Tuesday, August 28, 2012

Revolutionalizing Ghana's Financial Sector on the back of ICT -MTN leads the way....


The issue of the building a cashless economy in Ghana has been an interesting topic for discussion on many platforms. This issues is making waves in Ghana because of the way transactions of business has transformed some few years down the line from the old traditional system of carrying huge amount of cash to pay for goods and services to a cashless one,and it done at easy irrespective of one geographic location through the use of ATM cards and Mobile money transfers currently been offered and powered by all the major telcom operators in Ghana. MTN Ghana is leading the discussions on the possibility of building a strong vibrant cashless economy in Ghana. MTN Sales & Distribution Executive, Mr. Ebenezer Asante present's the MTN Idea..... Building a Cashless Economy in Ghana: Prospects, Challenges, and the Way Forward

 Gathering here today to discuss the prospects of a cashless Ghanaian economy is a truly important step, because as a growing economy we must focus on a structured programme to achieve the benefitsof a cashless economy.
In its ideal form, a cashless economy  is one in which the purchase of goods and services and the payment of debtsand remittances are done through electronic money media,  (via credit and debit cards, direct transfers from one account to another, smart cards, mobile payment systems, and other technologies, etc.).
The benefits of such an economy are numerous and include: 
·         Reduction in the cost of printingcurrency notes, replacing them and transporting cash along the value chain from the Central Bank to banks to businesses and consumers.  As an example, according to Nigerian Central Bank Governor, SanusiLamidoSanusi, the direct cost of cash management to the Nigerian banking industry is estimated to be N192 billion (approximately US$1.9 billion)by 2012;

·         The benefits include the reduction in the risks associated with transporting currency notes, both for banks and individuals (robbery, loss from fire or flood, etc.);

·         Increased service options for consumers, including efficiencies created when goods and services may be purchased and bills paid 24 hours a day, year round, without having to be physically present; Thus time, space and distance are no barriers for economic transactions in a cashless economy.

·         The net effect of the benefits is Business and economic growth through e-commerce promotion, enhanced individual, business and national productivity, with positive impact on job creation and its attendant multi-sectorial multiplier effects.

It is therefore not surprising that the prospect of spreading the concept of a cashless economy has created some excitement among financial sector experts in Africa and beyond.

Mobile Money and Cashless Transactions
Fortunately, technology is helping to accelerate the process of cashless economy particularly in the so-called informal financial system in Ghana and the developing world at large.Products on the Ghanaian market that support our march towards a cashless economy include the E-zwich smart card, ATM cards, and of course mobile money services such as the MTN Mobile Money and its peers in the market.
A joint research by Mckinsey and the Financial Access Initiative in 2009 reported that more than half of the world’s adults are unbanked; (2.5B people) but two –thirds of the unbanked, 1.8B adults have access to mobile phones. This growth (access to mobile phones) combined with the ability to deliver financial services telephonically, now makes it possible to tap vast markets that bankers previously considered unprofitable.
Mobile Money services have transformed the way in which people handle their finances, allowing people to transfer money, make purchases and pay bills with a few key strokes on their mobile phones.
According to a research report by Aite Group, mobile payments will reach $214 billion in gross dollar volume in 2015, up from 16 billion in 2010 which represents a 68% compound annual growth.
In July 2009, MTN Ghana introduced MTN Mobile Money, which provides customers with immediate access to banking services through their mobile phones. In 2012 (three years later) it projected to record about 13.5 million transactions totaling over GHc 300millionwhich represent over 265% growth in the value transacted.
To throw some practical light on cashless economy possibilities available right here in Ghana, please permit me to touch on some wonderful Mobile Money services on offer.
The MTN Mobile Money service offers subscribers many convenient and safe services, including the ability to:
·         purchase MTN airtime,
·         transfer money to any part of Ghana that has Network coverage,
·         pay bills (DSTV, ECG, MTN Post Paid Bills)
·         make bulk payments to many people spatially at a click of a button. ,
·         purchase micro insurance (Mi life Insurance) and pay for micro investment products
·         shop online(airline tickets, shops, restaurants)
·         have digital access totheir salaries and loans
·         maketuition payments.
MTN Mobile Money also gives the millions of Ghanaians, who, for one reason or another, are unbanked, access to banking services, thus improving the banking culture of both urban and rural populations.Tens of Thousands of MTN mobile phone subscribers now have e-wallets where their monies are lodged and saved. This creates a money savings habit amongst subscribers and helps in economic growth. Mobile Money affords better and efficient financial inclusion.For example, MTN Subscribers in remote parts of Ghana without traditional financial coveragehave signed on to Mi-Life Mobile Insurance by paying monthly fees as low as 1, 2 or 5 Ghana Cedis. These payments are automatically effected from their mobile phone wallets.

Another MTN Mobile Money service is the Bank Integration system which allows a Mobile Money subscriber to link their bank accountsto mobile wallets. Thus they can pull money directly from their bank accounts to mobile wallets in order to effect transactions from their phones. . In addition, there is the CardlessATM service which allows subscribers to withdraw money from their mobile wallet using the ATM. This serves as an alternative to visiting a merchant point for cash withdrawal.
MTN Mobile Money is provided to its customers in partnership with 10 banks,including; Ecobank, Fidelity, GT, Stanbic, Zenith,CAL Bank, Merchant Bank, Access Bank, United Bank for Africa and Agriculture Development Bank. MTN Mobile Money currently has over two million subscribers on its platform and about 5,000 active merchant points. The use of MTN Mobile money services cuts across the entire spectrum of the economy spanning the working class, students, traders, institutions, SME’s and retailers. MTN Mobile Money is contributing to making Ghana a cashless economy by making it possible for millions of Ghanaians to conveniently perform their everyday money transfer and other transactions, anywhere they are, from their phone.
With these wonderful services available to everyone having any mobile phone right here in Ghana, why do people still engage in such risky ventures of carrying large sums of money and attracting unwanted elements like highway robbers? Why do business people in Ghana such as those in Construction, Real Estates, Produce Buying, Security firms, etc still travel to the regions districts and towns just to pay Wages and other bills? Building a cashless economy is fraught with some key constraints.

Challenges and Way Forward
Given the benefits a cashless society affords us, it is important that we continue to do all we can to encourage a cashless economy based on technology.  However, there are challenges we must resolve in order to chart a clear path forward.  We must focus on a number of key areas in the short and medium term:
·         Policy -- We need clear policies in place that would allow us to follow a structured advance towards achieving the full benefits of a cashless economy, including a national policy that encourages more electronic-based transactions, while discouraging physical cash usage and circulation.  Nigeria set an example when the Central Bank instituted a cashless economy policy to:
o   drive development and modernization of Nigeria’s payment system in line with the country’s vision 2020 goal of being amongst the top 20 economies by the year 2020. According to them, an efficient and modern payment system is positively correlated with economic development, and is a key enabler for economic growth.
o   reduce the cost of banking services (including cost of credit) and drive financial inclusion by providing more efficient transaction options and greater reach.
o   improve the effectiveness of monetary policy in managing inflation and driving economic growth.
o   curb some of the negative consequences associated with the high usage of physical cash in the economy
While we are by no means prescribing the details of the Nigerian policy and its implementationprocess as a silver bullet (given the inherent problems), we believe apolicy that prescribes a structured approach is a step in the right direction to a well thought-out, properly sequenced cashless economy implementation.
·         Infrastructure – We need to expand our infrastructure and systems to the point where we are ready for a cashless economy, and electronic transactions are truly ubiquitous and sustainable; so that everyone – retailer, service provider, consumer or business – can have the option to transact electronically regardless oflocation, or even time. This means that the technology coverage must be adequate, as well as other supporting structures such as energy availability for consistent connectivity and reduced downtime.
In the long term, we should be driving towards universal access and convergence to all forms of cashless mode of payments – All ATMs/ E-Zwitch/Mobile Money must cross-transact.

·         Security – In cultures where a cashless economy is well advanced, we have learned that some of the pitfalls include inadequate security.  The need to have secure systems that allow citizens to transact without worry of identity theft or other cyber fraud is critical, and so we must ensure our electronic transaction/payment systems and processes are truly secure.
·         Cultural resistanceand Education – Since MTN rolled out MTN Mobile Money, we have experienced some resistance from prospective users simply due to the fact that as a country we are used to a cash culture.  However, it has been our experience that once people start using Mobile Money they wonder why they did not start to do so sooner.  This tells us we must have a singular focus on educating people about the full benefits of a cashless economy – the benefits afforded them as well as the benefits afforded the country as a whole.  This is something that must be done by all stakeholders because as a country we all benefit. Perhaps government should consider using its own purchasing power to radically promote Cashless payments as a first step. MTN commits to continue its investments in this regard; to make Mobile Payments popular, acceptable and trusted nationwide. This is our commitment and we shall lead the way.
When we consider the history of money, we realize that what we have today is the result of many years of innovation; innovations that have been in response to the changing needs of mankind and the need to find solutions outside our limitations.   Centuries ago, we began with cashless society based mainly on barter, gift economics and debt, and then evolved to the use of money.  Technology now offers us the opportunity to go back to being a cashless economy, albeit a more efficient one that is not based on barter and gift economics, but allows us fast, safe and convenient transactions. 
We already carry our phones and our wallets wherever we go; why not use the telephone device and other smart cards as the medium of financial transactions, for the efficiencies we get from the ability to transfer money seamlessly,pay our bills and purchase goods and services without having to carry money around?
I will like to conclude by saying that Telcom Operators like MTN can and will promote cashless transactions;a lot will depend on the Central Bank and Government in the areas of policy, advocacy and the enabling environment for a structured/centralized approach.

Thank you.
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