Ghana moves beyond mobile money, deepens financial inclusion with QR payment system

Ghana, the biggest gold producer in Africa recently launched a national Quick Response (QR) code payment system, an infrastructure that is mostly used in cashless economies like China.

Unique in its ability to meet the needs of both banked and unbanked customers, Ghana’s Universal QR Code is a key plank in the government’s efforts to deepen financial inclusion and follows the successful implementation of Mobile Money Interoperability.

According to Ghana’s Minister of Communications, Ursula Owusu Ekuful, the new QR code payment system allows customers to make instant payments for goods and services from different funding sources (mobile wallets, cards, bank accounts) by scanning a quick response code on a smartphone, or dialling the USSD Code of the payment service provider.

“Today is a historic day. Once again, we are moving to solve a major problem in our society, making it easier to access and pay for goods and services,” Ghana’s Vice President, Mahamudu Bawumia said at the launch of the national QR code.

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QR code payment is a contactless payment method where payment is performed by scanning a QR code from a mobile app. It is an alternative to doing electronic funds transfer at point of sale using a payment terminal.

According to market analysts, QR code payment helps to avoid a lot of the infrastructure challenges traditionally associated with electronic payments such as payment cards, payment networks, payment terminal and merchant accounts.

“Ours is a cash- based economy, which is very inefficient. Historically, many have been excluded from the financial system, but we have since been working to make Ghana’s economy a cash-lite, more efficient one, with the introduction of the Mobile Money Interoperability and today, Universal QR Code,” Bawumia said.

Vice President Bawumia disclosed that 13 banks have so far rolled out the QR Code, while telcos like Vodafone and Airtel-tigo have also joined, with MTN on the verge of doing so.

Financial inclusion experts believe digital financial services is the easiest, most affordable and convenient approach to achieving a broader financial inclusion goal.

Ghana’s decision to have a telco- led financial inclusion model resulted in a 73 percent increase in registered mobile money customers in just one year, according to World Bank data, an initiative that lifted financial inclusion rate in the West African country to 58 percent in 2017 from 41 percent in 2014.

Also, mobile money-led financial inclusion model has played a significant role in the level of progress reported in some other African countries as the telecommunication companies in the countries leveraged on their existing infrastructure to deepen access to finance.

Kenya has about 60 percent mobile money service penetration, while Ghana has about 40 percent service penetration, and Nigeria with a lot more population remains at 1 percent owing to its bank-led model.

While Nigeria came late to the mobile money party as the central bank of Nigeria only gave an official node to non-financial companies to apply for mobile banking licences on the 5th of October 2018, the country is dragging in granting the licence to the biggest players in the telco industry.

Two smaller telcos and a payments company have been given mobile money licences, the country’s largest mobile operators, MTN and Airtel are yet to receive the licence.

Targeted at Nigeria’s over 40million unbanked population who are mostly in the rural communities, the payment service bank (PSB) by the apex bank would enable telcos and other non-financial institution to offer financial services while deepening the country’s financial inclusion rate.

“If Nigeria wants to deepen financial inclusion with the right oversight, then the banks and telcos should work together to drive it,” Yewande Adewusi, a Lagosbased financial inclusion consultant said.

Adewusi says it is “obvious that what the country has been doing in the past is not working.”

Before now, only banks and licensed financial institutions were allowed to provide financial services ( bank- led financial inclusion model). Although telecom operators and other fintech companies indicated interests to operate in the market, the CBN policy would not allow them.

The regulator eventually shifted because of the increasing rate of financially excluded people in Nigeria and the lack of progress in getting banks to provide financial services to people living in areas that lack access.

The apex bank has a target to ensure that 80 percent of the country’s adult population is financially included in the financial cycle by the year 2020. The CBN had in a circular on July 2018, lamented that Nigeria was not meeting any of the financial inclusion targets agreed and contained in the 2012 Financial Inclusion Strategy.

Not only was the country not meeting its targets, but it was also declining in growth. For instance, while Nigeria achieved a 60.3 percent financial inclusion rate in 2012, it declined to 58.4 percent in 2016 against a target of 69.5 percent, translating to financial exclusion of about 41.6 percent.

Even though the population of Africa’s largest economy is 2.6 percent of the total world population, the World Bank Global Findex Report 2017 estimates that 3.4 percent of Nigerians are among the global 1.7 billion adults who are unbanked and financially excluded.

“From a regulatory perspective, one basic requirement for mobile money to succeed is to create an open and level playing field that includes non-bank mobile money providers such as Mobile Network Operators ( MNOS),” London- based Group Special Mobile Association (GSMA) said.