The Internet has changed the relationship between consumers and physical money, reducing the importance of trading physical money.
Ghana is shifting from the internet economy to a digital consumer economy. People’s everyday lives must be simplified.
The personal behavior of the customer is virtualized and mobilized by smartphones. Customers now prefer to transact on their smartphones with technology companies that offer more convenient financial services via the mobile internet.
Consumers are now conducting their financial transactions remotely across a variety of digital platforms: desktops, laptops, tablets, phones and even watches and glasses. The company needs to redesign its delivery channels for credit products to reflect the current digital consumer economy.
The Covid-19 pandemic and its impact on e-commerce has encouraged some degree of international collaboration and the evolution of policies for online purchases and deliveries. The pandemic has made e-commerce an essential tool or solution, especially since e-commerce sales can support small and medium-sized businesses that form the backbone of our economies.
This is expected to significantly boost the growth of digital payment methods in various economies. Globally, cardholder spending has been severely impacted due to the pandemic.
As businesses expand contactless payment options to invite customers, it has been observed that contactless has become a unique selling proposition for businesses around the world. Due to such developments, banks worldwide are expected to partner with mobile payment providers to expand their banking services.
Covid-19 and global policy initiatives
The use of digital payment methods has improved after Covid-19.
The Covid-19 pandemic has fueled the adoption of digital payments in Singapore, especially following the adoption of a common QR code standard.
London-based Rapyd, a global fintech-as-a-service company, announced a new solidarity program designed to help Singaporean businesses accept payments online quickly and fee-free by June 2022.
Governments are taking the initiative to introduce digital payment solutions. For example, in August 2021, Indian Prime Minister Narendra Modi launched the digital payment solution e-RUPI, a person- and purpose-specific digital payment solution. e-RUPI is a cashless and contactless digital payment instrument.
Emerging and developing countries worldwide have seen significant growth rates in the adoption of mobile payments, not only due to the ease of making transactions or the proliferation of smartphones, but also due to the financial inclusion features the technology offers.
The increase in international trade, the internationalization of production and cross-border e-commerce indicate that the demand for digital cross-border payments will continue to grow worldwide. Financial institutions around the world have adapted their systems and processes to protect payment systems from new threats.
Some of the financial institutions replaced their legacy systems, while others partnered with FinTechs and mobile operators to offer innovative products and services. There are regulatory reforms around the world to create a favorable payment environment in many countries.
Some countries have introduced policies like regulatory sandboxes to encourage FinTechs, while others have enacted new payment laws to create competition and allow non-banks to participate in the payments ecosystem. Regulatory Technology (RegTech) solutions are also being implemented by some countries to improve their regulatory frameworks.
Digital banking originated in Ghana around 2008 following the arrival of Nigerian banks, who at the time had been developing web-based platforms to help businesses seamlessly manage their income and payments. By 2010, MTN, Vodafone, Airtel and Tigo dominated the e-money issuer ecosystem with their Mobile Money (MoMO) in partnership with a number of banks.
MTN MoMo, Airtel Money, Tigo Cash and Vodafone Cash serve the consumer with their deposit and withdrawal services. Since 2016, the Bank of Ghana has been implementing important policy reforms to ensure a secure digital industry in Ghana. Today, Ghana has five dedicated e-money issuers, 41 payment service providers (PSPs) and one payment and financial technology service provider.
In 2019, the BoG facilitated the passage of the Payment System and Services Art, which guides the payment system landscape and also allows non-banks to operate in the payment ecosystem. A cyber security policy has also been issued by BOG to payment service providers. The policy provides payment service providers with a framework to implement cybersecurity measures to protect digital payments.
An Open Application Programming Interface (API) system also created opportunities for (FinTechs) to shorten the time to market of their products, reduce development costs, increase product flexibility and improve market competitiveness.
FinTechs have received and continue to receive significant government support in ICT infrastructure over the years. The retail payment interoperability project was completed, helping to improve the overall efficiency of retail payments. Funds are seamlessly transferred from one mobile money platform to another.
Similarly, funds are transferred from mobile wallet to bank account and vice versa. The E-Zwich payment system was integrated with mobile wallets, while a prototype agent registration was developed for the payments ecosystem.
The 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. Most banks’ cards and systems are EMV compliant. BOG approved QR codes and Near Field Communicator (NFC).
Ghana has widely used QR codes; All systems have their own QR codes, banks have their proprietary Gh QR codes and GhiPPS has its own. Efforts to ensure the development of the FinTech industry culminated in the establishment of the Ghana Chamber of Technology as an umbrella organization.
The chamber offers FinTechs a forum for exchanging experiences and also serves as a single point of interaction with the bank.
In the digital sector, innovative products and services have been developed in the payments ecosystem, leading to improved access to microcredit, insurance, savings, investments and pensions. Financial institutions, FinTechs and mobile money operators are working together to introduce products that offer consumers convenient means of payment and bring the unbanked into the financial system.
Some of the services provided by FinTechs in partnership with financial institutions in 2018 included digital savings, credit scoring, agency banking, electronic payments, integrated know-your-customer (KYC) solution, investments, pensions and insurance, which BoG approved in 2018 has 27 products and services for 16 financial institutions compared to 38 products and services approved for 21 institutions in 2017.
The approved products were mainly Inbound Transfers, Agency Banking, Mobile Banking Services and Mobile Money Pension Service. The completed National Financial Inclusion Development Strategy outlines the necessary actions needed to increase the pace of adoption and uptake of technological innovation in mobile phones to cater to Ghana’s young population.
BoG has formulated a payment systems strategy to accelerate e-payments developments and help achieve the national development strategy goal of increasing financial inclusion from 58% in 2017 to 75% in 2023. Several projects promoting financial inclusion include mobile money interoperability with; Interconnection of Mobile Money Platforms and Ghana National Switch (gh-link)