Kojo Choi, CEO, PaySwitch

On how smartphones and rising digitisation are helping boost financial inclusion

How would you evaluate the pursuit of a cash-light society? 

KOJO CHOI: The pursuit of a cash-light society has been a slow but progressive journey. Since the 1990s there has been an explosion of card issuances by banks. Unfortunately, the majority of these debit cards were used simply for withdrawing cash at ATMs, rather than for transactional interactions. While card issuances were growing quickly among the banked population – which is less than 40% in Ghana – there were a limited number of point of sale (POS) outlets, and almost no web channels. Within the last few years, however, this reality has changed completely and cashless transactions are reaching critical mass. The rate of POS outlets has increased significantly and a number of banks, financial technology (fintech) firms and telecoms have launched products and services that enable cashless transactions. 

Much of the work to get Ghana cash-light has been a collaborative effort between regulators and the private sector, with the private sector contributing more at an infrastructure level. 

The advent of mobile money has seen more striking growth. Between June 2017 and June 2018 there was a 53% increase in the value of transactions, and the volume of transactions grew just as remarkably. In addition, the number of mobile accounts and registered agents has greatly expanded. All of this has been led by the private sector – mainly by telecommunications firms – and has been enhanced by aggregators that provided interoperability prior to the official launch. 

Considering that an estimated 65% of the population does not yet have bank accounts, cash-free mobile has become the means of financial inclusion for much of the population. That said, while mobile money now guides 97% of non-cash transactions, it is important to mention that cash remains the dominant form of payment in Ghana.
 
To what extent do smartphones define the fintech environment? 

CHOI: Smartphones comprise about 32% of the total phones used in Ghana. Certainly, the increase in smartphone usage is the real engine for innovation, with most apps and solutions created to revolutionise financial inclusion aimed at smartphones. However, unstructured supplementary service data (USSD) still plays a significant role in the country, as we have to deal with relatively low internet penetration, the persistence of 2G availability, and a significant rural-urban divide. In addition, quite a number of people use phones only for basic features such as voice calls and standard mobile money transfers. Banks with mobile apps have implemented USSD codes as an additional functionality, and the success of mobile money is mainly due to this. 

As of June 2018 the apps for Ghana-based banks had been downloaded about 10,000 times. While data usage is heavy in urban areas, this is largely influenced by the youth and middle-income class, and the smartphone market still has serious room for growth. 

What capacities will increasing digitisation open up in the fintech sector? 

CHOI: Digitisation is fundamentally changing the behaviours, needs and requirements of the everyday consumer. Increasing these capacities will make it easier for fintechs to innovate, especially on the African continent where start-ups are constantly doing the same. Indeed, there are a number of big data start-ups in the country innovating in the agriculture and health sectors. 

Regarding financial services, banks have now partnered with fintech-orientated financial service providers to launch pension products, savings products, investment products and credit facilities via mobile. Using a combination of learning algorithms and the know your customer system, they have more data about subscribers and applicants than ever before. This aids in the sector’s approach towards risk and profile methodology. With an increase of 29m mobile money wallets in seven years versus the opening of 8m bank accounts in 150 years, data mining and analysis has just begun. 

The last area of growth we expect digitisation to help drive is that of alternative types of investment, such as cryptocurrency. The reason we have seen little activity thus far has little to do with regulatory appetite or a lack of private sector initiative. The major underlying challenge concerns processing identity: the country continues to have inadequate infrastructure for identifying residents and citizens. Until the identification process has improved, we can discuss these ideas but we will encounter serious handicaps when it comes to implementation.