Accra, Ghana//-Ghana’s enthusiastic efforts of becoming the hub for digital payments have been boosted by the meteoric penetration of smartphones, robust IT infrastructure, sound regulations and policies, and growing middle-class.
Similarly, several vital elements have contributed to the shift to digital payments, notably good connectivity, budding financial technology (fintech) industry, growing telecoms and financial infrastructure, and a continuously improving regulatory environment.
Significantly, there is also a common recognition of the need to continue building an inclusive and responsible digital payments ecosystem on the continent.
Especially with the emergence of African Continental Free Trade Area (AfCFTA) which is the largest free trade area founded in 2018, with trade commencing as of 1 January 2021, markets have widened and with the increasing acceptance of e-commerce, digital payments are expected to grow.
So what therefore is digital payment?
A digital payment as defined by the United Nations-based Better Than Cash Alliance, is “sometimes called an electronic payment, is the transfer of value from one payment account to another using a digital device such as a mobile phone, Point of Sales (POS) or computer, a digital channel communications such as mobile wireless data or Society for the Worldwide Interbank Financial Telecommunication (SWIFT)”.
This definition includes payments made with bank transfers, mobile money, and payment cards including credit, debit and prepaid cards, according to the Alliance which is a partnership of governments, companies, and international organizations that accelerates the transition from cash to responsible digital payments to help achieve the Sustainable Development Goals (SDGs).
Additionally, digital Payments are payments that are conducted over the internet and mobile channels. So, any payment that is sent online or through mobile computing and internet-enabled devices can be referred to as digital payment.
The rise of digital payments in Ghana
Despite earlier attempts by several providers, the digital payments revolution really started to gain traction with the launch of the Mobile Money (MoMo) service in Ghana by MTN in 2009.
At launch, the service which operates on the MTN Ghana network was a very simple service, offering person-to-person (P2P) transfers, airtime top-up and cash-in and cash-out services via a network of agents.
The major innovation that it brought was to decouple the financial service from the accepted financial infrastructure.
The business model was based on transaction fees and supporting the core MNO business, with low transaction charges (and revenue) per user. This model has been adopted by many new digital payment solution providers from all sectors since then.
The service which has been separated from MTN Ghana to stand as a business entity called MobileMoney Limited (MML) now has six major categories of financial transactions under which varying services are provided.
The services are pensions, insurance, savings, micro loans, shopping, payments, international remittances and banking/investment options.
Additionally, the MML and its two other competitors-Vodafone Cash and Airteltigo Money have partnered with several organizations to rollout key social empowerment projects over the decade including helping digitize the Agriculture Value Chain through mAgric, POS in partnership with several banks and scaling up female participation within the MoMo merchant space.
Also, the advent of Mobile Financial Services by MTN Ghana in 2009 with nine banking partners has democratized mobile money transactions in the country.
The democratization of mobile money transactions in the Ghanaian economy has instigated a paradigm shift to a new kind of retail banking system where large segments of the unbanked populace are being absorbed into the financial services sector.
The Ghanaian banking sector was also innovating around this time. The Bank of Ghana (BoG) which regulates the digital payments sector as well as the banking and financial sector allowed the various commercial banks to develop innovative lower-cost products for consumers, MSMEs and the agriculture sector, among others.
By April 2021, latest Economic and Financial Data from BoG revealed that the total value of MoMo transactions in the country had jumped to GH¢67.9 billion in February 2021, from GH¢30.1 billion in February last year.
BENEFITS OF CONSOLIDATING DIGITAL PAYMENTS
Indeed, digital payments offer significant benefits to individuals, companies, government, international development organizations, among others.
Eli Hini, the Chief Executive Officer (CEO) of MobileMoney Limited, the MTN Ghana subsidiary responsible for mobile financial services in the country, believes that if the country’s payment platforms are fully utilized the socio economic benefits will be enormous.
In view of that, they are committed to elevating the level of awareness of digital payments and the benefits that can be derived from these innovations, he said as the company celebrates the ninth edition of MoMo Month.
Digital payments more attractive and convenient
Over the years MML and its executives have been working with other partners to develop solutions that make digital payments more attractive and convenient to customers across the length and breadth of the country.
Moving from the usual transfers, bill payments and loan acquisitions, the company introduced the MoMo Business Platform, a web platform that allows businesses to make bulk payments, pay bills, among others.
The MML’s MoMo open API (application programming interface) allows other companies to integrate their platform with that of the company to receive payments.
“We also have the Merchant App that allows merchants to track transactions and manage their accounts and we have also introduced Consumer Apps, a self-service platform for customers to manage their accounts.
We need to make these digital payment options more attractive, eliminating all forms of challenges and providing a one stop shop for customers to perform all transactions end to end”.
Digitizing key initiatives
“The future really is digitization and how we can leverage it for the benefit of our citizens. This is why digitizing initiatives such as our flagship conditional cash transfer program Livelihood Empowerment Against Poverty (LEAP) is a key milestone,” Ken Ofori-Atta, Ghana’s Minister for Finance said.
The country is making considerable strides to improve transparency, accelerate opportunities for economic growth and empower women
“We recognize that there is still more work to do to transition most of the country away from cash. Yet with great potential for cost savings and opportunities to increase transparency and accountability, we cannot afford not to,” the Minister added.
Transparency and security can enhance traceability and accountability which will eventually lead to reduction of corruption and theft as a result.
For instance, a recent report analyzes risks incurred by individual purchasing clerks in cocoa value chains (including assault), due to the prevalence of cash.
While Ghana’s Ministry of Finance and the Better Than Cash Alliance report also predicted that if the government continues to make progress, savings could reach over GHC250 million (nearly $60 million) each year.
Investing in infrastructure for digital public utility payments
80 percent of the population uses public essential services such as water and electricity, but only 20 percent of the population has access to digital technology such as smart meters.
By investing in smart distribution infrastructure that digitizes end-to-end delivery and payment, it will increase efficiencies and ease of use for citizens – ultimately increasing adoption.
Digitizing payment of government fees and fines
With 97 percent of fees and fines currently paid in cash, the Ghanaian government could gain enormous cost savings if they commit to using digital payments exclusively and mandate all government agencies to use a central payment system, according to the report.
Encouraging digital payments in the Fast Moving Consumer Goods (FMCG) value chain to support digitization of small retailers and customers: For FMCG companies operating in Ghana, 96 percent of distributor payments and 59 percent of vendor and employee payments in volume are made in cheques.
Deepening financial inclusion
Digital payments are the surest way through which financial inclusion can be deepened.
These digital payment channels enable increasing access to a wide range of financial services, including savings accounts, credit and insurance products.
Digital payments are also the key drivers of financial inclusion- the availability and equality of opportunities to access financial services. So they are driving the effort to make financial services inclusive to all.
Doing so is driving financial inclusion, particularly for women, improving transparency of payments, and opening up new markets for goods and services, which in turn support economic growth.
Indeed, the launch and growth of digital payment channels has led to an unprecedented increase in the number of people enjoying access to formal financial services, according to the ‘Digital Access: The Future of Financial Inclusion in Africa’, 2018 report.
Mobile money solutions and agent banking now offer affordable, instant, and reliable transactions, savings, credit, and even insurance opportunities in rural villages and urban neighborhoods where no bank had ever established a branch.
Inclusive growth
Cumulatively, the benefits outlined above help unlock economic opportunity for the financially excluded, and enable a more efficient flow of resources in the economy.
Digital payments have spread rapidly over the last decade in Ghana, Africa and across the world, yet, there is potential for growth.
They have impacted and continue to impact every aspect of various economies especially Ghana and the developing world in its financial inclusion drive.
Digital payment solutions are providing powerful solutions for expanding access and usage of financial services in Ghana and beyond.
By Masahudu Ankiilu Kunateh, African Eye Report
