mobile money
mobile money

The Central Bank announced a new set of guidelines for the service about a year ago to improve money transfer via mobile phones.

mobile money
mobile money
The new regulatory regime among others empowered telecom companies to also own and run the electronic money business like banks.
However, it appears the banks are rather concerned about the threat posed by mobile money services.

For instance the August 2015 Telecom Subscriptions Report by the National Communications Authority (NCA), posits that mobile money made significant strides between 2012 and 2015.

According to the report, registered subscribers increased from 3.8 million to 13.1 million while registered agents also increased over tenfold from 8,660 to 79,747 within the three year period.

A recent survey by Pricewaterhouse Coopers [PwC] indicated that over 70 percent of CEOs and Heads of e-banking services in Ghana view mobile money as both a threat and at the same time an opportunity.

Also, about 56 percent of banks are of the view that mobile money presents threats to the traditional ways in which the industry operates, even if these threats do not measure up to the opportunity.

The report captioned, “How to win in an era of mobile money,” surveyed CEOs, CFOs, and Heads of E-banking of 25 out of a total of 30 banks.

The threats as viewed by the bankers were the relatively cheaper or no costs telcos charged on services such as of bills or services offered in restaurants and items purchased in certain shops.

Even though about 29 percent of the participants viewed mobile money as an opportunity which has generally enhanced the delivery of services such as domestic remittances and bill payments, 71 percent of the respondents view mobile money as both an opportunity and a threat to their operations.

The bankers also argued that the E-Money Issuer (EMI) Guidelines of the BoG have set the stage for a possible entry into the banking arena by telcos.
As a result, the bankers believe that the telcos will at that point become direct competitors to banks instead of partners and service providers to the industry.

The Senior Vice President, Strategic Planning at Royal bank, Dr. Kwame Baah Nuako, has noted that, regulation is key to foster the collaboration between telcos and banks.

“My argument is that you cannot have one part of the banking space that is the universal bankers being regulated while another part that is the telcos also engaging in banking, not being regulated,” he opined.

For Buddy Broukou of the financial inclusion think tank, the Consultative Group to Assist the Poor [CGAP], Ghana is less likely to see the mobile money take over traditional banking.

“I would say no because the two services are operating independently…if you take the case of Ghana where there is high banking penetration and relatively low mobile money penetration, that has been more a function of regulatory environment,” she remarked.
Also, Managing Director of HFC Bank, Robert Le-Hunt, however, expressed that a level playing field may be required for the desired results.

“If you want to the bank to open an account, there are a number of information that is asked not he forms. That si because there are Know Your Client (KYC) requirements and we all ahem to be mindful of that,” he said.

“As it is now, the restrictions that are placed on banks for us to open an account are not the same as those placed on other institutions, you don’t need all that requirement to open a mobile money account,” he added.

He is calling for all the requirement to be the same adding it is either we choose all or we increase all.

“It, therefore, means that there are people whom I can’t bring to the banking sector yet other people are able to bring them in to open accounts.

According to the Southern Zonal Manager for GN Bank, Kofi Fosu, a collaboration between telcos and banks remains the key.

“The telcos are not banks, they will need banks if they are keeping an account of all the money they are mobilising. Eventually, the money will sit in the bank and the banks can use them to give out loans to the sector that need it,” he said.

“So we should notably say they are competing, of course, there are competition in every sphere of life and therefore so far as the banks don’t have the facility, skill, ability to do this retail transaction, then we should allow the telcos just like Microfinance and rural banks,” Mr Fosu added.

Meanwhile the banks believe three key things, regulation, technology and partnerships together with other conditions will propel them to win in the era of mobile money.

Between 2012 and 2015, the number of transactions increased substantially from 18 million to 266 million while the value of transactions equally went up from GH¢594 million to GH¢35 billion.

Also, by the end of 2015, the mobile money balance on float stood at GH¢548 million.

The Bank of Ghana’s Payment and Settlement Department however reports that the figure increased by about 24 percent as at the end of June this year.

According to the central bank, the mobile money balance on float increased from the GH¢548 million to GH¢679 million.
Meanwhile, the Head of Electronic Business of Cal Bank, Mrs Martha Acquaye has urged telcos to engage Banks efficiently in the sharing of data and ideas in order to grow the mobile money sector in Ghana.

She said although the Electronic Money Issuers (EMI) guidelines clearly implied a collaborative effort to grow the sector, the actions of the telcos had implied competition instead.

Mr Acquaye said this at a Banking Conference which was on the theme “mobile money and banking: complementary or competitive.

Touching on the issue of data sharing, she said strategy and decision making was driven by data and as such, the lack of it stifled the potential of mobile banking in the country.

“Today, Mobile money transactions are overwhelming but banks have no idea who is spending on what, when and where, and so on. Customer spending pattern and transaction history is not available to the banks,” she stated.

She said personal information of subscribers and agents were difficult to access from the telcos on the basis of customer confidentiality even though the subscribers were customers of the bank based on the trustee relationship.

“If we see cash as the key challenge in building a cash lite economy then banks and telcos need to collaborate more in this regard to enrich user experience,” she pointed out.

Mrs Acquaye said one other thing that had implied the telcos were competing with the banks has to do with the ownership of subscribers, stating that “some of the telcos have taken over the subscription of agents hence there is little interaction between agents and banks during the onboarding process.”

She said this has made most customers oblivious of the trustee relationship between themselves and partner banks.

“Telcos determine the level of partnership with the banks leading to banks being categorized as partners or aggregators. As aggregators, it does not make financial sense to buy e-money with depositors fund to trade whiles the partner bank enjoys the float. We believe the telcos can make the aggregator role more appealing for Banks in order not to create an unhealthy competition amongst banks,” she added.

She said competition had also deprived users the opportunity to transfer funds across networks, and this was worrying if they wanted to make the service accessible and affordable and create the maximum impact on the cash lite agenda through mobile money.

The EMI guideline directed all banks to pay interest on float at current account rate, which ideally is zero for most banks.

The Bank of Ghana thereafter determined the existing current account interest rate as ranging from 1.5 per cent to 7 per cent.

Mrs Acquaye, however, accused the telcos of using this opportunity to create an unhealthy competition among the banks.

“In order to keep enjoying mobile money float, most banks proposed to pay the higher interest rate, which may be higher than actual current and savings account rates, thereby creating a fierce competition between mobile money and bank savings products”, she said.

She said banks would now have to look at their pricing structure all over again as mobile money interest rates had become the new competitor price benchmark.

The Head of Payments Department at the Bank of Ghana, Dr Settor Amediku, for his part said the BoG was currently engaging the various stakeholders to change the EMI guidelines into a regulation to be passed by Parliament.

He said the rate at which mobile money was growing required a regulation to regulate the sector.

He said the total amount of mobile money transaction for 2015 totaled over GH¢35 billion, with telcos holding over GH¢600 million as floats in banks but this figure looks likely to be doubled as just the half year results for 2016 indicated a total transaction volume of over GH¢30 billion, with Telcos holding over GH¢700 million as floats in banks.

-Adnan Adams Mohammed

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