BY EUNICE ANKOMAH
“Interoperability” became a buzzword in May this year when the much awaited Mobile Money Interoperability project was launched. The platform that was going to allow seamless movement of funds across the mobile money networks, had finally gone live! For many, Ghana had made great strides in the mobile money space. Joining countries like Kenya, Tanzania and the likes, positions Ghana on the list of countries championing financial Inclusion. Interoperability among mobile money operators; in Countries where it has been implemented, has proven to be a game changer. Governments, Financial Institutions, the banked, the unbanked, the under banked, third-party payment providers have all benefitted from interoperable platforms.
“Interoperability” has been used in different industries, including the financial sector to refer to the ability of different systems to seamlessly interact. It has also been defined as “the ability of systems to work without friction enabling users to make digital payment transactions with any other user in a convenient, affordable, fast, seamless, and secure way.” Systems that are Interoperable allow proprietary platforms to communicate smoothly, enabling the exchange of payment transactions between and among payment service providers and their end-users.
Existing Forms of Interoperability in Ghana
Ghana’s journey towards achieving Interoperable payment system platforms started in 2007 with the launch of the e-zwich biometric smart card. The card allowed e-zwich cardholders to assess banking services from partner financial Institutions. This was irrespective of which Financial Institution issued the e-zwich card. Cardholders can walk to any bank to withdraw funds on an e-zwich card. This was the Bank of Ghana’s attempt to address some microeconomic issues like the dominance of cash outside the banking system, increasing number of unbanked and under banked population among others.
The Second system interoperability was created in 2012 with the launch of Ghana’s Interbank Switching and Processing System. This was to deepen financial Inclusion and financial intermediation. The National switch sought to allow for the seamless movement of funds from bank accounts across Financial Institutions in Ghana. The gh-link scheme allowed members to connect to a central switch. This connection enabled members to communicate effortlessly with each other. Impacting positively on ATM transactions in Ghana. Bank Customers could conveniently use ATMs irrespective of which bank owned the ATM. Same allowed the use of gh-link cards on Point of sale terminals of participating Financial Institutions. Ghana’s real-time payment service (GhIPSS Instant Pay), which allows instant transfer of funds across bank accounts also sits on the gh-link system.
While the e-zwich system was a major instrument for Financial Inclusion, gh-link created convenience for the banked and perhaps made banking attractive to the unbanked and under banked. To deepen the level of convenience, and equal the playing field for the banked and the new entrants into the banking sector, the e-zwich system and the gh-link system were connected. This allowed e-zwich cardholders to move money from their e-zwich cards to any bank accounts and vice versa; offering e-zwich cardholders an opportunity to own bank accounts while having the freedom to move funds across platforms.
In May and November 2018, Ghana’s third system interoperability was launched: Mobile Money Interoperability Phase 1 & 2. This followed the year on year increase in the Volumes of Mobile Money transactions as well as the number of subscribers. Also in line with best practice, enabling mobile money subscribers to move money seamlessly across wallets was a step in the right direction. Ghana is not the first country to create Interoperability in its mobile money space. However, the icing on the cake, for the Ghanaian case is the interconnection of the interoperable mobile money space to the existing interoperable platforms (e-zwich & bank accounts). Making it feasible for Ghanaians with mobile money accounts, e-zwich cards and bank accounts to move money across and among these platforms with ease.
Ghana has really made progress with regards to the development of electronic payment systems. Different payment duration options now exist: Instant or real-time (account to account, mobile money, e-zwich), same-day (Cheques, Direct Credit) and Next day (Cheques, Direct credit, Direct Debit). Individuals and businesses seeking to make payments are at liberty to decide how fast or otherwise they want to make or receive payments.
The sweetness of the pudding, they say is in the eating. The systems are in place; deciding to take advantage of them and utilizing them fully, is entirely a decision we need to make as a country.
The implication of Interoperability for Individuals, Businesses & the Economy
The benefits of Interoperability in payments systems have been widely discussed in many industry and academic publications. While it is said not be the singular charioteer of financial inclusion, payment systems interoperability has long been proposed as a tool to “achieve broader strategic financial inclusion goals”. It is an opportunity for regulators to reduce the amount of cash outside the banking sector and empower people to migrate to electronic transactions.
Achieving a cashlite Ghana is possible with the systems that have been put in place. If you’re an account holder, for instance, you can connect your mobile money wallet to your bank account and move money easily across both platforms; equally, you can remit family and friends who do not own bank accounts but have wallets or e-zwich cards directly from your phone or bank account. No need for cash. Similarly, businesses can accept payment directly into their bank accounts or mobile money wallets or e-zwich cards. Thanks to the interoperable platforms, customers who have bank accounts can move money instantly into the bank account of businesses. Those with wallets can move directly from their wallets to the wallet or bank account of business entities. Schools can work with their Financial service providers to ease the pain of parents. In this era of Interoperability, educational Institutions should demand more from their Financial service providers. Why should parents join queues in the banking halls when the opportunity to pay directly into bank accounts or mobile wallets is possible?
The days when businesses preferred cash to other forms of payments should be a thing of the past. Instead of cash, why not provide your customers with your bank account or mobile money details? For both options, your account can be credited instantly. We need to collectively make a conscious effort to utilize these platforms. Either than that, we will have these platforms in place but cash will still be king.
The 2017 Global Findex Report on Ghana, has it that 300,000 unbanked adults in private sector jobs are paid in cash. Even though of the number, 73% own mobile phones, they receive payment in cash. Maybe, we all need to assess the cost of cash and the many problems associated with it. It is only then; will we appreciate fully the benefit of electronic payments.
Harnessing the Gains, the Role of Stakeholders
The availability and adoption of interoperable platforms have a lot of economic value for Ghana. While that is not an end in itself, various stakeholders have to work together to ensure the utilization of the potential of these platforms.
Government: Over the years, governments have adopted Digital Financial services for the payment of allowances to beneficiaries of its social intervention programs. This is a good move but there’s still more room for improvement. The enabling work environment should be created for Financial Technology Companies. The government should also leverage on these platforms to fully digitized its payments.
Financial Institutions: Banks and non-bank Financial Institutions are key to the utilization of the full potential of Ghana’s interoperable platforms. They are responsible for providing payment services to end users; and are equally responsible for educating end users on the availability of these payment platforms and how they can be accessed. It is important for Financial Institutions to recognize that their actions and inactions, can impede any progress Ghana hopes to make. Making these services available on channels that makes it easily accessible will go a long way to encourage usage. The platforms can even be used as value propositions for businesses seeking bespoke payment solutions. Interoperable platforms create convenience, let’s utilize them to make banking attractive and less stressful. People need to have access to their funds anytime they need it. Interoperable platforms make this convenience possible.
Role of Regulators: They have laid a good foundation with Ghana’s Interoperability journey. In harnessing the full potential of these platforms, we need policies in place that will ensure all Financial Institutions comply with the deployment of the platforms. Areas such as pricing should also be regulated. The use of these platforms should not be so expensive much that, it will be a put off for both the banked and the unbanked. Partnership with Financial Institutions on public education and understanding of the benefit of these platforms is key.
Interoperability as a tool for fueling Financial Inclusion has been touted extensively. Ghana still has over 7million people outside the banking sector. Stakeholders should collaborate on using the existence of these interoperable payment platforms to get these individuals into the Financial sector. Countries that have achieved cashlite societies have all done so by developing electronic payment platforms and promoting electronic transactions. Ghana has joined the train. We can only enjoy the full benefits if all hands are on deck.
The Author works as a Corporate Communications Officer in a Payment Systems Company. She is a firm believable of Strategic Communications and its ability to transform organizations. You can send all comments to firstname.lastname@example.org