As an early adopter of technologies that allow for the quick and easy transfer of funds, Ghana has maintained a highly efficient payments system. It is at present moving rapidly towards making the country’s commerce as cashless as possible.
The latest push towards smart payments should further improve the transparency of transactions, reducing what has traditionally been a largely cash-dependent society. While challenges exist in terms of public acceptance and the costs of some services, these issues are being addressed.
From MIRC To E-ZWICH
In 1997 Ghana introduced a magnetic ink character recognition (MIRC) cheque system, allowing for greater automation in the processing of payments. In addition to this, in 2002 the Ghana Interbank Settlement (GIS) system, which handles real-time gross settlement payments, was initiated, with all major financial institutions on the network. The Payment Systems Act was passed in 2002, and the Bank of Ghana (BoG) became responsible for developing and maintaining the network.
The Ghana Interbank Payment and Settlement Systems (GhIPSS) came into being in 2007. It aims to facilitate transactions and payments between institutions, individuals and merchants. Several features of GhIPSS have been rolled out since its establishment. For example, a Cheque Codeline Clearing system became operational in 2010, making clearing completely automated and taking the process down to two days – it had taken as long as two weeks previously. By 2011 the Ghana Automated Clearing House was operational. It is a platform for the cheque-less electronic transfer of funds between accounts.
Card usage is becoming increasingly common among Ghanaians, but it is still low. Financial inclusion figures from the World Bank in 2014 show that the country had 8.32 ATMs per 100,000 adults, while 10% of the population aged 15 or over had a debit card, compared to 35% in Kenya and 55% in South Africa.
The uptake of cards has in part been aided by a handful of government reforms. For example, gh-link, which was activated in 2012, allows for the interoperability of ATM cards between banks, so that customers from one bank can use an ATM belonging to another bank. However, the biggest change came about in 2008 when the BoG introduced e-zwich, the national switch and smart card payment system. e-zwich cards can work both offline and online, and at any participating institution, meaning that it is independent from a bank and can be used to make payments where the network does not currently function.
Merchant agents can act as branchless banks, as they can make deposits to a cardholder’s account in exchange for cash. This provides users with two so-called wallets, one of which operates like a current account and the other which acts more like a savings vehicle. The card gives people who do not have a formal bank account access to what amounts to a bank account within a card.
Moreover, this would work at a range of locations, including rural banks. A total of 26 banks, five savings and loans institutions, and 29 rural and community banks are participating in the programme. Indeed, the e-zwich has been adopted by more key institutions and groups over time. Money from the student loan scheme is paid out via the card, as is the national service allowance.
Some government workers are being paid via e-zwich, and the Controller and Accountant-General’s Department is pushing to have all public workers paid in this way so that phantom workers can be weeded out more efficiently. Cocoa farmers were brought into the system during the crop season in 2014, a move that added to participation. The use of the e-zwich will increase payment speed, reducing the corruption that can plague cash settlement, according to local media.
For some time, the use of e-zwich was quite low. ATMs must be retrofitted with fingerprint readers, as a print is need for identification, requiring a a sizeable upfront investment. In the early stages of the rollout, no one was even able to supply machines that would meet the hybrid specifications required (they were finally sourced from the UK’s De La Rue). As well as technical issues related to the cards, banks have favoured international network cards such as Visa and MasterCard at the expense of the e-zwich.
In June 2014 the BoG took decisive action. It ordered all banks to have e-zwich point-of-sale (POS) terminals installed at all their branches by the end of the month. The bank also demanded in a directive that banks make all new POS terminals sent to merchants capable of taking e-zwich cards. In early 2015 officials from the central bank and GhIPPS, which is a subsidiary of the BoG, began travelling around the country to inspect banks for their e-zwich compliance. The BoG has already placed significant pressure on the institutions. In order to keep their banking licences, they have had to join the GhIPPS system and install a telecom network to connect to the system. However, implementation has been lagging.
A 2014 study of e-zwich usage at Ghana Commercial Bank found a variety of reasons for the lack of usage. A majority of those polled found that infrastructure and public perceptions stood in the way of acceptance. A full 93.3% of the respondents agreed with the statement “ICT accessibility is a challenge for e-zwich usage”. The same percentage agreed with the statement “Poor connectivity hampers e-zwich usage”. More than 90% agreed that “Erratic power supply is a key challenge”. “Low community acceptance” (91.4%) and “ignorance by most customers” (100%) were also cited as issues. Concerns were also expressed about security by 87.7% of those polled. “In short, despite the quest by most banks to increase e-zwich patronage, various challenges hamper the use and provision of e-zwich services,” the study concluded. “Moreover, whether respondents use e-zwich or not, they perceive the outlined challenges as key issues hindering the successful operation of e-zwich in the country. This major finding implies that both users and non-users share similar views on the challenges.”
The obstacles are perhaps not unexpected, given that the e-zwich programme is an ambitious project. It has been identified by some as the “world’s first biometrically regulated money supply”. When the programme was first developed in 2006, a few key and unique criteria were insisted upon, according to Keith Breckenridge, a South African academic. It had to be designed for both the banked and the unbanked, and it had to be biometric. Interesting features were built into it, including the alarm finger.
If robbed, a user can put this finger on the scanner and a predetermined fake balance will appear, with just enough money to appease criminals. The card is also all but blank, with no identifying letters or digits, meaning there is no information to steal. Breckenridge notes that the system is revolutionary in terms of the ability to give the central bank line of sight visibility into all corners of society. “If it works, the e-zwich system will offer the Ghanaian central bank surveillance of the economy, and the individuals caught up in it, that is historically unprecedented,” the author wrote.
Despite progress in the development of more advanced electronic banking solutions, some challenges do remain. Access to and the cost of using ATMs and POS terminals are material issues for some consumers and have the potential to impede the creation and utilisation of an effective and comprehensive network.
While the banks are doing well at reaching customers in urban areas, the fees they charge vary significantly and can be burdensome to many people. The Agricultural Development Bank charges the most, GHS0.50 ($0.14) per withdrawal, according to the central bank. Prudential Bank charges GHS0.40 ($0.11), Société Générale GHS0.35 ($0.10) and GT Bank GHS0.30 ($0.08). A total of 10 banks charge nothing for ATM withdrawals.
The higher charges tend to be seen at POS terminals, according to local media, and the fees can be so steep and inconsistent that they could have the effect of limiting the growth of the cashless society in Ghana. Some customers are reporting fees as high as GHS9.10 ($2.53) for a product costing GHS7.00 ($1.94), according to local press. As a result, people have tended to gravitate towards using ATMs and cash, rather than going cashless.
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