Ghana: Aiming for Interoperability in Branchless Banking
Over the past several months, we have taken a close look at the branchless banking industry in a few key countries. We have presented our learning from Brazil, Mexico, India and Pakistan. Today we continue with our analysis of Ghana and share this summary note on the branchless banking industry.
With 6 live branchless banking deployments involving 12 banks, 3 Mobile Network Operators, 2 start-ups and a government entity, the race is on in Ghana to reach the unbanked with branchless banking services. Ghana has 15 million adults and a majority of the population living on less than $2 a day, making it significantly smaller and poorer than the other countries featured in this series. It is a unique market with a regulatory focus on interoperability and interesting dynamics in the bank-MNO partnerships. As the market develops, it should yield useful lessons on the role of government, interoperability and the nature of partnerships.
In 2008, the Bank of Ghana issued Branchless Banking Guidelines that allowed for a bank-based model of branchless banking using nonbank retail agents. This is common yet the Bank of Ghana added a stipulation that makes the market different from any other we know: it also prohibited exclusive partnerships and only permitted a many-to-many model. Its reasoning was that “this model offers maximum connectivity and hence maximum outreach and is closer to the desired situation where all banks and all telcos should be able to entertain each other’s customers.” As a result, each of the MNOs with branchless banking services has signed up at least 3 partner banks (and in one case, 9).
So, who are the main players? Of the 6 branchless banking deployments, 3 (Airtel Money, MTN Mobile Money and Tigo Cash) are run by MNOs in partnership with banks. Of these, MTN Mobile Money has been around the longest and has the highest number of registered customers. Two others (AfricXpress and eTranzact) are start-ups and one (eZwich) is actually run by a government entity, the Ghana Interbank Payment and Settlement System. Together, the deployments claim to have more than 3 million registered customers but the number of active customers is much less. This is partly due to issues within the MNO-bank partnerships as well as a combination of operational challenges around building a viable agent network, effective marketing and robust technology.
Moving forward, there are at least 4 interesting dynamics within Ghana that should yield lessons applicable to the wider branchless banking world:
- Interoperability and the Role of Government – The Bank of Ghana is actively trying to ensure that branchless banking services are interoperable from the inception of the industry. In addition, it is pushing its own interoperable card and POS solution in the market. Many governments are interested in interoperability and the Ghana market will provide useful lessons on the pros and cons of direct government support for this.
- Bank-MNO Partnerships – Around the world, banks and MNOs are forming often uneasy alliances, acknowledging that each needs the other but struggling to bring two very different cultures together. In Ghana, these dynamics are exacerbated as each MNO is working with multiple banks. Not only is there disagreement between the MNO and the banks on roles and responsibility (and corresponding remuneration) but the banks are asked to invest in a service that will also directly benefit their competitors.
- Customer Adoption and Product Development – The current deployments have struggled to gain traction with customers when pushing domestic remittances. The market to ‘send money home’ seems to be limited and there is a big opportunity for creative product development in areas such as micro insurance (exciting pilots are underway) and even savings (Susu collectors are widespread in Ghana).
- Agent Networks – The MNOs in Ghana are taking very different approaches to building networks of agents. MTN has built a completely independent network of cash-in/out agents as airtime distributors were initially reluctant to get involved in mobile money. However, other MNOs are attempting to completely leverage their existing airtime staff and distributors. It will be interesting to see how these two different approaches work in the same market.
There will be much to learn from Ghana as the market develops. For more detailed information on branchless banking in Ghana, read our country note here.
- Claudia McKay
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Comments
Dear Claudia,
Dear Claudia,
Txs for the overview of M-money and branchless banking in Ghana, food for thought.
What stays unclear to me is what many-to-many means on the MNO side. Interoperability means, from my perspective, that it is possible to send M-money on a MTN-Mwallet to an M-wallet of Tigo. Is this the case in Ghana? E.g. via the GhippS platform? And how is this feature valued by customers?
Or does interoperability apply to the bank side (you can send from one bank to another provided they operate the M-wallet of the same MNO)?
Thanks for your reaction,
Gera
From the description of the
From the description of the eZwich product, it is difficult to assess whether it is a purse product, or a debit pre-paid product.
The difference matters, because purse products, so much hyped ten years ago tend to disappear all over the world.
The country note states that banks are reluctant to install POS in their branches, the primary usage of these POS is likely to support cash delivery. In payment systems such as Visa and MasterCard it is the cardholder who pay (significant) fees to the acquirer to cover the costs.
The cardholder fees are at minimum a couple of dollars. If the eZwich cardholder fees are much lower than that, then there may be indeed an issue for the banks.
The eZwich protocol between card and terminal is a proprietary protocol, which makes it is not compatible with Visa and MasterCard contact chip EMV technology.
However if the eZwich terminal supported magnetic stripe, they could offer cash advance for Visa and Mastercard cards, which could make it easier to reach the break-even point. However a permanent reliable online connection is required by those payment systems for all cash delivery transactions.
Interoperability means
Interoperability means sending e-money from one Bank or MNO’s payment platform to a client on another bank or MNO’s payment platform e.g.sending money from one MNO mobile money wallet to other MNO mobile money wallet – this is not happening in the Ghana I live in.
The branch-less banking (mobile money services) sphere in Ghana is very fragmented so it surprises me to read that the Ghana government is pushing for interoperability when it allows an MNO to engage with only 3 of the 27 or so universal banks instead of (1)replacing the Net1 switch that drives the national payment platform (e-zwich) with an EMV compliant, non-proprietary, non-biometric switch (2) enforcing the Central Bank directives for all deposit-taking institutions to connect to the new switch (3) redefining the branch-less banking policy to force MNOs to connect their mobile money platforms to the national switch – NOW this is what we would call attempts at interoperability.
As it is, we are no where near creating an ecosystem where interoperability prevails – MNO’s must engage with all the banks and each other and set pricing structures aimed at the un-banked/micro-finance community which forms 80% of the population rather than a pricing structure that targets the 20% who may be already banked!.
I am glad to hear that Visa International are now getting into branch-less banking arena by their recent acquisition of Fundamo. In heading for the un-banked sector,I’m looking forward to a resolution to the chicken and egg scenario that has plagued the success of branch-less banking implementations and give the MNO’s something to think about.
BTW, I still have hope for my motherland Ghana and I look up to my colleagues at GHIPSS!
Thanks to all three of you
Thanks to all three of you for your interesting comments. I agree with the comments that branchless banking in Ghana today is not interoperable. However, it is indeed the aim of the regulators. There are different categories of interoperability. One category which both Gera and Modibo mention is being able to send money from one MNO’s mobile wallet to another mobile wallet. This is not yet possible in Ghana although Ghipss is talking about a way to do this via the eZwich platform. Another category is shared agents so any mobile money customer can cash in/out at any agent. The regulations currently allow this and I believe a few agents are shared but it has not taken off in a big way.
Modibo, I certainly agree that the Net1 switch is proprietary and expensive and I hope that Ghipss is looking at alternatives. I’m not sure exactly what progress has been made on your points 2 and 3 but I certainly think this is what Ghipss is aiming for as well. One point of clarification – you say that the Ghana government “allows an MNO to engage with only 3 of the 27 or so universal banks.” In fact, MNOs need to engage with AT LEAST 3 banks but are able to engage with more – MTN Mobile Money started with 9 banks.
There is a long way to go until interoperability is achieved in Ghana and no one is quite sure of the best way to achieve this or the best timing. However, we are very interested in learning from the market and think it will be very interesting to see how it develops.
Very useful report. The role
Very useful report. The role of the Ghanaian Diaspora is greatly understated in terms of Customer Adoption and Product Development. In a large number of cases the senders of remittances tend to pay for the purchase of mobile phones, and in some cases, even for airtime so they can keep in touch with family, friends and informal “trustees” who may be looking after their interests.
However, due to the fact that remittance senders tend to be financially excluded in destination countries such as the UK, and are still largely ignored by financial product developers (until they develop their own structures, as happened with remittances) their influence in terms of being able to tell their beneficiaries to adopt specific products is often ignored or at best under-estimated.
Research into our livelihoods and transnational connections indicates that this “double exclusion” contributes to many missed market, marketing and partnership opportunities. This includes partnerships with small payment institutions (SPIs).
Many of these (often fully registered and KYC-compliant) SPIs are also trusted intermediaries in the community,are sometimes led by qualified and innovative entrepreneurs who do not have the lobbying power of banks or the PR capacity of MNOs. However they have quietly and consistently proved over the years that even small shops in deprived neighbourhoods can organise to deliver money safely and securely thousands of miles away within one hour of the money being sent,compared with major financial institutions who may take days and yet charge more for the privilege.
It is hard to imagine how branchless banking, whether through mobile, e-zwich or other forms, can work effectively without including senders and SPIs who are often the first link in the transaction chain, but also influence the “last mile”. In many cases senders form part of the chicken that lays the monetary egg. But all eyes are on the eggs and not the chicken!
hello frinds. i want to work
hello frinds. i want to work on "e-banking interoperability" and need some history and related work of it. please if everyone have something to can help, send an e-mail to me. tnx all guys
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