Emerging payments and digital financial services have experienced increased adoption in Africa and specifically Ghana over the last decade. Traditional banks, mobile operators and fintechs have invested heavily in deploying various client led solutions aimed at facilitating the delivery of efficient payments and collections services in the economy. From person to person (P2P), person to business (P2B) business to person (B2P), business to business (B2B), person to government (P2G) and government to person (G2P) transactions, we have seen a lot of investments aimed at creating solutions to facilitate efficient movement of funds.
From the announcement of the Imposition of Restrictions Act, 2020, (Act 1012) enacted to enforce social and physical distancing protocols in response to COVID-19 and the subsequent closure of our borders last year to the current gradual return to the new normal, we have seen a significant increase in the adoption of digital financial services and emerging payments solutions.
According to the recent PWC Ghana Banking Survey Report 2020, the traditional mode of banking (face-to-face) changed during the COVID-19 crisis with mobile banking becoming the most preferred medium of banking. From a corporate and business banking perspective, we have also seen an increase in the use of digital solutions (web and mobile) such as Stanbic Bank’s Business Online and Host-to-Host solutions with document upload feature as a means of keeping the business going whilst adhering to the COVID-19 protocols.
Emerging payments and digital financial services in Ghana is evolving very fast. The beauty about the evolution is the ability to customise to the unique needs of Ghanaian clients and their respective ecosystems. The increasing rate of mobile and web penetration in Ghana has meant that we have a tool that can help us leapfrog and more importantly customise our technology to suite our reality instead of the wholesale adoption of technologies from advanced countries that may not be practical to our Ghanaian reality.
As part of the continuous improvement process, there is an increasing need for coordination and improved integration of emerging payments and other digital financial solutions to ecosystems as an embedded function to make it seamless, efficient and hustle free.
Prior to COVID-19, I published an article titled ‘Riding the tide: Emerging payments and doing business in Ghana’. In the article, I noted that “emerging payments sits at the core of the transformation of the Ghanaian economy and has the potential to impact in all spheres of our lives’. The rate of adoption then, though good, was relatively slow compared to other countries such as Kenya and South Africa. Since the onset of the current pandemic, adoption of emerging payments in the personal, commercial and corporate segments of the population has increased significantly. For instance, digital payments captured by GhIPPS grew 81% in Q1 2020.
As the saying goes, necessity is the mother of inventions. The current pandemic helped move people outside of their comfort zone and their proficiency in digital consumption increased with experience and exposure to the solutions. The variety of options available such as Apps, Web Portals, QR Codes and USSD made emerging payments and digital financial services available to a wide variety of consumers catering for the varying degrees of sophistication and preferences.
Emerging payments prior to COVID-19 were seen largely as efficiency, convenience and cost saving tools. It was largely delivered through a push marketing strategy by financial institutions, mobile operators and fintechs. The pandemic has given it a new relevance and we will likely see that consumption of emerging payment products and solutions transform from a push strategy to partnerships and co-creation between consumers, financial institutions, fintechs and telecoms companies. This gives me confidence that, the recent gains in adoption will be sustained and accelerated post COVID-19.
The rate at which various forms of emerging and contactless payment mechanisms are being introduced and adopted by customers means that this phenomenon is here to stay. I see people naturally gravitating towards contactless payments as a way of life. This is because it is not only the new normal, I think it’s the new better. There are several benefits to emerging payments and I struggle to see a return to cash. Cash and Cheques will still be used but I see an increasing decline in favour of electronic alternatives.
With heightened awareness of hygiene in the wake of the COVID-19 pandemic, and the risk associated with dealing with physical cash I think behaviours and attitudes towards cash will dwindle. At the same time, there is an increasing shift towards emerging payment instruments in Ghana such as account transfers, mobile money payments, QR code, inter-account transfers through instant pay in the personal space.
In the corporate and commercial banking space, the ability to make domestic and cross border payments the feature to upload supporting document online as well as the functionality to connect clients ERP through a secured interchange with banks means payment flexibility and security for clients. With Stanbic Business Online for example, Corporate clients can initiate cross border payments on their electronic banking portal, attach all the necessary supporting documents to enable the payment go through automatically without the need for any manual intervention.
Financial institutions and Fintechs need to build on the current momentum to consolidate the adoption rate of emerging payments and digital solutions. There is a need for constant engagement with clients to understand what works for them. Stability, simplicity, efficiency, security and cost are some of the key areas of concern and efforts must be made by the players to address these to create the needed comfort and confidence in financial institutions.
Whilst there are risks associated with emerging payments, they are insignificant compared to risks associated with physical alternatives especially cash and cheques in Ghana. I would argue that due to various layers of authentications, the risk of fraud is minimized with greater adoption of digital alternatives. The key here is the intensification of client education to prevent them from falling victims to phishing attacks.
In the recently published 2019 Banking Industry Fraud Report, whilst overall fraud increased marginally from 2,175 in 2018 to 2,295 in 2019, suppression of cash and deposits accounted for 77% of the total number of fraud cases in Ghana. On the other hand, there was a 34.48% drop in cyber and email fraud from 174 to 114 cases. Fraud associated with e-money accounted for 0.6% of fraud cases.
The increase in the adoption of digital financial services allows banks, telcos and fintechs to continue the current drive to invest in protecting clients and their valuable data in a much better way to ensure that they are always protected. Also, because of improved security, audit trail and the use of sophisticated systems of verification and authentication, digital payments are safer than physical transactions with cash and cheques.
Positive digital financial services adoption is linked to increased uplift of GDP as it helps in reaching and roping in the largely unbanked population. It can also be a great tool for revenue mobilization by governments as well as deployment of targeted social interventions in P2G and G2P respectively.
A recent study by MasterCard revealed that countries that prioritize digital payments are better placed to mitigate the associated adverse impact of unemployment, financial exclusion, fraud, theft, cost of cash and corruption. The study found that each 1% increase in use of digital payments produced an average annual increase of 0.04% in GDP in developed markets and 0.02% in developing countries.
The digitization agenda by government across the various segments of the economy highlights the importance of digitization and financial institutions and other significant players have a great role in facilitating it.
The next evolution in digital payment development has to be in the area of full integration into ecosystems as an embedded functions that is seamless and intuitively connected.
By Musah Abdallah
The writer is the head of Transactional Products and Services for Stanbic Bank