Addison Bright Sloane’s Victoria Bright provides an insight into Ghana’s burgeoning fintech market
Ghana’s financial technology ecosystem has experienced notable transformation over the last two decades from a largely cash-based and manual financial system fraught with delays and inefficiencies to a cash-lite and digital economy that guarantees safe, secure and seamless financial transactions for the consumer.
Ghana’s fintech journey has been characterised by the timely introduction of various regulatory frameworks to streamline fintech development in a manner that enhances innovation, whilst prioritising consumer protection, in order to attain the government’s goal of financial inclusion for Ghana’s underserved population.
The Bank of Ghana (the bank) regulates the fintech ecosystem. The bank’s primary responsibility is to issue licenses, maintain oversight on electronic money issuers (EMIs) and payment service providers (PSPs). The powers of the bank within the fintech sector are provided by the Payment Systems and Services Act, 2019 (Act 987).
The predominant fintech system in Ghana is the mobile money transfer service which was introduced by MTN Ghana in 2009. Airtel Ghana and Tigo Ghana (now Airtel Tigo) and Vodafone followed in 2012 and 2015 respectively. A study commissioned by the Bank in December 2021 indicated that the number of active mobile money users increased exponentially with the total value of transactions within the study period of GHS 82.9bn (approximately $10.9m). However, this figure reduced to GHS 76.2bn in January 2022 in the light of the government’s imminent introduction of the Electronic Transfer Levy Act, 2022 (Act 1075).
The mobile money transfer service has been significantly enhanced with the introduction of the ‘Mobile Money Interoperability’ (MMI) platform by the bank through its subsidiary, the Ghana Interbank Payments and Settlement Systems (GhIPPS). The MMI is a service, which allows direct and seamless transfer of funds from one mobile money wallet to another mobile money wallet across networks.
Ghana’s fintech journey has been characterised by the timely introduction of various regulatory frameworks to streamline fintech development in a manner that enhances innovation.
Furthermore, the government has recently introduced the Quick Response Code known as GhQR. It is a new and easy way to make payments to merchants by scanning a QR Code displayed by the merchant with one’s mobile phone. The merchant receives the money as instantly as paying with cash.
Online mobile banking apps like G-Money and the introduction of fintech start-ups such as Expresspay, Slydepay and Zeepay reflect the continued influx of fintech innovations in Ghana’s fintech ecosystem.
Ultimately, the primary policy concern within Ghana’s fintech regulatory framework is the need to balance the encouragement of innovation in the financial space without endangering the stability of the financial sector.
Innovation backed by regulation
Prior to officially on-boarding banks to provide fintech services, the bank issued the ‘branchless banking guidelines’ in 2008 to provide regulatory approval to banks, in order for them to partner with telecommunications companies and assimilate online fintech banking into its traditional banking services. As a result, the sector flourished by 2009 with increased mobile money service operators and fintech start-ups. In addition, the introduction by the bank of the ‘electronic money issuers guidelines’ had a monumental impact on the sector. The guidelines directed all non-banking entities such as telecommunications companies offering mobile money services to decouple mobile money services from their core businesses by establishing subsidiary companies which will be licensed by the bank to enable them to purposefully engage in mobile money enterprises.
The emergence of fintech has seen the rise in non-bank entities providing financial services and/or solutions through sophisticated technologies demanding exceptional attention. Consequently, in May 2020 the bank established a dedicated fintech and innovation office to understand and supervise fintech effectively.
The data protection commission plays a significant role in ensuring consumer data are collected, processed and stored in a manner that protects privacy rights. In addition, the securities and exchange commission maintains regulatory oversight over fintech companies that operate within the securities and capital markets space. The financial intelligence centre has a mandate to ensure that fintechs do not become vehicles for money-laundering, terrorism-financing and/or economic crimes.
Balancing the demands of innovation and market integrity
The complementarity of the role of regulatory bodies in protecting the fintech ecosystem from fraud and the desire by fintech start-ups to churn out innovations to enhance digital finance, uncover the tension between innovation and market integrity.
Throughout Ghana’s fintech journey, innovation has always been a step ahead of regulation, however the regulatory institutions have acted timeously to ensure that such innovation is controlled and tackled within a progressive regulatory space.
In advanced economies, the use of blockchain technology such as cryptocurrency has gained traction. For some emerging economies such as Ghana, there is a reluctance to introduce blockchain technology due to the risks associated with it and unavailability of a regulatory framework and/or institutional support.
The bank is yet to license the use, holding and trading of virtual or digital currencies in Ghana. In its circular of February, 2018, it notified the public that it had not yet licensed cryptocurrencies in Ghana. By way of example, in March 2022, a well-established Ghanaian entrepreneur went through all the regulatory hoops to obtain a fintech license to enable him to launch a cryptocurrency he named the ‘freedom coin’. The bank as the regulator of the sector quickly issued a circular again in March 2022 informing the public that neither the cryptocurrency nor the promoting company had been licensed to operate in Ghana and re-iterated that the bank was yet to regulate the use of cryptocurrencies in Ghana.
Throughout Ghana’s fintech journey, innovation has always been a step ahead of regulation, however the regulatory institutions have acted timeously to ensure that such innovation is controlled and tackled within a progressive regulatory space.
Against the backdrop of these competing interests between tech-innovation and integrity of the financial market, the bank has launched a regulatory and innovative sandbox to test and pilot new innovations in order to encourage new fintech technologies. Effectively, the sandbox is a supportive and controlled policy environment that enables firms to test innovative products, services and business models under the supervision of a regulator.
In conclusion, the regulatory and innovation sandbox will provide a forum for financial sector innovators to interact with the sector regulator to test digital financial service innovations within an evolving enabling regulatory environment. In this regard, the bank and a potential innovator can assess the usefulness, viability and safety of innovations through a shared understanding of their respective interests.
Going forward, the continuous positive regulatory reforms in Ghana has the potential of making the country one of Africa’s preferred destinations for foreign investments in fintechs. We are already seeing signs of this in our practice which is seeing an increasing fintech client base.
Victoria Bright, managing partner
E: vbright@addisonbrightsloane.com
