Accra, Ghana//-The Bank of Ghana (BoG) is emphatic that achievements in the payment ecosystem would not have been possible without the solid payment infrastructure base and sound regulatory frameworks.
Highlighting a few of the domestic policies that have been spurred Ghana’s advancements in the payment and settlement systems, the Governor of BoG, Dr Ernest Addison said these solid payment infrastructure base and sound regulatory frameworks are paying off.
According to him, the Bank laid the foundation for the payment system to thrive by providing the required payment systems infrastructure.
The domestic policies that are spurring Ghana’s advancements in the payment and settlement systems are- the set-up of the Ghana Interbank Payment and Settlement System (GHIPSS), Real Time Gross Settlement System (RTGS), Cheque Codeline, Clearing System (CCC), the National Biometric Smartcard (E-zwich) and the National Switching and Processing System (gh-Link) to create a solid framework for market infrastructure to support efficient payment system and financial inclusion.
“To further address the need for faster payments, the Bank introduced GHIPSS Instant Pay (GIP), a real time utility solution to support instant funds availability for customers, as well as the Mobile Money Interoperability platform to facilitate transfer of funds across mobile money networks and bank accounts.
Again in 2020, the Bank launched the Universal QR Code to scale up affordable and interoperable merchant payments. There is also the hybrid Gh-Link Card, which is an EMV compliant card that facilitates both biometric E-zwich transactions and PIN-based transactions at Point of Sale (PoS)”, Dr Addison added.
The expected impact of these innovations in the diffusion of digital payments into everyday activities has the potential to further deepen financial inclusion.
Currently, the Ghana Interbank Payment and Settlement System (GHIPSS ) provides a fully interoperable payments platform that allows for seamless transactions across mobile phone networks, mobile money wallets and bank accounts.
In addition, the platform supports payment solutions from retail to merchants, for example through the national QR Code.
The Ghana Government also took a bold decision to pursue a national digitalisation agenda with the launch of the National Digital Property Addressing System and National Identification Project to create a database of secure personal identification system for citizens and proper national addressing and location systems.
This policy measure he said has helped to address a major obstacle to financial inclusion as the poor address systems made location of clients a major hurdle for financial institutions. These ongoing projects have yielded positive results with major milestones.
Gradually, the Ghana Card is becoming the unique instrument of identification for access to various services across the country and its recent linkage to Tax Identification Numbers (TIN) and Pensions Schemes are laudable.
Digitisation is becoming key for fiscal policy and through digitization of systems, the government also implemented the paperless port operations systems, aimed at increasing efficiency at the port, reducing cost and time of doing business at the ports.
The recent launch of the Revenue Assurance and Compliance Enforcement (RACE) Initiative, to block leakages and increase domestic revenue mobilization, widen the tax net, and ensure compliance with tax obligations are all driven by the national agenda to formalise the economy.
The enactment of the Payment Systems and Services Act 2019 (Act 987) firmed up the regulatory framework for digital financial services.
The Act brought together fragments of regulations and guidelines on the payment systems to centralise the regulatory regime and support the orderly development of the ecosystem.
The introduction of a new licensing regime under Act 987, has also brought Financial Technology firms under a formal regulatory regime that sets out capital, governance, and technical standards to ensure operational resilience and contain financial integrity risks.
In 2018, the Bank of Ghana issued the Cyber and Information Security Directive which added another layer of regulation to safeguard operational resilience, safety and soundness of the entire system, while promoting confidence in the use of digital financial services.
There are many home grown policies such as the National Financial Inclusion Development Strategy (2018-2023), the Digital Financial Services Policy (2020-2023), and the Cash-Lite Ghana (Building an Inclusive Digital Payments Ecosystem) which are all supportive of the digitisation of financial services towards the cash-lite policy and inclusive economy objective.
The establishment of a FinTech and Innovation Office at the Bank of Ghana in April 2020 gave impetus for the orderly development of the ever-expanding digital financial services landscape.
In February 2021, the Bank issued the Crowd Funding Guidelines to promote and guide the development of crowd funding products and services to support the needs of diverse groups of people and further promote financial inclusion.
The launch of a Regulatory Sandbox regime was another milestone achieved in the Fintech sector. The objective of the sandbox is to help financial services providers and FinTechs test new innovative ideas in a controlled regulatory environment prior to licensing or product approval.
Since the announcement of the sandbox pilot there has been overwhelming interest from stakeholders both locally and internationally.
The Bank is currently working on testing a blockchain based product and innovations in the remittance space.
From BoG’s engagement with this first cohort, several lessons have been learnt which will inform an enhancement of the BoG sandbox experience and provide more opportunity for other innovative products.
Strong Regulation to Address Emerging Risks in Digital Financial Services
Aside the progress made in financial digitisation in the economy, the widespread use of technology has also heightened risks in the financial services sector, evidenced by incidences of cyber-attacks, mobile money, and ATM fraud.
This calls for tighter regulatory frameworks to ensure the integrity of the digital financial services ecosystem. In addition to the Cyber Security Act, 2020 (Act 1038) and the Data Protection Act, 2012 (Act 843, the Bank has established a Financial Industry Command Security Operations Centre (FICSOC) to provide broader perspectives on cyber threats confronting the sector through constant monitoring and intelligence sharing.
Overall, the Bank has adopted; an integrated Risk-based Supervisory Approach for digital financial services to focus on functional areas of operation and systemic risks.
This includes a holistic review process involving prudential, market conduct, financial integrity, and payment systems risk perspectives for products, services, and technology outsourcing arrangements proposed by banks and non-banks or FinTechs.
In addition, the Bank has adopted the use of technology to improve regulatory compliance and supervision and upgraded its Supervisory technology (SUPTECH), introduced in 2018, to automate data collection and analytics on a disaggregated basis for electronic money issuers.
The SUPTECH is now augmented under the artificial intelligence powered Online Regulatory and Analytics Surveillance System (ORASS) to cover all banks and other licensed financial services providers under the Bank’s regulatory perimeter.
This is critical for supervisors in identifying trends and early warning signs for early supervisory interventions when necessary.
The Pandemic – Driving Financial Digitization
Although technology has been a driving force for change in the financial sector for some time now, the COVID-19 pandemic provided a strong leverage case point for the global financial technology sector.
In Ghana, the digitisation agenda, including financial digitisation which began long before the pandemic, received an added push during the pandemic, evidenced by the dramatic increase in the growth of digital financial services.
Currently, there are more than 19million active mobile money accounts driving the digital financial services industry. Prior to the pandemic, this number stood at 14.4 million).
It is clear that the pandemic resulted in bringing household and firms into the financial technology (fintech) space. Similarly, the Mobile money interoperability continued to show strong growth, recording 365 percent growth in volume and 651 percent in value between 2019 and 2020.
As at September this year, interoperability transactions grew by 216 percent in volume and 350 percent in value compared to same period last year.
This further indicates the increasing consumer confidence and preference for digital payment options.
Rapid changes in payments technology has made the use of technology in financial services a necessity rather than a choice, driven by consumer demand for convenience, efficiency, and lower cost of transactions.
Currently, digital payments have been on an uptrend and various governments’ have joined in the digitisation process and most central banks are at various exploratory stages of developing Central Bank Digital Currencies, with the recognition of money as an important public good and whose stability needs to be protected.
The Bank of Ghana has already entered the space and piloting the CBDC, with broad stakeholder consultations on the project.
This will eventually lead to the issuance of a digital currency, the E-Cedi, a safe and stable means of payments and settlements which would further advance financial inclusiveness, promote efficiency in the payment systems, and foster competition in the financial sector.
In conclusion, the Central Bank is a progressive Bank. The Bank of Ghana has set up a FINTECH OFFICE to help shape policies in that space to support growth and to support the national digitisation agenda, including financial digitisation for inclusiveness.
More than ever before, digitisation is now part of the society, and as policymakers and regulators, must leverage on its advantages and contain the risks to deliver a shared financial prosperity in the economy.
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