Ghana initially lagged behind other African countries when it came to mobile money adoption, but fast forward to 2020, and Ghana is now the fastest growing mobile money market in Africa. How did the country pull this off? In this episode, we go deep into the origins of mobile money in Ghana, its early challenges, and how numerous organizations successfully came together to take this technology mainstream. Among the many guests who help break it down for us are Archie Hesse, CEO of Ghana Interbank Payment and Settlement Systems (GhIPSS), and Bruno Akpaka, the first General Manager of MTN Mobile Money in Ghana. Listen to learn how Ghana became one of the fastest growing mobile money markets in Africa.
Ghana initially lagged behind other African countries when it came to mobile money adoption, but fast forward to 2020, and Ghana is now the fastest growing mobile money market in Africa. How did the country pull this off?
In this episode, we go deep into the origins of mobile money in Ghana, its early challenges, and how numerous organizations successfully came together to take this technology mainstream.
Among the many guests who help break it down for us are Archie Hesse, CEO of Ghana Interbank Payment and Settlement Systems (GhIPSS), and Bruno Akpaka, the first General Manager of MTN Mobile Money in Ghana.
Listen to learn how Ghana became one of the fastest growing mobile money markets in Africa.
0:00 — Introduction
02:00 — Mobile Money 101 - A timeline of Ghana's journey
03:37 — Enter GhIPSS - controller of the spaghetti junction
06:44 — The Bank of Ghana and GhIPSS' first attempts at improving financial inclusion
11:24 — The rise and fall of bank-led branchless banking
13:30 — The rise of MTN Mobile Money
19:01 — [Paystack Product Alert] Introducing Paystack Transfers paystack.com
20:03 — The early days of MTN Mobile Money in Ghana
23:42 — The first iteration of mobile money in Ghana
25:42 — Improving financial inclusion through mobile money interoperability and agent distribution
29:06 — The role of mobile money in Ghana's financial system
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Kwami: [00:00:09] I sat down to kind of just look through the numbers a bit when I realized that like, as of right now, 60% of the sales that we have coming from individuals, is paid through MoMo.
And then I was like, okay, what else? And then I dug into our payroll and I realized that almost 80% of our team's payroll is paid also through Momo.
Mohini: That's Kwami Williams. He's a NASA researcher turned entrepreneur. He's currently co-founder and CEO at Moringa Connect where he and his team have planted over 2 million Moringa trees across his home country, Ghana. Providing jobs for farmers while making natural cosmetics from the Moringa seeds.
Kwami: Our team is spread across multiple regions in Ghana. And some of those, those communities legitimately just don't have a bank. Like they might have a, um, a rural savings and loans, type of outfit, but not a bank that I can send a transfer to. And so it's been amazing to see mobile money spread and enable us as a company to take care of our people, and also enable us as a company to earn income.
Mohini: [00:01:31] Hi, I'm Mohini Ufeli. And this is the Decode Fintech podcast brought to you by Paystack. The Decode Fintech podcast is where the people building Africa's financial infrastructure share what they're seeing on the front lines. In each episode, an operator shares insight on how they're handling everything from product development to marketing in some of the world's fastest changing business environments.
Today's episode is all about mobile money in Ghana. Mobile money in Ghana started out like a 4x100 relay race with a slow first runner. Here's some context. Around 2007/2008 mobile money kicked off in Kenya and a couple other African countries like Tanzania, courtesy of Mpesa. Ghana's journey kicked off in 2009, just one year after Tanzania.
However, in 2012, while Tanzania could boast of 8 million mobile money wallets, Ghana had just 350,000. Fast forward to 2020, the relay baton has been passed and team Ghana is furiously outpacing the other countries on the continent with 14.7 million mobile money wallets, almost half the entire population of Ghana. Citizens like Kwami use it for everything from personal food purchases to paying farmers salaries. So what was the cause of the slow uptake and who do we have to thank for Ghana becoming the fastest growing mobile money market in Africa? Coming up next.
As we dive into the details behind this amazing race, it's important to understand the role of one very central team player GHIPSS, spelled G H I P S S, which stands for Ghana Interbank Payment and Settlement Systems. In Nigeria, we have NIBBS. Ghana has GHIPSS. GHIPSS is Ghana's national switch. If you think about money moving from one bank account to another bank account on a train track GHIPSS is the tracks.
Here's how that started.
Archie: [00:03:50] In order for me to pay a service provider or a merchant, I need to move money from Bank A to Bank B. So Bank A and Bank B systems must be connected.
Mohini: [00:04:03] This is Archie Hesse. He's the CEO of GHIPSS and he's been at GHIPSS for over 13 years.
Archie: [00:04:09] Then you have another customer. The other customer says, unfortunately, I don't belong to Bank A or B, I belong to Bank C. So Bank A now has to link directly to Bank C. Then a fourth customer too comes and says, Oh, I belong to Bank E. So it means that Bank A has the responsibility of linking directly to B, C, D and goodness knows when it's going to stop. Worldwide they say, “Hey, hang on. We can't have this spaghetti junction.” “Why don't we form a central company that everybody can link to?” So once you've linked to that central entity, you can have access to all banks in the country and that entity then becomes the national payment switch. So that is the GHIPSS that you now know.
Mohini: [00:05:01] The GHIPSS we know now was incorporated in 2007 under the Bank of Ghana. So if GHIPSS is the athlete on the team, does that make Bank of Ghana the coach? Possibly. GHIPSS is central to how mobile money works on the backend.
Archie: [00:05:20] If you have MTN mobile money. MTN would say that they have opened an account at GTBank, and you are a subset of that account at GTBank. But if you go to GTBank, GTBank doesn’t know you, but they know MTN mobile money. This is the non-bank financial institution model.
Mohini: [00:05:39] So, for example, Archie has money with MTN under MTN’s name at GTBank. I've also got money with MTN, but it's under MTN’s name at UBA. Archie wants to send funds to me via mobile money.
Archie: [00:05:55] Electronically funds will leave GTBank through the national switch and then into UBA’s accounts. So the role of the national switch is do what we call clearing and settlement between the two.
So so far as we’re concerned at the center. We don't know MTN. We don't know Airtel Tigo. We know UBA and we know GTBank. But the end user, the names there, you are calling it MTN etcetera. So the switching clearing and settlement is basically the same.
Mohini: [00:06:34] So now we understand how mobile money works. Summary is on the financial processing backend, it flows pretty much the same way as money from bank accounts. In 2008, one year after GHIPSS was officially launched, the bank of Ghana and GHIPSS took some key steps towards tackling Ghana's financial inclusion problems. By doing two things. The first was deploying e-zwich, which is Africa's first biometric electronic payment system.
We'll explain more about that later. The second was launching their branchless banking guidelines. The lessons learned during the execution of these two initiatives paved the way for the growth of mobile money.
Archie: [00:07:17] At that time, the central bank governor rightly realized that majority of the funds in the country were outside the banking sector. So it was outside. They don't know what's going on. When it comes to payments, it's also done in cash. So they don't really have records of the economy in terms of usage of money, etcetera.
Mohini: [00:07:37] Banks are pretty important to an economy. When people save banks cycle that money into loans that other people and companies can use to build businesses, farms and overall grow a country's commercial activities.
Archie: [00:07:51] So the central bank said, look, the systems that we have currently in the banking sector, doesn't help. Why don't we come up with a biometric payment system where everybody can use, we can all receive our salaries from etcetera, use it, and they will then see the movement of funds within the country.
Mohini: [00:08:14] So the Bank of Ghana spoke to the banks to rally them to the cause.
Archie: [00:08:18] The banks then said, well, that is true.
But really what we need as banks is that we do have payment systems infrastructure within the various banks. Yes, they are in silos, but we have them. What we need really is to interconnect the switches that we have to facilitate the movement of funds within us. We don't need a new system.
Mohini: [00:08:41] But there were two key problems.
One - back then there was still just 10 regions in Ghana. Now there’re 16. And Archie says that at that time, the banks only had branches in about three. Not because the remaining regions didn't have banking needs. Infrastructure, hiring, all those necessities were difficult to access,
Archie: [00:09:03] So nobody wants to go there, but that's what most of our bread basket was. Cocoa farms and...farms were there. So there were all cash in sacks being buried underground.
Mohini: [00:09:14] Problem number two, KYC. KYC means know your customer. It's a set of guidelines for financial services that outlines the identity data that a business should have on a client in order to be able to determine risk and limit fraud. Problem number two is that these banking KYC requirements were too rigid for many people.
Archie: [00:09:38] In order for you to be given a bank account, one, you need a legal document. You need a reference from two people who have bank accounts. And for me, I don't even know my address. I might as well not bother to take my funds, secure myself with a bank account. So majority of the funds really that existed in the country was outside the banking sector.
Mohini: [00:09:59] So our two main problems overall, were about accessibility in terms of physical location and in terms of account setup requirements, there were a few more problems. Like what Ghanaians called “dumsor,” which means inconsistent power supply. A lot of the banking infrastructure back then relied on electricity. So it doesn't work too well if there's not a consistent power supply. So one of the Central Bank’s solutions was to launch the e-zwich biometric driven payment system in April, 2008. With an e-zwich card you could access financial services at any bank, any savings and loans companies. So one of the selling points of e-zich was this nationwide access plus it gave Ghanaians a form of ID, it was mostly successful among university campuses where students would use it to access loans and merchants use the POS’. But there wasn't a massive adoption per se, asides from problems with the ATM machines being expensive and hard to find, the thumbprint reader returning errors, the usefulness of a card being limited because not a lot of merchants or shopkeepers accepted it. Asides from all that, it didn't completely solve our two problems, KYC and ease of access.
Archie: [00:11:15] You have a system that is facilitating one bank account to another, but you don't have, it’s not heavily banked. So who’ll be using it?
Mohini: [00:11:24] Exactly. At its core e-zwich was still a bank-driven service. It didn't solve the problem of connecting the majority of unbanked Ghanaian citizens to financial services. So the next solution was to make the banks expand their services. In August, 2008, the Bank of Ghana, recognizing the value in branchless banking issued branchless banking guidelines.
Overall the idea was to create multiple access points for people to get at formal financial services. Some key highlights of those guidelines were that the banks would lead this initiative. Customers in the system must open an account at the bank. This account could be opened by an agent in a remote outpost, but at the end of the day, the money must be in the bank.
Banks could collaborate with telecoms companies (telcos) to offer mobile banking services, but the banks would manage the agent networks and the customer information. Another key highlight was that in order for the telcos to operate, they would have to partner with at least three banks. And that was called the many-to-many model.
So this kicked off in 2008. In 2009, MTN was the first mobile money network to officially launch in Ghana. And they had to operate within this bank-led branchless banking system. But for telcos, like MTN, there were a few areas of friction. One, the banks owned the customer and agent relationships. So telcos would be the ones investing hours and manpower into a system where they didn't have the control.
Two - with telcos, having to partner with multiple banks at the same time, the banks weren't really excited to invest themselves into these arrangements because the market was open to all. Any innovations they came up with would be reaped by the other bank partners. There wasn't a ton of competitive advantage.
We wanted to hear directly from the telcos. So we had a chat with Bruno Akpaka, the general manager at MTN in Ghana at the time when MTN launched their mobile money service,
Bruno: [00:13:41] You're not licensed to do banking services. You as MTN. You go and see the banks, they welcome you. But that doesn't mean they want to put resources in place to help you to launch your products.
What they want, banks, is your money, your deposits, and to show them how you're capable of increasing the deposits. So the banks were quite difficult to convince in putting real resources in place so that we build that ecosystem together.
Mohini: [00:14:25] And these are some of the reasons that branches banking didn't quite take off.
At this point. You can say another coach came in to provide some more perspective. In 2013 with the help of CGAP Consultative Group to Assist the Poor, the Bank of Ghana circulated the first draft of a revised agent and e-money guidelines, Archie shares more context.
Archie: [00:14:53] We realized that because we have such a large unbanked, why don't we enable the banks to offer a light KYC for the unbanked, because they don't have the prerequisites. We looked at it, it wasn't working. We said, look, let's get non-financial institutions to offer it. If the banks are going to delay. So we changed our policies - branchless banking policies - from many-to-many, bank-led and all those to a non-financial-institution led.
Mohini: [00:15:24] And in 2015 bank of Ghana fully launched these revised guidelines, featuring some new key improvements.
Non-banks like MTN were allowed to own e-money businesses, and the Bank of Ghana would regulate them as e-money issuers without dictating who they could partner with. Next there would now be three different KYC tiers, a minimum KYC account with low ID requirements, daily transaction limit, to an enhanced KYC account with stricter KYC and higher limits.
So this approach met the unbanked where they’re at. Last key improvements, customers could earn interest on the money they left in their accounts. Talk about incentives. These new regulations essentially gave telcos like MTN, their independence.
Bruno: [00:16:15] The regulatory journey wasn't that, wasn't the easiest, but it's normal.
Mohini: [00:16:23] That’s Bruno again.
Bruno: [00:16:24] Let us swap, okay. And put ourselves into their shoes. This was a disruptive service that telcos were bringing into the markets. Their role is to listen, understand, build some, some framework. Guide you for the interest of the entire market and not just for one party. Obviously they were a bit skeptical.
Okay, they didn't believe that it would be that successful. But as we were rolling out after the proof of concept/the pilot, they could get the sense of the value brought in by mobile money. And I must say, they helped us.
Archie: [00:17:22] So then it became very easy that if I have a student ID card, I can get a wallet and start transacting offered by telco. The telcos, they’re sales people. They’ll push it, drive it, they’re agile. The banks they’ll wear coats, like myself, aside from the tie that is missing. So the telcos started driving mobile money aggressively.
Mohini: [00:17:50] And so it was that courtesy of these responsive regulation iterations that allowed the stakeholders involved play to their strengths. Mobile money finally began to take off. Between 2012 and 2017, the number of agents increased 25 X - from 6,000 to 150,000. And guess what? Mobile money accounts also grew from about 345,000 to 11.2 million within that timeframe. This is important because remember banks didn't have branches in all the 10 regions and agents could go where the banks couldn't. So more agents meant more convenient ways for people to access money provided they had a mobile money wallet.
Now we've heard a lot from GHIPSS, and their leg of this race is not over yet. They've got a tricky bend to navigate before they pick up speed again. But before we go too far, let's have a chat with Bruno to understand some of the other challenges MTN faced back when they started. Coming up after the break.
Toba: [00:19:01] Hi, this is Toba, Media Associate at Paystack. We'll head back to the show in just a second, but I’d like us to chat for a bit about what we do at Paystack. Paystack powers payments and growth for some of the most interesting fintech companies operating in Africa. Whether you run a lending, investment, cryptocurrency or savings company, our job is to provide you with tools to grow your business. One such tool is Paystack transfers. It allows you to transfer funds from your Paystack balance to multiple bank accounts instantly via the Paytack dashboard or API. No matter how large the recipient list is, you can distribute money to multiple beneficiaries all at once in Ghana and Nigeria, freeing you to do more interesting work that will grow your business. To start making instant transfers head to paystack.com and create an account today. Now let's head back to the show.
Bruno: [00:20:03] There were a lot of studies about 11 years ago, 12 years ago, showing that getting into the basic financial services would increase the loyalty and the stickiness to the brand and to the company. So mobile money was to be one additional revenue stream, but not necessarily a major product at that time.
Mohini: [00:20:38] So when MTN launched mobile money, the goal was primarily to build brand loyalty. They first kicked off with the pilot and the results were quite surprising.
Bruno: [00:20:48] If we were to decide on the launch of the product, based on the results of that pilot, we probably wouldn't have launched mobile money in Ghana.
Mohini: [00:21:00] To think that there's a chance that this product that has over 7 million accounts and majority of the market share might not have existed...it's fascinating.
Bruno: [00:21:11] Ghana is a country, and Accra is a city where as creative as the people can be there, they are not always ready to embark themselves into something that is new, completely new in the market, has not been heard of. Because at the time, yes, M-Pesa did exist, but there wasn't that, all that PR and noise around the M-Pesa. Therefore people were not comfortable even internally to put their money in.
Mohini: [00:21:58] So the pilot started out as a test between family and friends and some of the banking stakeholders. And people had to get warmed up to the idea of putting their money into a mobile wallet. But if it didn't quite go the way they planned, what gave MTN the confidence to launch?
Bruno: [00:22:16] The confidence came from the fact that in West Africa, we do remit money. We have no choice. Should it be within the city from point A to point B. Okay. Because there is, or there was, and there is still a lot of traffic. So you have the convenience brought in with mobile money. The second one is that during the pilot, there wasn't any major technical challenge. So people will check the statement on a daily basis, and will confirm that the money they left yesterday is still in, if they haven't transacted. So we've been able to build more and more confidence around the convenience and the security.
Mohini: [00:23:14] So culturally mobile money was well set up to solve a problem that Ghanaians face in daily life, remitting money, peer-to-peer transfers to friends and family members, as well as just paying for regular goods and services.
Nana Ama Yankah: If I'm buying food items, I'll send you mobile money. If I'm buying water, I'll send you mobile money. If I'm, you know, buying raw materials for my suppliers in the North, I send them mobile money. It's convenient.
Mohini: That's Nana Anna Yankah. She runs Naya naturals, where she creates natural cosmetics using shea butter sourced in Ghana. And for Nana AMA mobile money is very much a part of her daily personal and professional life.
However, this, this being mobile money being a convenient part of daily life, wasn't always the case. And that brings us to that other hurdle that GHIPSS had to navigate.
Nana Ama Yankah: Initially when they started, I think it was only MTN that had it. And then I think Tigo got in, and Vodafone came in last at a point. But you could only do transactions within the same phone company. Right. So you would only be able to send mobile money from MTN to MTN. You couldn't send that across to any other one.
Mohini: That must have been so inconvenient. So what was the fix?
Nana Ama Yankah: So I think they tried something where you could get some code and you could send to several others, and then it became cumbersome at a certain point. And some people were doing it and they couldn’t and you have issues. And then there was a, a coupon or something you can send, and then some people have to withdraw it. And I actually had some issues with that where…
Mohini: And Nana Ama explains that if a customer paid her through a mobile money provider that she didn't have an account with, she would sometimes forget to go get the cash with the code the customer gave her. And then the money would be returned to the customer. And hopefully it was an honest customer, otherwise they just never resend the money and never come back. So clearly the system was due for a change and it's at this point that mobile money in Ghana got its second wind. When in May, 2018 GHIPSS launched mobile money interoperability.
Archie: [00:25:42] Mobile money interoperability created the possibility whereby you can move funds from one wallet to another, and also move funds from a wallet to a bank account and vice versa. And thirdly, from a wallet to an e-zwich wallet and vice versa. So we connected all the three platforms in the country, which we christened the financial inclusion triangle. So just about anybody at all you meet, you are able to transact what the person. It’s like creating a universal language in a country
Mohini: [00:26:15] It's like creating one universal language and a country of about 30 million people with about 80 different languages.
Beyond being able to transact with anyone as long as they have a mobile money wallet, there were implications for agent employment. Initially there'd been concerns that airtime sellers would lose their jobs. But that wasn't really the case.
Bruno: [00:26:42] The reality is that those selling the scratch card could be used differently if you train them. If you give them a chance to change the work scope. Some of them became agents. Not some, a lot of them became agents.
Mohini: [00:27:00] Distribution is a key ingredient in the success of mobile money. And Nana Ama paints a picture of just how key agents are.
Nana Ama Yankah: [00:27:10] You would actually see in a Sunday afternoon, you would see a person that is not dressed properly, like probably wearing some shorts and flip flops and a t-shirt, standing on the corner of the road with a phone. And he's doing mobile money transactions. Because the thing is you had everybody - students, roadside sellers, all these people that were keeping their money safe by just going to these guys and just giving them the cash and having them transfer to their phones. We are needing the banks less and less and less.
Mohini: [00:27:44] So all those problems from before were gradually being solved. The problem of cash not making it into the formal financial system because the unbanked didn't have enough KYC details. That's how mobile money was successful at being the bridge between the unbanked and the formal financial systems. Bruno explains how that opens up a lot of opportunities for people.
Bruno: [00:28:05] First of all, as Africans, for me, it was and it remains very important to try to get as much as possible many of my, brothers and sisters into a kind of financial system. I don't want to call it mobile money. What was important was to bring them on board, show them the value in having a transactional bank account. Show them quickly the value of being able to get a life insurance product, for instance, which is something that we quickly designed and launched in Ghana.
There's a tremendous number of mobile money wallet owners who now have bank accounts because they have some records.
Mohini: [00:29:11] Remember how I mentioned earlier that mobile wallet accounts had limits according to the amount of KYC provided.
Archie: [00:29:17] During the COVID times we realized that a number of the mobile wallet account holders started hitting their limits. It’s good when you are within it, but with time, you've experienced it, you can now work between bank accounts and mobile wallets, and nothing now stops you from transitioning to become a full fledged bank account holder.
Mohini: [00:29:40] And if a farmer gets access to loans via the mobile money app or a banker in the States is able to remit money to her mother in Ghana. It's a win for the Ghanaian communities. But what does this mean for the economy as a whole?
Archie: [00:29:54] If you have a country where most of the funds are outside the banking sector, the country can’t develop.
So if you improve your payments systems, such that 80 plus of the funds reside within the banking sector, this is where the banks will have money, use it for big ticket projects. That's one advantage of the payment systems. Secondly, if the payment systems has been structured in such a way that individuals, corporates do not use physical cash, but they transact electronically, there will not be a need for the country to print the currency.
Mohini: [00:30:41] Currency printing is such a big cost. And it's not as uncommon as you might think. Nigeria, Ghana, Liberia print their currencies overseas because printers are expensive. You have to switch them up to keep up with anti-counterfeit technologies, etcetera. But still printing overseas is quite an expensive practice. Ghana spent millions of dollars on currency printing in 2019.
Archie: [00:31:10] If it's even halved and they spend that half the whole amount, on your health sector, it would be the best health sector in the world. So modernizing the payment system is just about fintechs coming out, there are national developmental agenda that also underpins it. So the idea of cashless transactions, people would talk about it, but they don't know the economics behind it.
Mohini: [00:31:38] The story of Ghana's journey to fastest growing mobile money market in Africa is one of collaborative regulation between the bank of Ghana and GHIPSS teaming up with stakeholders to revisit the branchless banking guidelines and kicking off mobile money interoperability. And this is alongside a host of other considerations that we could dedicate a whole season to exploring. So what comes next? Well, at the beginning of 2020, Ghana launched what CGAP says is the world's first digital financial services policy. The goal - to make sure that 85% of men and women have financial accounts by 2023.
In 2020 when we recorded this episode, the stats were that 62% of men and 54% of women had financial accounts.
With Ghana’s track record, they can do it. But will they? We’re excited to watch and learn.
That's it for today's show folks. Thank you for listening. Every week we share a tightly curated debrief of the most important fintech news from around the continent, as well as jobs, events, and much more. To subscribe, kindly visit decodefintech.com. Once again, that's decode fintech.com. Decode fintech is brought to you by Paystack.
Paystack helps Africa's most successful fintechs build powerful, scalable financial service products with the industry's best documented APIs, please visit paystack.com/fintech to find out more. This episode was produced and narrated by me and edited by Temitope Olaleye. I'm your host Mohini Ufeli. Once again, thank you so much for listening and see you in the next episode.