Ahead of the Q

AHEADOF THEQ

Ghana Interbank Payment and Settlement Systems

has been working to put the country on a cash-lite footing since 2007. And the launch of Africa’s first national QR code payment scheme could finally deliver the digital prize, says

Kwadwo Ntim

Significant changes are afoot in the Ghana payments space, as the country transitions from a cash-dependent economy to a digital one. At least, that is how it’s been presented over the last 12 months, as the world’s media was drawn to Africa’s experience of the pandemic.

In truth, these changes had been afoot since 2007, when Ghana slipped under the radar as the first country in the world to introduce a fingerprint-enabled smart card linked to the country’s national switch scheme – in effect, a biometric banking system.

More than three million Ghanaians (a sixth of the adult population) hold what are known as E-zwich cards, the technology provided by South Africa’s Net1 UEPS as an alternative to the Europay, Mastercard and Visa (EMV) standard. The E-zwich card can be used by customers across Ghana, particularly the unbanked and underbanked, and often in rural communities without the communication infrastructure cardholders typically rely on in the West. 2008, Ghanaians being invited to register for them through their banks, recording their fingerprints, including an ‘alarm digit‘, for cards that could be used with point-ofsale (PoS) machines and ATMs equipped with fingerprint recognition pads. That was followed by the national clearing system in 2009, and the deployment of the national switch infrastructure in 2011, binding what was a fragmented payments industry into a harmonious whole.

Implementing the national switch infrastructure was a major undertaking.

“All the participants within the space, which were mainly banks then, were running their own payment systems infrastructures, of sorts. So, the thinking in 2007 was to have a harmonised system that was integrated, would allow for the sharing of costs, and encourage all parties to work to a level that brought efficiencies to everyone,” says Ntim.

Today, the payments landscape is looking rather fragmented again, given the subsequent evolution of technology, including mobile technology and e-money providers, in particular.

“Financial technology companies started out by providing technology solutions to finance houses, but in the process have tried to take advantage of the opportunities within the space to operate in a quasi-financial service company structure, up to now,” says Ntim.

“More importantly for us, the internet has become the cheapest source of communication to facilitate the interaction between a customer and a processor, which is what results in the interoperability service we are trying to achieve.

Tasked with enabling this vision of a ‘cash-lite’ Ghana with a standardised and regulated payments infrastructure, was GhIPSS (Ghana Interbank Payment and Settlement Systems), a subsidiary of Bank of Ghana. It was setup by the central bank with a mandate to implement and manage Ghana’s biometric card-based payment system, move banks to an automated clearing house and operate the national payment switch.

When given its ‘to-do list’ in 2007, even the processing of cheques was still in ‘semi-manual mode’, as Kwadwo Ntim, general manager for technology and operations at GhIPSS, recalls.

“A few of its components had been automated, but people were required to physically transport cheques into a central location, exchange them for processing, go back to their offices with reports on the results of the processing and then make a decision whether to pay. Not only was the process tedious, it was also inefficient,” he says.

The biometric card was introduced in

Unpacking the potential:

Ghana is the first African state to harmonise QR code payment systems at a national level

“One of the primary reasons why, in 2007, we resorted to investing in the national biometric switch infrastructure, was that it offered the capability to work offline; in the sense that you could go to a point-of-sale terminal with your biometric card and be able to complete a transaction without having to make a communication/ connection to any other party outside of the terminal.

“Having efficient and affordable internet communication is absolutely crucial for what we are now doing in this space.”

At the end of 2019, the president declared that Ghana would have eliminated paper

A first for Ghana: The country is fast moving up Africa’s digital leader board

from most services and transactions by 2021. Digitisation of land registry, hospital and court records was already underway and the country had revived a national identity scheme that would form the basis of an integrated database with passports, tax identification numbers and drivers’ licences – all part of public policy to bring the informal economy out of the shadows.

Just months later and Ghana was in lockdown and the volume of digital transactions captured by GhIPPS in the first quarter of 2020 surged by 81 per cent, including credit cards, banking applications, digital cash, mobile payments, smart card-based electronic payments and electronic billing. E-money accounts, held by 81 per cent of the population, saw a less noticeable four per cent increase on the previous quarter, but then, given their already widespread use, there was less headroom for growth; mobile payments represent 82 per cent of the nation’s GDP.

Much of this increased activity was encouraged by government intervening to cap digital transaction charges – a major impediment to the adoption of cash-free payments. Which is why GhIPPS hopes that taking the opportunity now to roll out another new low-cost national payment service will get the mass buy-in it needs.

CODE FOR SUCCESS

GhIPPS, in partnership with its payment technology provider HPS, recently launched Ghana’s Universal QR Code (GhQR) and Proxy Pay platforms. With GhQR, customers can make instant payments for goods and

services from different funding sources (mobile wallets, cards and bank accounts) by scanning a quick response (QR) code on a smart phone. The facility also allows feature phone users to make payments at a PoS terminal using a USSD (unstructured supplementary service data) code from their payment service provider. The initiative makes Ghana the first state in Africa to harmonise QR code payment systems at a national level.

Ghanaians are already used to seeing the codes printed on goods; the government has been using them for several years to speed up the payment of excise duties. But this latest move will mean traders and shoppers in rural settings, and in Accra’s busy Makola open markets, for instance, are able to download and set up a payment system that doesn’t even need a bank account, instantly, and be ready to transact. Crucially, it will route that payment through the national payments platform. But while the expectation is for QR codes to have a significant impact, Ntim won’t celebrate it just yet.

“In our experience, over the last 13 years, there are always adoption issues, some of which are infrastructure-based, some service-based and some to do with culture,” he says. “From a cultural point of view, there is a very high affinity with cash, which is going away, but very slowly.”

In QR codes, GhIPPS has clearly found a mechanism that’s easy for the customer, cheap for the merchant, and not hindered by the smart phone/feature phone technology gap. With a little bit of societal engineering, it could use it to readily scale up digital payments across all channels and achieve the country’s cash-lite ambition.

“We believe QR is the kind of technology that’s going to take us there, in the long run,” confirms Ntim.

Such has been the rapid increase in customer interest in contactless transactions generally over the past year, that government is also reportedly considering requiring public transport operators to accept mobile money instead of cash, in preparation for when the pandemic recedes. Evidence elsewhere in

From a cultural point of view, there is a very high affinity with cash, which is going away, but very slowly the world – Transport for London included – suggests that making cashless the default payment for fares can rapidly scale digital adoption elsewhere in the economy. In Accra alone, 70 per cent of Ghanaians move around on tro-tro buses, so the potential to influence payment choice is huge. Ghana is lucky not to be hindered by legacy infrastructure, says Ntim. “Because we don’t have to spend money beyond what we’ve already invested, we can experiment with new and innovative technologies as they evolve. “Providing an interoperable ecosystem for payments and pushing payments to the point where the cost is next to nothing for all participants, will only improve the customer adoption rate, merchant sales, and businesses’ ability to innovate, produce more and create more jobs, which all of us benefit from in the long run.”