current practices on prescribed on specific methods not allowing for innovation while mitigating risks. In addition to the principled based regulation, risk based approach will prioritize regulatory attention and resources – based on the potential impact of digital finance activities on country financial stability and consumer protection.
Principle based regulation will ensure technology neutrality. Regulating activities rather than specific technologies, ensuring that regulations apply equally to traditional and digital financial services. The principle based regulation foster closer cooperation between regulators, industry participants and technology providers to stay ahead of emerging risks and emerging opportunities. Principle-based regulation have the ability to develop robust regulations to protect sensitive financial data and ensure the security of digital financial systems
There is a growing need for a regulatory paradigm shift in the face of digital finance in Ghana. Traditional regulatory frameworks often struggle to keep pace with the rapid innovation and evolving landscape of digital finance, necessitating a move towards more flexible, adaptive, and technology-neutral approaches.
Digital finance, encompassing technologies like fintech, blockchain, and digital currencies, presents both opportunities and challenges for regulators. While these innovations can enhance financial inclusion, promote efficiency, and reduce costs, they also introduce new risks related to cyber-security, data privacy, consumer protection, and financial stability.
Current regulatory landscape of traditional financial regulations are often designed for established institutions and products, lacking the agility to address the unique characteristics of digital finance. Existing regulations may not be suitable for decentralized platforms, peer-to-peer lending, or crypto-currencies, leading to regulatory gaps and uncertainties
The rapid advancement of financial technology (FinTech) has presented both unprecedented opportunities and challenges for the financial sector regulators. As FinTech innovations reshape financial services, regulatory bodies like Bank of Ghana face the challenge of designing adaptable frameworks to address emerging risks, particularly those related to fraud prevention.
The growing diversity of financial services providers and business models often requires expanding the regulatory perimeter. Payments, loans, and deposit taking services may be provided by specialized payment service providers (fintechs), e-commerce platforms (big techs), and other non-banks. It is therefore important that regulators develop approaches to ensure a level playing field and provide clear requirements for licensing. Regulatory shifts in digital finance in future will require that Bank of Ghana and other financial regulators move towards creating frameworks that support innovation while managing risks, rather than trying to prevent it.
Regulatory paradigm shifts will require that regulators like Bank of Ghana will need to adopt technology neutrality. The principle of technology neutrality allows for new technologies to be adopted as long as they comply with existing regulations, but this needs to be balanced with consumer protection.
Regulatory and supervisory policy tools will have to adapt. Existing Bank of Ghana regulatory perimeters may not adequately cover emerging providers of financial services, and new players may pose challenges for day-to-day financial supervision.
Central banks including Bank of Ghana worldwide struggle to deal with regulatory challenges, especially the impact of technological innovations on the financial system. Financial Technology (FinTech) innovations generally occur ahead of regulations; therefore, critical challenges for central banks, including the Bank of Ghana, is how to stay ahead of these innovations and frame supervisory mechanisms to suit the FinTech space. Understanding this problem is crucial because the central bank’s regulations can hurt or support the rapid adoption of FinTech in Ghana. The Bank of Ghana will require regulatory shift to deal with massive innovation in digital finance over the past decade.
Bank of Ghana’s regulatory sandbox is a controlled environment where companies can test innovative products or services under a regulator’s supervision, often with relaxed regulatory requirements, for a limited time. It allows for experimentation with new financial technologies (FinTech) or other innovative solutions while minimizing risks to consumers and the broader financial system.
A regulatory paradigm shifts entails moving away from the current rigid, rule-based approaches towards more principles-based, risk-focused, and technology-neutral frameworks.
This involves on principle-based regulation where it focuses on outcomes and objectives rather than on current practices on prescribed on specific methods not allowing for innovation while mitigating risks.
In addition to the principled based regulation, risk based approach will prioritize regulatory attention and resources – based on the potential impact of digital finance activities on country financial stability and consumer protection. Principle based regulation will ensure technology neutrality. Regulating activities rather than specific technologies, ensuring that regulations apply equally to traditional and digital financial services.
The principle based regulation foster closer cooperation between regulators, industry participants and technology providers to stay ahead of emerging risks and emerging opportunities. Principle-based regulation have the ability to develop robust regulations to protect sensitive financial data and ensure the security of digital financial systems.
As part of the regulatory paradigm shift, it will be appropriate for Bank of Ghana and other regulators must adopt a new, dynamic regulatory approach to FinTech regulations, which is premised on maintaining a balance between pre-approval culture (rule-based supervision) and permissive culture (principle-based supervision). Rule-based supervision relies on detailed, specific rules to guide and evaluate compliance, while principle-based supervision uses broad principles to guide conduct, allowing for flexibility and innovation in meeting regulatory objectives.
Both approaches have their strengths and weaknesses, with rule-based approaches often providing clarity but potentially stifling innovation, and principle-based approaches fostering flexibility but potentially lacking clarity.
Rule-based supervision emphasizes detailed, specific rules and regulations while compliance is achieved by adhering to these specific rules, offers clarity and predictability, reduces ambiguity, and can be easier to enforce in some cases, but remains inflexible, may stifle innovation, and may not address all possible scenarios, leading to loopholes.
Principle-based supervision emphasizes broad principles and objectives rather than specific rules, while compliance is achieved by demonstrating adherence to the principles, which may involve different approaches for different entities and also allows for flexibility, encourages innovation, and can adapt to new and changing circumstances, but can be ambiguous, requires a strong understanding of the principles, and may be more challenging to enforce. Principle-based supervision often requires a strong and sophisticated supervisory capacity to assess whether entities are genuinely meeting the principles.
Principle-based approaches may offer better consumer protection in some cases, as regulators can adapt to new risks more quickly and Principle-based approaches also foster innovation, as firms are encouraged to find creative ways to meet regulatory objectives. Bank of Ghana and other regulators in the financial digital space may have to shift from the rule- based regulation to principle- based regulation in order to accommodate the innovation in the digital finance.
Principles-based regulation, in its broadest sense, refers to a shift away from comprehensive, prescriptive rules and toward using high-level, vaguely expressed guidelines or Principles to establish the standards by which regulated enterprises must operate. Using principles-based regulations allows for easier adaptation to new products and business models, which are constantly evolving in digital finance.
Principles-based regulation, compared to detailed, rules-based regulation, facilitates adaptation to the rapid evolution of digital finance by focusing on broad, outcome-oriented principles rather than prescriptive rules.
This flexibility allows regulators to respond effectively to new technologies and business models in the financial sector. Principles can be applied to regulation in two ways. First, legislation can require that principles, expressed in a relatively general way, must be complied with.
This form of principles-based regulation is often contrasted with rules-based regulation: principles-based regulation focuses on outcomes, whereas rules-based regulation prescribes the format compliance must take..
Bank of Ghana as the regulator must ensure that Fintech firms in Ghana adopt Reg-Tech solutions to automate compliance processes. Regtech refers to a regulatory technology or Regtech involves new technologies to help regulated financial service providers streamline audit, compliance and risk management and other back office functions to enhance productivity, and overcome regulatory challenges, such as the risks and costs related to regulatory reporting and compliance obligations.
These technologies streamline reporting and ensure adherence to regulatory requirements. Bank of Ghana should be guided by the principles of innovation and efficiency in its regulatory posture.
It can follow these principles by investing in RegTech, improving its regulatory sandbox capabilities, and serving as a catalyst to promote FinTech innovation by enabling the interoperability of FinTech infrastructure on access, costs, and quality. Principles-based regulation is more adaptable to evolving technologies and business models because it focuses on desired outcomes rather than specific methods.
It can be more cost-effective to adapt and update principles-based regulations compared to frequently revising detailed rules, especially as new technologies emerge. This approach can provide firms with greater flexibility in how they achieve regulatory objectives, allowing them to tailor their approach to their specific circumstances and strengths.
Principles-based regulations can help create a more level playing field for market participants, ensuring that all businesses, regardless of their technology, are treated equally under the law
A successful regulatory paradigm shifts by Ghanaian financial sector regulators to principle- based approach can lead to increased financial inclusion. Principle-based regulation could foster innovation and reduce barriers to entry, digital finance can expand access to financial services for underserved populations.
Digital technologies can streamline financial processes, lower transaction costs, and improve access to financial products and services. Furthermore, principle based regulation could foster greater consumer protection, can also provide clear and effective regulations that can protect consumers from fraud, data breaches, and other risks associated with digital finance. A well-designed regulatory framework such the principle based regulation can mitigate the potential risks of digital finance to the overall financial system
In countries like United Kingdom and Indonesia, principle-based regulation is able to respond the financial innovation in the digital finance. In its development, principle- based regulation experiences adjustments and does not immediately leave behind rule-based regulation. Therefore, systems that are based on rules and systems that are based on principles are the best for achieving regulatory harmony.
It still needs to build a rule-based system for various points in order to prevent violations. On the other hand, some regulatory points require a principle-based approach in order for stakeholders to adjust to the digital evolution.
Ghana may have to adopt the hybrid approach, combining elements of both rule-based and principle-based supervision, as this allows regulators to benefit from the clarity of rules in certain areas while still allowing for flexibility and innovation in others. For instance, a system might have specific rules for capital adequacy but rely on principles for customer service standards.
Given these considerations, Ghana can adopt the hybrid regulatory approach that might be the most pragmatic solution for the fintech industry. By merging the flexibility of principles-based regulation with the clarity of rules-based regulation, regulators can create a dynamic environment.
This environment would support innovation while ensuring that critical areas have definitive guidelines, striking a balance between fostering growth and ensuring safety and consistency in the sector.
- Conclusion:
The rapid evolution of digital finance in Ghana necessitates a proactive and adaptive regulatory approach of principles-based approach gives fintech firms the flexibility to innovate without being hindered by rigid rules. This can lead to the development of more efficient, user-friendly, and secure financial products and services.
A paradigm shift towards principles-based, risk-focused, and technology-neutral regulation is crucial to harness the benefits of digital finance while mitigating its potential risks, ensuring a safe, inclusive, and stable financial ecosystem. The principle- based regulation is not to favour one technology above another, nor to prefer or prejudice a particular business model or market player.
As such this approach of ‘technological neutrality’ is about achieving the right balance between facilitating innovation, scalability and competition across the internal market whilst continuing to achieve our central regulatory objectives. Ghana with a well-designed regulatory framework such as principle -based regulation can mitigate the potential risks of digital finance to the overall financial system. Principles-based regulation emphasizes the desired outcome (e.g., consumer protection or financial stability) rather than dictating the specific means to achieve it.
This allows firms to determine the best way to meet regulatory objectives, tailored to their specific circumstances. This approach involves setting out high-level principles that firms must adhere to, rather than prescribing specific rules. It allows for flexibility in how the principles are applied, depending on the specific circumstances of each case. Principles-based regulations offer more flexibility, allowing firms to interpret and apply the regulations in ways that make sense for their unique circumstances.
On the other hand, rules-based regulations are more rigid, providing specific guidelines that must be followed. With the emergence of fintech and digitalized platforms in the country’s financial space Principles-based regulations can encourage FinTechs to develop a deeper understanding of their own risks and to implement more comprehensive and tailored risk management strategies. While principles-based regulation holds significant promise, it’s crucial to approach its implementation with discernment.
This method emphasizes broad guidelines that underscore the spirit of the law rather than strict rules. Such an approach can be advantageous as it offers flexibility, allowing financial institutions to adapt to evolving market conditions without being constrained by rigid rules. This adaptability can be particularly vital in fast-paced sectors like fintech, where innovation can quickly outpace traditional regulatory frameworks
DR RICHMOND AKWASI ATUAHENE
BANKING/CORPORATE GOVERNANCE CONSULTANT
