Developing Electronic Payment Systems in Ghana | GhIPSS

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

The Ghana Interbank Payment and Settlement Systems (GhIPSS) is a subsidiary of the Bank of Ghana and was set up in 2007. Please briefly describe your mandate and institutional role in Ghanaian finance sector.

GhIPSS was set up with a mandate to implement and manage interoperable payment system infrastructure for banks and non-bank financial institutions in Ghana. Before the inception of GhIPSS, there was no interoperability between banks in Ghana, this means that if you were with Bank A it was virtually impossible to make transfers to a customer who banked with Bank B. Again, majority of the banks were around the main cities such as Accra and Kumasi, but that didn’t necessarily mean that banking services were not needed in other areas. So GhIPSS had that additional responsible to bank the unbanked.

At the time that we were set up, there was roughly 85% unbanked population in this country and the majority of transactions were done in cash as opposed to electronic transactions. Thus GhIPSS was set up to address all of these shortfalls that existed in the country then.

We are now in 2015 so brief us on what you have accomplished.

In terms of progress, the first product that we came out with was e-zwich, which is a banking and retail application that all banks were asked to subscribe to. It was actually chosen for specific reasons: one is its bio-metric nature. We are in a country where meeting the requirements to satisfy KYC was difficult: you may have an electricity bill but it might not be in your name for example and if you give your driver’s licence there is no way to know where you live etc. It was difficult to confirm someone’s true details beyond reasonable doubt. Thus we decided to go the biometric way.

Then also compared to getting an e-zwich card, it takes time to open a bank account in Ghana; in some cases you need to know someone in the banking arena. However with the e-zwich system it takes just 5 or 10 minutes. You go to a bank of your choice, give them your legal ID: either your passport, driver’s licence or a voter´s ID, and you can start the process of getting a card. Each fingerprint is taken thrice and stored on the e-zwich card and then you have a fully-fledged bank account that you can start operating without enduring the laborious process of opening a typical traditional bank account.

We have also introduced the cheque clearing system.

It was a system that was introduced to encourage financial inclusion. Apart from being bio-metric, it also works offline. We live in a country where we have challenges with our telecommunications as well as our electricity. The e-zwich system is not solely reliant on being online. Once you have loaded your card, you can go to a merchant location and you can transact offline but if the merchant wants to settle straight away they will need online activity.

Apart from encouraging banking, we also use this system for salary payments. This is a country where we have individual salaries that are sometimes bloated, whether it is in the government sector or whatever. If you use this system for salary payment, it is impossible to duplicate a salary. Thus it is also being used to weed out duplications in salaries.

I believe that in 7 or so years we have issued well over a million cards. The usage rate is increasing because it is now becoming the de facto card for certain organisations to receive their payments.

We are looking at other products that we can add to it. The latest one we will be introducing the ability for individuals to receive international remittances directly onto their e-zwich card. Currently you are given a pin code and you sometimes have to go to a designated location to receive funds that have been sent to you from the diaspora. We are now finalising a system that is linked to the e-zwich system whereby if I am in London and I want to send someone some funds I can ask them for their e-zwich card number and the funds will be sent directly onto that card. All one needs to do afterwards is to go to a bank of their choice to have access to those funds. Furthermore we know beyond reasonable doubt that no one else can have access to these funds apart from you because the authentication is done biometrically.

One other great advantage of the e-zwich card is that in most card systems, to use Visa as an example, you can use an ATM of Bank A, B or C etc. if they all accept Visa, however if you are with Bank A you can’t go to Bank B’s office or bank branch and transact there. With the e-zwich card however you are able to do this. This means that you have interbank operability not just at the ATM but also at the bank branches. This makes it very convenient and very appropriate for countries that do not have enough bank branches.

We have also introduced the cheque clearing system. When we started, cheques were physically sent to the Central Bank before they were exchanged and cleared. Depending on where the cheque was coming from it took between 3 days to 2 weeks to clear. Currently in Ghana, irrespective of where you are, cheques are now cleared with a next day service for standard or same-day for Express service. We also have the automated clearing house for direct credit which is good for salary payments. It works very much like the cheque system but in this case it is electronic files appropriate for salary payments. Without this system the situation is very different; for example if you work for an employer who banks with Bank A and you also save with Bank A, then come pay day, you will receive your salary that very same day. However if you are with Bank B, C or D then the payment will be settled according to an arrangement between Bank A and yours; that will determine when you will receive your salary. We have had instances where salaries were delayed for as long as two weeks. With the invention of the direct credit, everybody irrespective of the financial institution that their employer uses can receive their salaries at the same time. It is being used by a lot of employers for salary payment as well as business to business payments. We have also introduced direct debit into the system for repetitive payments. Before that, we had standing orders where you have a company that receives payments from individuals but because there was no link between the banks, the company would have a direct debit mandate for every bank in the country, which means having bank accounts with all the banks in Ghana. Now, insurance companies and utility companies have the option of saving or banking with one bank and having a mandate that can be used by all, irrespective of the bank used. This is creating convenience for giving out payments and receiving payments.

The latest addition now, is the gh-link; it is the most recent product that we have launched. The idea is to create inter-operability for local card holders. Before this, if you were a local card holder in Ghana, you could only have access to your own bank’s ATM. Currently all local card holders can use all ATMs in the country and also shop with their cards on the gh-link hybrid POS. We now have more convenience than any other card in the country. We are also about to launch the internet payment gateway that will allow local card holders to make payments for goods and services online locally. We believe that when that is launched around late August, it will also encourage individuals to opt for the local card because now they can make payments online. We have a whole range of online services in Ghana but they don’t have any mechanism to make payments, most of them have bespoke arrangements with the banks in the country whereby when you shop online you physically have to go to a bank branch to make the payment with special codes etc. Once we go live, you will be able to shop with any of the local airlines, hotels, restaurants; you name it, and make payments online. We are also looking at modernising our retail payments to include real-time interbank payments whereby you can send funds to someone from a different bank and they can receive those funds from an ATM of another different bank instantly. These are some of the remarkable things that we have done. By the end of August all of these services will be up and running.

You touched upon the vision of GhIPSS, which is to move Ghana towards an electronic banking society. GhIPSS has an important role to play in educating the public. How do you encourage Ghanains to use ATM cards as a form of payment instead of cash?

We have two visions actually. One is to encourage banking and the other is to encourage electronic transactions. How do we encourage people to use this system? Firstly, we do this by creating convenience for people. Once you have a bank account card or an ATM card you are able to transact. One of the issues with the ATM card is that you might have one but if you don’t have access channels or places to use the card then there is a real problem. That is one of the main reasons most people didn’t find the ATM card useful. Thus by linking all of the banks’ ATMs and creating the interoperable environment which I cited earlier we encourage individuals, so that irrespective of where you live or what bank you use, you no longer have to look for your own bank’s ATM. Secondly, one of the issues that most people who use ATM cards are concerned about is charge back. If things should go wrong, how quickly will I have access to the funds that I have lost? For example, in cases when in the course of a transaction the ATM machine is not able to give the funds even though it registers that the transaction was successful, these instances go through a dispute resolution. We have created an internal system within all of the banks where we can resolve these issues in the country within ten days. These are some of the things that are encouraging individuals to actually opt for this kind of banking.

If you look at card fraud, the majority is associated with cards that can be used from outside of the country; most of it is not from within the country. The local card is an advantage as opposed to international cards. We know that card fraud cannot be eliminated but we have put in measures to reduce it drastically. We are looking at the possibility of encouraging all banks to migrate from max stripe to chip and pin which is a safer card option. In the case of internet payments we are also introducing a secure payment that is verified by GhIPSS, whereby every local card will be registered with us. It is similar to “Verified by Visa” etc. but we have our own version. This will make the cards very safe; we will ensure that the card holder is actually the person who is making the online payment.

One way of encouraging ATM card usage as opposed to using cash is to make the use of cards more convenient and safer. We are trying to create convenience so you can go to any ATM. We have instances where individuals still go to their bank’s ATM, check their balance and then walk into the banking hall to withdraw funds. When they go there they ask for a specific teller and if that teller has gone out for 5 minutes they are quite happy to wait because they want to sit down and chat etc. So we do have some change management that we have to take into consideration. Providing the technology is one thing, but there is a whole change management area as well that we need to look at. We hope that education and promotions etc. will address those issues.

To conclude, could you tell us about your medium term strategy? You have already mentioned the internet gateway and public education but what other products would you like to introduce in the future?

In terms of products, when you look at the spectrum of products that we have, and compare it to similar establishments in other countries, I believe we have a very large bouquet of suites and systems and products and services at GhIPSS. What we have left to do now is to increase adoption. That is what we are really going to focus on in the medium term whilst ensuring availability and ensuring that transactions are carried out in a secure mode to ensure that the number of people who have bad experiences is minimal.

Promotion and education are our goals. Promotion in the media by looking at the benefits of transacting is an area that we want to concentrate on.

Also, in most payment systems the government are your main customers or users so we want to work more closely with the government to ensure that their modes of payments and payment receipt are all converted to utilising our systems. In so doing we would achieve a critical mass that would then with time become the norm in the country. That is what we are focusing on in the medium term whilst keeping an eye on the operational side of things.
I believe that when it comes to the systems side, we are 80% there. The processes and keeping up with international standards etc. are there. Currently we are also ISO certified so we are in touch when it comes to system deployment. When it comes to usage and education, and the reasons for change, these areas need to be worked on all the way from government to businesses and even the financial institutions.

There is also a need for us to improve the IT skills and knowledge in the country because although the system is available in the centre, most financial institutions as well as industry players will have to change their systems to integrate with ours. Most of them do not have the required skills to perform these functions. I only wish that we had a whole host of IT companies spring up in the country so that integration would be easier for us. The lack of such competence and skills tends to elongate the time to market in the country at the moment. One of the key things that we have for the electronic based transactions is a switch and host application; none of these are Ghanaian based; they are all foreign bought. The companies are not even in Ghana, so for any upgrade or changes to be made we have to invite them to come here and perform the changes, which tends to add costs. Maybe we need companies here to partner with them so that we can have a local presence at least to begin with before we start to develop switches and all the other necessary things ourselves. The IT knowledge is really necessary to support everything that we are doing. In this way the costs would decrease and the time to react and to go to the market would also reduce. There are times when you have a service that is wanted, but if it takes a year or so before it comes, most people lose interest. I have personally spoken about some development work that we will be going live with and the go live date has had to be moved a number of times because of some of the constraints that I have mentioned here. So in the medium term these are things we have to look at. We want to work more with the government, businesses, and individuals, as well as IT establishments and universities to ensure that these things all come together. It is a whole ecosystem.

With regards to the internet gateways, you recently noted that the local businesses have to, first of all, upgrade their websites.

Precisely. This is exactly what I am talking about. Most merchants at the moment are not internet merchants. In order for merchants to have internet sales, there needs to be a lot of IT companies or web designers that can put these merchants onto the web and also update them as frequently as possible within an affordable system so that merchants can have their services advertised on the web. That would really help the situation. There may be some individuals in the diaspora who say they will do it for next to nothing but here it is quite costly, therefore it tends to slow things down quite a bit. That’s why I wish that we can partner more with the universities specialised in ICT to find relevance in that field. We as an institution, take on an annual basis national service, where people come to us and spend a year working with us to familiarise themselves with the products and services that we offer. A significant number of them end up gaining employment in the financial sector. Once you have been with us and you are working for Bank B or A, you then become a sort of mediator between us and that bank. It tends to help us and so it is something that we really encourage. We wish we could do more.

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