GhIPSS: The Infrastructure Provider for the Financial Services Community in Ghana

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

How does the system work in Africa compared to other countries? How does the Central Bank deal with your role?

The common trend with national payment system infrastructures is that they are cooperatively owned by financial institutions in a country. In some cases, the Central Bank shares the ownership with a small stake. In Ghana’s particular case, when the idea of a national infrastructure was mooted, the banks did not buy into it straight away. So, the Central Bank decided to go ahead and then bring the banks in when the time was right. Now, the national payment system infrastructure in Ghana is owned 100% by the Central Bank. Today, the interest of banks in owning a stake in GhIPSS is at an all-time high. About two years ago, GhIPSS started a process which will eventually lead to joint ownership of the company by banks and the Central Bank. the preferred model is to have majority shares owned by banks and to a lesser extent by the Central Bank. For example, in England, Vocalink is now owned by MasterCard, which is purely a private company. So you can see that generally, it is either exclusive ownership by banks or a combination of banks owning majority shares and the Central Bank owning about 5 to 10% of the company.

What will be the advantage for Ghana with the commercial banks starting to join the system?

For any project or task that we undertake as GhIPSS, we first ask ourselves if it will help individuals and corporate institutions to do better banking and if it was going to promote electronic use of money.

One of the key advantages is vested interest. If the national switch is owned by the banks, it presupposes that they are represented at the Board level. So they will be part of decision making on the direction of the company and the various services it should provide. When that happens, ownership and adoption of products and services is easier. At the moment, banks’ representation on the GhIPSS board is through the president of the Ghana Association of Bankers who has the unenviable task of getting the buy-in of members on board decisions. The model is that when it is owned by the banks it is easier and supports adoption. That is the path we would like to pursue with the blessing of our owners. I am very optimistic in the not-too-distant future this will become a reality.

What are your main objectives?

Our role as the national switch has two main objectives. The first is to implement and manage the technology infrastructure that supports banking and payments in the country. An infrastructure that gives Ghanaians equal opportunity to participate in the banking system. The more people are able to participate in the banking system, the more deposits financial institutions are able to mobilise, particularly from the informal sector where cash is held outside the banking system. If funds reside outside the banking system, government will not have enough funds to embark on big ticket projects for example. To put it simply, if you have a country that has 1,000 cedis in circulation but only 100 cedis reside in the banking system, it means that if the government wants to borrow money or to do anything, it can only access the 100 cedis.

So the first objective is to bank the unbanked and bring about financial inclusion through providing the technology infrastructure. The second objective is to promote electronic or cashless transactions by making sure that the requisite infrastructure for the exchange of electronic value is in place. For a country like Ghana, we use a huge amount of foreign currency to pay for printing of our own cedi notes. We do not print them here. The amount of money that we spend to maintain them and to decommission them is also huge. Considering the environment in which these notes are handled and used , the replenishment cycle is very short. We spend a huge amount of our foreign money as well as our local money to maintain them. Then, we must distribute them as well. We have to go through the various regions, the hinterlands, with bullion vans, with armed police, and all these things cost money. If you add all these costs together, it amounts to millions. Can you imagine a situation where the majority of our transactions were done in the electronic mode? It means that all that money will be savings that can be used to support education, agriculture, health, the police, the army, etc. It is important for us to save on the cost and the money that we spend as a country on transacting. An institution like ours is vital to the economic development of the country. A country that intends to embark on major development programs without an effective and efficient payment system is not serious. If you want to embark on big ticket projects, and all your funds reside outside the banking sector, it does not make sense. For any project or task that we undertake as GhIPSS, we first ask ourselves if it will help individuals and corporate institutions to do better banking and if it was going to promote electronic use of money.That is why we work in partnership with financial institutions, because we do not have a banking license. We are an infrastructure provider for the entire financial services community.

What are the specific services that you provide?

Our first product was e-zwich, which is a banking and retail system based on biometric authentication. We found that the reason why most people did not have bank accounts in this country was because account opening requirements were bureaucratic and very cumbersome so, most people just did not bother. With the e-zwich biometric card system, all you need is a legal ID,either driver’s license, a passport, voter ID, or national ID as the case will be very soon. They will ask you a couple of questions and take all your fingerprints which then get stored on your card, and then you have a full-fledged bank account, on the card. Issuance is instant, so you can start transacting and banking services right away. This was a platform that was created for all banks. All the banks in Ghana have their own branded e-zwich card for individuals who belong to those banks. Funds held on the card reside in the bank that issued it. That was the first platform we put in place and has been working very well over the years, looking at the number of individuals with e-zwich bank accounts. It also comes with a payment distribution system where you can disburse funds directly onto the card, or because they can be linked to traditional bank accounts as well, you can split funds paid to the card between the card and the traditional bank account. The biometric data collected at registration also allows us to provide a biometric search service which is able to eliminate duplicate payments. Apart from e-zwich we also provide services such as electronic clearing of cheques known as Cheque Codeline Clearing – CCC, ACH Direct Credit and Direct Debit transfers. We have the Interbank ATM, POS and e-commerce transaction switching, clearing and settlement services.

The implementation of the cheque codeline clearing with cheque truncation was a move to modernize our cheque clearing system. Before that time, major banks were taking physical cheques to the Central Bank in suitcases and physically exchanging them. A cheque in Accra would typically take about three days to clear. Cheques from other regions of the country would take between three to seven days. I am happy to say that we have since moved to cheque truncation where you present a cheque at your branch, it is scanned, then transmitted electronically to GhIPSS, and then onward to the paying bank. We have two services: express which is same day and standard which is next day. We also have the ACH direct credit for electronic funds transfer. I can send requests electronically to my bank to debit my account and then credit a beneficiary, either an individual P2P, or P2B, customers, salaries, etc, and these funds would be lodged directly into their bank accounts. We also have the ACH direct debit for repetitive payments, either a fixed or variable amount, and this is being used mainly by the utility companies and the insurance companies in the country. These are payments that in the past would have been done by cash that are now being done electronically.

We also have the interbank switching, clearing and settlement service known as gh-link™ which currently serves domestic white label cards issued by financial institutions in the country. It is not MasterCard or Visa, but propriety cards issued by banks. We have linked banks’ systems together, so their customers are able to use each other’s ATMs. We started this service with magnetic stripe cards but are currently transitioning to EMV. The whole world is moving toward EMV which we have aligned to with our own gh-link EMV published standard for issuing cards. Banks have started the migration and some have started issuing them to customers. Soon, everyone in Ghana will have their own local card which is EMV compliant and compatible with all ATMs and POSs in the country. We also have an internet payment gateway to drive our domestic e-commerce business. So domestic businesses connected to our gateway via their websites can accept online payment from domestic cards. We provide these cards with a second layer authentication service brand named gh-secure which is our variant of the 3D secure technology like verified by Visa.

Recently the world is gravitating towards instant payments.. Our latest product which is the GhIPSS INSTANT PAY (GIP), is an instant interbank account-to-account transfer service which guarantees transfers between accounts in different banks in under a minute. After enabling their core systems to send and receive instant transfers, banks are busy working on front ends for the variety of devices available to customers to initiate instant transfers. With instant transfers in place, our next move is to leverage it for electronic bill presentment and payments – eBillsPay for large corporates which currently operate the ‘cash and carry’ model with their wholesalers.

We are also working with remittance companies in the diaspora, such as UnityLink, MoneyGram, Ria, etc., who are exploring ways of putting remittances directly into beneficiary bank accounts. With inbound remittance, typically what happens is you are given a code and then you go to designated banks and you are paid cash. But now, we are facilitating an integration with our GIP engine so that they can effect payment directly into beneficiaries’ accounts or onto their e-zwich wallet. Once we complete the mobile money interoperability project which we have been tasked with, the third leg will also be possible, whereby they can remit directly into individuals’ mobile money wallets. Most of the interoperable systems in the world of mobile money have not been achieved at the platform level, but that is our target to have a fully centralized mobile money interoperable switch. This means that MTN can talk to AirtelTigo, who can talk to Vodafone and vice versa. We are not stopping there. We are also linking mobile money with bank accounts and then bank accounts to the e-zwich wallet system. We will then have a full triangle operating. E-zwich will be able to talk to mobile money, so you can move funds between your e-zwich wallet and all mobile money wallets and can also move funds between your e-zwich wallet and bank account, bank account and mobile money wallet and bank account and e-zwich wallet. Thirdly, with the mobile money wallet, e-zwich wallet, and bank accounts, we have the full financial inclusion triangle. Irrespective of where you are in the country, you are not limited by the form in which your money is. Once we have launched, in a month or two’s time, we will have accomplished most of our technological developments.

Our energies will then be focused on creating a nationwide acceptance network for cards, mobile money and all forms of electronic payments. We will be encouraging merchants to get POS devices, so customers can use their cards directly to shop instead of going to the ATM to withdraw cash. Individuals will be able to shop directly off their mobile money and e-zwich wallets, rather than going to agents to redeem cash. We will do away with cash payments, establish some governance structure around it, and make sure we meet periodically to move the development forward. The EMV environment is also now moving to biometric. On the whole, we will have the entire range of payment system services that when fully deployed and used, will significantly reduce our reliance on cash as a country. The savings that is made can then be used for other things in the country. Hopefully, with all of this, you know that once you need money or access to your funds, you can have that access and it is therefore safer to have your funds in the bank.

Are you trying to get more organizations to use this system?

With e-zwich, one of the original goals was for all government employees, agents, and entities to be paid using this platform and to use the e-zwich system as a matter of course. We have not fully achieved that yet, but I am happy to say a lot more organisations are adopting the system for payments. We have a growing clientele from the cocoa sector where Licensed Buying Companies (LBCs) want to adopt it for cocoa purchases due to issues associated with cash purchase. One unique attribute of the e-zwich system is that it is fully interoperable at the terminal level and also at the branch level. Irrespective of the issuer of the card, an e-zwich card holder can perform any banking transaction with the card at the branch of any other bank. Due to the level of security based on biometrics we have not had any impersonation fraud related incident since inception. If it is not your fingerprint, you will not have access to the card. It is one of the safest cards in the country.

We are also working through FIs and also directly with companies to move bulk payments to bank accounts such as salaries to ACH direct credit which deposits funds directly into bank accounts electronically, rather than manually writing individual cheques. We are also working to develop the ACH direct debit service which has a huge potential to transform the repetitive payments business through engagement with key stakeholders such as the Central Bank, banks, insurance, hire purchase, utility and lending institutions.

As I said earlier, Instant payments is the future and GhIPSS is partnering FIs, Fintechs and MTOs to deliver the value of immediacy of payments to a wide range of customer segments.

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