Financial Services in Ghana: GhIPSS to Focus on Electronic Payment Services and Products

Interview with Archie Hesse, CEO of GhIPSS (Ghana Interbank Payment and Settlement Systems Limited)

What objectives have you set for GhIPSS (Ghana Interbank Payment and Settlement Systems Limited) in 2019?

The vision of GhIPSS is to migrate Ghana to an electronic payment society. If you look at the products and services that we offer currently, we offer the e-zwich biometric smart card system which is currently being used by a lot of government agencies for payments in particular. It is important to note that by virtue of interoperability, the e-zwich platform is linked to the banking and mobile money platform, so when you have been paid onto the e-zwich smart card you can move your funds into your bank account or your mobile money wallet. The key important feature of the e-zwich payment system is that it is able to filter all payments. So, you would eliminate duplications within a payroll file. Although it has a banking and retail system, we are beginning to realize that it is predominately currently being used for verified payments. This is mainly because once you have your funds on the card, you are able to go to a bank and have access to your funds. It would be better if we were able to use a biometric card as well to shop, but we do not have enough of these biometric point of sale devices. So, we are working with a couple of companies to ensure that we come up with cheaper biometric point of sale devices that also support the financial institutions to offer these point of sale devices to their merchants. As a result of that, it is being used as a mode of payment. We have also modernized the check clearing system, the automated clearing house or ACH Direct Credits for bulk payments directly into bank accounts, but that is batch based. We have also modernized the check clearing system which is truncated. Once you present a check at the bank it is truncated and cleared electronically. Currently, you can clear it same day or next day you can have access to your funds. Interestingly, although our aim is to reduce the use of cash as well as checks in the country, because we have made it better for checks to clear, i.e. from three to seven days to same day and next day, we have seen marginal increases in the use of checks in Ghana as opposed to what the trend is worldwide. We have also noticed that corporate Ghana tends to prefer checks over other electronic instruments. It has to do with the fact that that is what we are used to. When it comes to payment, the CEO or the finance director or the nominated signatories would have to sign, etc. Although we have other electronic services, there is a need for businesses to change their business processes to suit them and that has not happened. There is also a need for government as well as corporate to have IT systems that they can integrate seamlessly with their banks before they are able to send payments electronically to their bank. These are some of the frictions that we need to address in 2019 to reduce the reliance on checks. ACH Direct Credit, the bulk payment which is also being used for salaries, is also coming up very nicely. When we started about eight years ago, the volume was in the thousands, but currently we have logged about 6.6 million transactions in 2018, not very far from checks now. Checks and ACH Direct Credit are neck and neck in terms of volume. But when it comes to value, checks are really far higher than the ACH Direct Credit. We also have the ACH Direct Debits for repetitive payments. Because of the governance structure and the peculiar nature of our terrain it has not done as well as it should. There are a few marginal things that we need to correct. However, in other jurisdictions, they have also introduced what they call the request to pay where you set up insurance companies or billers on the system and the beneficiary is the one who actually initiates the payments as opposed to the service provider. Therefore, there is no need for a mandate to be signed. That would replace the ACH Direct Debits. With the mandates system, it has not worked well in Ghana for the following reasons. If I sign a mandate in Ghana, and come the due date, I am not able to honor it because I do not have enough funds in my bank, we do not have punitive measures or it is not as biting as in other western countries where you would be backlisted or do everything to save your name. We do not have that kind of system here. The banks are also not honoring them. It has not worked very well because of the cumbersome nature. We were mindful that the regulatory framework was not as friendly. Nevertheless, we decided to go live because we had a clearing house system which could provide that service. We have learned from it and in 2019 we are looking to move into a request to pay system. We also have our gh-link which is the Ghana local card. We have the local biometric card and then we also have the local EMV card which is chip and PIN based. It is a safer card, you can use it at any ATM in the country to have access to your funds even if the ATM does not belong to your bank, similar to LINK in the UK and other countries. We are working with a point of sale manufacturer to have a universal point of sale where you can use your gh-link card, your biometric card, and also have other international cards used on the point of sale device as well as other applications. Once you have a unified point of sale device, effectively, you have economics of scale and it will make it cheaper for merchants to go in for the point of sale devices or banks or other third-party companies setting up a business where they will rent them to merchants to create payment channels for the cards that we are introducing. In terms of ecommerce, we also have the gh-link eCommerce where domestic merchants can actually advertise their products and services on the internet locally and also receive payments. There are a couple of pilots going on now. We have what we call the 3D secure with a second authentication layer where you have your PIN, you type it in on the internet, and then a second PIN comes to your phone which you also input before the payment is completed. We have mobile money in the country currently. There are four networks: MTN, Airtel, Tigo, and Vodafone are all offering mobile money services. Last year, we integrated the three mobile money networks together so you will be able to move funds seamlessly between them. We also integrated to bank accounts so you can move funds between bank accounts and mobile money wallets. We also included the e-zwich wallet into the system. We have what we call the financial inclusion triangle in Ghana where we have full convenience. If my funds are on an e-zwich wallet and you prefer a bank account, I am able to move funds into your bank account. We can still send and receive payments between the two of us. If it happens to be across mobile network, that is also possible. If it happens to be across mobile network and all bank accounts in Ghana, that is also possible. The same if it is between e-zwich and mobile network. We realize that just by the wide range of payment services that we are offering now, the majority of the use cases have been for transfers. In 2019, we are going to look at how we can move away from transfers to purchases as well. So, what do we need for all the various instruments that we currently have? How can we transition them for individuals to actually use them for payments as opposed to transfer between individuals, B2B or between companies, and between governments as well so you actually start using the electronic systems for purchases?

Why have people been using so many transfers? Is it not the custom here? Are they not yet familiarized with all the ways to pay directly?

Payment systems in Ghana are very advanced but it is not very well known. It is important to note that GhIPSS is the company responsible for the operations of the payment systems in Ghana in collaboration with the banking fraternity.

The reason why we are not using it for payment is because our retailers, our merchants, are not equipped to receive electronic payments. So, if you go to an orange seller and the orange seller does not have a point of sale device, how would you be able to use your card to make payments? What we are seeing happen is that the orange seller that is supposed to hold a corporate or a retail account is now being treated as an individual and funds are being transferred into the individual’s account, which is more or less a transfer not a purchase. This year, we are going to look at some of the issues surrounding what it is that is stopping us from actually using the electronic funds to make purchases. That is where we are going to focus most of our attention. We have two local cards in the country: the biometric card and the EMV as a chip and PIN card. We are looking at how we can join the two together so that it will make it cheaper for banks to issue cards for individuals to have both the e-zwich card, which is the biometric application, as well as the chip and PIN on the same card. So, you decide which one you want to use, but you have a combined local card. We also have the combined point of sale device as well. Further, we have what we call the GIP, the GhIPSS Instant Pay. The ACH Direct Credits which allows you to transfer funds from A to B, either by batch or in bulk. The GhIPSS Instant Pay is an individual instant transfer. So, if I want to send you money today, instantly, and I ask you your bank account details, I can go onto my bank’s portal, use GhIPSS Instant Pay and I can affect payment to you in a second. We have that service and it is growing but we have realized that in order for me to send you funds, I need to ask you your bank account number as well as your SWIFT code. That might have affected the rate of usage. Other jurisdictions have introduced what we call proxy pay, the proxy being that everybody is asked to link their bank account number to their telephone number. Now, if I have your telephone number, if I want to send funds to you, I do not need to ask for your bank account details again because they have been linked to your telephone number. So, we can now start receiving and sending payments into bank accounts using telephone numbers. At the same time, on the mobile wallet side, again, you are using telephone numbers to effect funds between senders and receivers emanating from mobile wallet. Because of interoperability, the two can move seamlessly together. For both customers who prefer to use bank accounts and those who prefer to use the wallet system, with a telephone number you can move funds seamlessly between each. That is one of the things we are going to introduce in the first quarter of 2019. Once we have done that, it will fast track the movement of funds between individuals, irrespective of where the funds reside, whether in your bank account or in your mobile wallets or your e-zwich accounts. So, now, if I want to transfer funds to you, what do I need? Only your telephone number. Now, what happens if that telephone number happens to be your merchant or your corporate number? This means that whatever goods or services you give to me, I can now pay into your corporate account using your telephone number. We are also looking into another possibility where we can introduce QR codes based on a telephone numbering system as opposed to the card system. With the telephone number translated into your QR code, you might have a bar in front of your store with a QR code on it. If I have a smart phone, I can come over and make payments because embedded in the QR code is your telephone number that is linked to your merchant or your corporate account and payment can be effected instantly into your bank account. Equally, if you have a phone that is not a smart phone, you can use a USSD version of the code if you have the telephone number written down. These are some of the things that we are going to introduce this year to improve on using electronic means to make payments. The ACH Direct Debit has not done too well, so we want to introduce request to pay. With most service providers currently in the country (water, electricity, insurance companies, etc.) you receive notifications on your phone on how much you have used and how much you need to pay. If I go to my phone now, in my texts, I can actually see a notification from my water company telling me how much I have used. There is a whole billing information associated with it. If we set them all up as billers on the request to pay service, because they have sent a text to my telephone number and my telephone number is linked to my bank account, I can then use a request to pay service to say that I have received a notification for this service, for example for 600 cedis, and I can press a button and say to pay the merchant in full, pay half, pay later, decline payment, or that I will contact the biller. What services providers and billers are now doing is instead of sending me, the user, a notification, they are sending me a request in addition to the notification for payments to be effected. We are also going to create the possibility of individuals who have enjoyed a service to be able to pay using their phones. It is important to note that for any payment service that you come up with now, there are three things you need to achieve to guarantee usage. It must be very easy for you to have access. It cannot be cumbersome. It must be convenient. If I give you a checkbook, you need to take the check to the bank before payments are done. But if the payments are on my phone, it is very easy for individuals to use it. If you have interoperability as well, because you can move funds between different platforms, that also makes it very convenient. So whatever payment service or products you come up with now, it must satisfy these three criteria. It must be easy to use, it must be convenient, and it must be instant. We are all gravitating towards instant. We are all very impatient. Time value of money means we want our money now. Gone are the days where one can wait two, three, four days before payments are made. You want to use your money. You want the turnaround. Payment service providers worldwide are now looking at providing the instant pay engine nationally and providing easy, convenient products and services around it for both individuals, corporate, and government to use. These are some of the things that we are going to focus on this year.

What are the challenges to roll out these projects?

There are quite a number of challenges that you face in the line of business that we are in. First, we are all hooked by the waist together, all the banks. Currently, we have more than 20 banks in the country. When you are rolling something out, you need to have all of them on board at the same time. If you have two or three banks on board and the rest not on board, it causes friction between the users. So, the coordination of getting everyone to work at the same time, although every bank individually has their own strategy, their own strength, is one of the challenges we have. We have, as a result, formed the CIO/COOs monthly meeting with the banks and the marketing and ebusiness heads monthly meeting in an attempt to ensure that there is constant dialogue between ourselves and them so they can better plan, be well-informed, and so that they know what to do. We also have challenges with technology provisioning because the majority of the technologies that we use in Ghana are from outside. If we decide to come up with a system, all the banks would need to contact their service providers who are not in the country, but outside. They need to coordinate, they need to plan with them, and these things also affect our time to market in that regard. It makes things more prolonged than we have originally envisioned. We are the center, we are ensuring that we have very robust systems, we have bought the IBM Power 8 and Power 9 systems for both our primary and DR, we are migrating to the latest version of our Switch to ensure that all the PCI requirements are fully met. We want to ensure that we have zero downtime to improve our availability and reliability of our systems. But there is also the last point of educating the general populace. Once the corporate side systems and things have been done, we then have the time to customize our processes which are comprised of education, awareness, roll out support to customers, and advertising and promotions to really fast track the adoption processes. It is a lot and it is multifaceted. One company holding everything together as well as keeping an eye on the regulatory requirements keeps us very busy.

How would you collaborate with fintechs which can serve as aggregators to enable companies to receive payment online?

Our primary customers are the banks. At the beginning, fintechs are more like the IT companies that support the financial sector. So, if a bank needs support, the fintechs are the right companies to support them. We are working with the fintech companies as well to enable them and let them know what the requirements are for the banks so the fintechs can be able to serve the banks better. For example, if we are having a meeting with the banks on a particular product, the systems requirement, what kind of integration is required, etc., we encourage the banks to come with their technological partners, which could be fintechs as well, to actually come over and get firsthand information as to what is required, as opposed to us dealing with just the banks and they in turn talking with the fintechs. We have also looked at the new Payment Systems Act which is being revised. This would allow the fintechs to also deal directly with us to provide payment products and services like aggregate on behalf of certain businesses. Indeed, some of them have started. If you look at the remittance world, there are a number of them that are offering products and services on behalf of the banks. Some of them have indicated that they would like to connect directly to us instead of going through a bank. So, they would then offer their services to the banks as opposed to offering services to one bank only. The Payment Systems Act is now going through the process for it to be passed. Once it is passed, it would then open the gates for us to start dealing directly with the fintechs to ensure that they contribute and support us along the journey. There was a conference in Bali last year called the Bali Fintech Agenda which looked at how fintech companies in various countries around the world can be incorporated in the payment systems for them to participate actively in it. We have had a number of workshops to look at to evaluate some of the requirements and incorporate them between ourselves and the payment systems stakeholders, such as the Central Bank, fintechs, and mobile money entities. We are building a strategy to ensure that fintechs are participating actively in the development of Ghana’s payment systems.

Cross network mobile transfers were performed about 2.2 million times between May and December last year. How do you assess the rollout of this interoperability project?

When we launched our interoperability platform, initially, we had three platforms in Ghana. The first was to integrate the mobile money network into the banking sector. Second was to include the e-zwich link. From May 2018 to December 2018 we logged 2.2 million transactions. This shows you in the absence of interoperability what individuals will have to go through in order to effect payment offnet. They were using the voucher system which was very expensive. The majority of individuals had two or three networks or telephones where if they meet a Vodafone customer, they ask what your telephone number is and what network you are with. Then, they would use their Vodafone network to make a payment to you. In a situation where I do not have any electronic money in my Vodafone wallet, but I have some in my MTN wallet and you only receive Vodafone, it means I need to go and top up my Vodafone wallet before I am able to send funds to you. All these things are things of the past. The fact that we have had 2.2 million transactions in seven months of operation is a clear indication. This first year proves that this was a needed service in the country. We believe that we will triple that particular mark by December 2019. Again, it is being used for transfers as opposed to purchase. We have seen a couple of service providers advertising that you can make payments with your mobile money there. They might have belonged to one network, but all individuals from different networks can also make payments to them because of the interoperability platform. We are creating convenience for payments, virtually creating the universal electronic transfer means, a universal electronic currency, and eliminating friction within the payment system arena. It has been a great success for us. As a result of that success, we have had a number of other countries understudying what we have done and they have asked us to share some of our experiences with them. Some have also written to us wanting to come here and study how we implemented the system in Ghana.

How do you evaluate e-zwich development spreading across the country?

E-zwich is the biometric banking and retail system which we created in the country. It has done tremendously well in serving the government agencies in particular. The e-zwich card is like a current and savings wallet on the card. Every bank subscribes to it. If you have funds on your e-zwich card, because every bank is connected to the e-zwich system, you can go to any bank branch and have access to the funds that reside on your e-zwich card. It is important to note that it is one of the only platforms in the world where you have full interoperability at the bank branch level. If you have a bank account at Barclays and you have a Barclays ATM card, you can go to, for example, Standard Chartered and use their ATM, but you cannot walk into Standard Chartered’s bank branch and give your card to a teller and then withdraw funds from it. We do not have interoperability at the bank branch level. We have interoperability at the ATM, the point of sale, and maybe at the ecommerce platform. But with e-zwich, you have interoperability at the bank branch level as well. This means that if you have been paid on your e-zwich wallet and you are in any part of the country and your bank does not have a branch there, it does not stop you from using it. So, as a result of that, it is becoming an excellent payment instrument for government workers or workers that are scattered all over the country like security workers, National Service, LEAP beneficiaries, government NAPCO initiatives. Zoomlion, for example, if you have a company where you have individuals everywhere in the country, you can pay them and it is all verified. You can eliminate duplications as well. Once they have been paid, they can go, irrespective of where they are, whether their bank branch is present there or not, they can walk into any bank branch and transact. As a result, the cocoa sector has embraced the use of e-zwich. The LBCs receive their funds from the Cocoa Board, they give it to the regional director, then to the purchasing clerk who then purchases the cocoa beans. They travel around the country looking for where cocoa beans are. You do not need to carry money with you, you can have it on your e-zwich card. Anywhere you are, when you find a deal, you go to the nearest bank branch, irrespective of whether it is your bank or not, you withdraw cash, and you make payments to the farmer. We are looking at a case where all farmers purchasing players can have a point of sale device so that they can pay the farmers directly onto their e-zwich card as opposed to withdrawing funds and paying the farmers in cash. The farmers, in turn, can go to a bank branch, withdraw cash and use it when they want it. Or even better, in the future, if all the merchants have a point of sale device, they will transition it. Now, we are going down slowly to find out exactly what the frictions are when it comes to payment: point of sale device, availability of channels, ensuring that the governance structure that surrounds it is there. Those are the things that we are going to work on this year.

Ghana has developed amazingly in terms of the way of paying, flexibility, and yet is not recognized as a major actor, even though there has been a lot of international interest in the e-zwich platform. Why has it not yet arrived here?

Payment systems in Ghana are very advanced but it is not very well known. It is important to note that GhIPSS is the company responsible for the operations of the payment systems in Ghana in collaboration with the banking fraternity, but it is only 11 years old. The majority of the payment systems in the world are very mature. Nigeria is 25 years for example. So, they have been there for a very long time. Within a short time, we have come up and we are now offering a wide range, so it is only now that the name GhIPSS or Ghana’s payment systems are being recognized. Individuals come into the country and are surprised at how advanced our payment systems are. We have had instances where remittance companies in the diaspora outside are looking to integrate their remittance systems to our national payment switch. At the press of a button, they can send money to their loved ones directly onto their e-zwich card, or into their bank account, or into their mobile wallet. Today, how many countries in Africa can boast this? In Ghana, it is happening. Now, most of the remittance companies are saying that they would like to also do the same in other countries. But when they go there, they are not able to because the necessary infrastructure is not there. The national switch could be there, but maybe they only have ATM interoperability. They might not have the instant speed which is a main engine. They might not have mobile money interoperability. They might not have interoperability between mobile money and their bank account, or e-zwich and mobile money, and vice versa. Those are the prerequisites that you need in order for you to connect any engine to in order for you to effect payment. If I have a company in Germany, for example, and I have workers in Ghana and I want to pay them, I can, in collaboration with a bank in Ghana, set up systems in Germany and at the press of a button I can affect funds directly into their bank account or mobile money wallets or e-zwich wallets. It is amazing. This is happening now. MoneyGram is now working with a fintech company with another bank and they are effecting funds directly from worldwide into the Ghanaian mobile wallet and bank accounts. UnityLink is also effecting it into mobile wallet, bank accounts, and e-zwich wallets. The rest of the remittance companies are also embarking on similar journeys.

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