Interview with Kojo Choi, Chairman and CEO of PaySwitch

What is your assessment of the sector in Ghana? What are the latest trends?

Many times, Ghana has jumped from one technology to another without the need to introduce an intermediary technology. For example, we never had a beeper or pager in this country, there was a straight introduction of cell phones. In the same manner, Ghana’s business economy is already dominated by mobile money and is going totally digital now. The government’s policy is to achieve a cashless economy. Such solutions and technology have been very fast changing and grasped at the same time.

Does Ghana stand out compared to other countries?

If you are looking at playing as a regional player, then you have to open up and invite more partners to come and take part. It is dynamic and we are open for discussions.

Tanzania and Kenya were previously leading in terms of searching out new technology backed by mobile payments. Ghana has now chased that and is doing better because Ghana has achieved a mobile money interoperability at the national level. It gives a better platform for all users to use and engage such services, irrespective of the networks they belong to. The challenge has been that the foreign card networks, such as VISA and MasterCard, were not being used much in Ghana because costs were high and ways to deploy the services were missing. About 90% of the banks in Ghana today engage third-party processers sitting outside Ghana which means that for all the VISA and MasterCards issued by those third-party processors, when they transact business, it gets processed and settled outside Ghana. In the same way of acquiring POS terminals, it is also provided by foreign third-party processors that are being processed outside Ghana. In Ghana and Africa in general, we are lacking in credit. One of the biggest criteria for forming credit comes from your purchase history. However, all that vital information of your purchase history does not end up staying in Ghana. It becomes very expensive as well. We saw many years ago the necessity for this industry.

The data is processed outside the country, but do the banks have access to this data?

They may ask, but at the end of the day, you need a centralized data pool that is not segmented data from one bank and another that is pulled in and can only produce segmented results of that data. What you need is complete data that is real time and does not need to be added and subtracted for different reasons. Those segmented areas bring a lot more risk in terms of fraud. The banks that operate fraud systems work only on the data they have. The moment that card leaves that bank’s domain and goes to the other bank, the first solution does not work on that card. There is a need for that centralized point so that both people’s money and data are protected.

What do you offer?

Primarily, we are the missing link which is being a processor. So, we handle both the issuing side and the acquiring side. On the issuing side, we issue cards, both foreign and local, and provide that to the banks and to savings and loans companies. Processing comes with acquiring services so we provide the banks with POS terminals. The benefit of this is that such transactions are no longer processed outside the country but locally. That is what we do primarily as a local processor. Additionally, we have built our own solutions, such as payment gateways. There could be so many different payment aggregators in the market and all these different payment aggregators have developed their platform themselves or they went to a platform service provider. We make anybody become an aggregator on any given day. We provide that payment gateway as a white label product. We provide this to both banks and companies that use our gateway, so individual merchants can now make and receive payments digitally through our platform. We have also created a marketplace similar to Alibaba. The merchants that want to be listed on this marketplace can list making it easier for the customers to search in this marketplace to better locate the merchant. We enable that payment for them. Currently, our switch is connected to VISA and MasterCards. We are in the process of connecting to pay cards in China. It is also connected to the telcos and the banks through the national switch, GhIPSS (Ghana Interbank Payment and Settlement Systems Limited), enabling 360-degree transactions through our switch. We also offer QR Code services. We actually have deployed our own physical POS application by ourselves, so we do not have to pay anyone to deploy them. On our physical POS, it acquires not only the physical cards but mobile money as well. But we realize that not everybody can afford POS so we have developed MPOS which is much cheaper and takes the e-commerce line, but that might still become expensive looking at the market which has no such infrastructure at all. We have various different products for the needs of the market.

Why has nothing like this been done before in Ghana?

Business like this requires a huge investment. Investment is not the only resource, actually it is the least resource in this industry. Technical know-how and understanding the business is the most important thing. For understanding the business and having the money to do it, we need about another three years just to go through the certification processes. No one will want to invest millions of dollars not knowing whether we will go through the certification process or whether the banks and the economy will use the service as well. People are not encouraged to go into this business.

Which state of development are you in now?

As a processor, we have completed the certification processes which means we have all the infrastructure in place. We have completed issuance of our VISA cards for a local national bank called Agricultural Development Bank. Also, with the same bank, we have completed POS acquiring terminals on the e-commerce side. We are currently in the process of issuing MasterCards for a bank called Access Bank. That shows our readiness and our capacity in this switching industry. In e-commerce, we have signed up over 100 merchants, some very big and some very small, some brought by the banks for us to provide them with services, some who came directly. For example, Melcom, which is the biggest shopping arcade in Ghana, currently uses our POS and e-commerce platform. Ghacem, which is a cement manufacturing company, uses our service. For companies who come from Nigeria for example, the same processes and aggregators in Nigeria having the need to process their clients for the need of the Ghanaian market come to us and integrate with us. It is not only local, it is becoming regional as well.

What is your international reach?

At the moment, Ghana has been our focus market. But, switching business does not restrict you in terms of geographical boundaries. Our intention was to become a regional player starting from West Africa. Excluding Nigeria, from Benin all the way to Senegal and Mauritania, we are the only third-party processor today. So, having that leveraging power in terms of speed, we are posed to go into those markets as quickly as possible. But Nigeria appears to be right next to us and Ghana and Nigeria share a lot in common. We are not there physically, but we are there through those interested parties who need our services.

Which area is the main source of revenue for you and what will be in the future?

It depends. As a processor, the more cards that we issue, and as the cards get used in the market, as we process them, we collect a fee. The POS, as they acquire more, we get a fee in that processing bit of the acquiring side. On the e-commerce and the payment aggregation side of it, where people basically end up using their mobile phone and their laptop to transact business, we have a share there as well. Another product that we have is our own proprietary card called TELA Card. Instead of using VISA or MasterCard, we can issue you a local card and we can waive many extra charges because we own the network. Maintaining and running that network is also a revenue stream for us. The question is which one will attract more and that depends on the market response to this. Some people say cards will not exist or just a handful will exist in the next ten years. Then, we are talking more on the e-commerce side and the acquiring side that will end up making more money. But if the card still does exist and people keep using it, we may make a lot more revenue from the transaction of the cards because we process all this across the board. It all depends on the customer pace and the trends in the market.

Are you looking for partnerships or investment?

I was taught that every businessman should open himself to every possible option. If you are looking at only Ghana, maybe you can just concentrate on what you are doing and continue with your strategy. If you are looking at playing as a regional player, then you have to open up and invite more partners to come and take part. It is dynamic and we are open for discussions.

What is your vision for the company in three years’ time?

When we first conceived this dream, we believed that the moment we set up the switch and proved to ourselves that we were able to do what people think is impossible, the banks would run after us because it is cheaper and more convenient. But people find it difficult to switch from their old way of doing things. So, my vision three years ago compared to what I have come to experience in these last three years has made me a lot more conservative. In the next three years, we want to introduce at least one of the services, out of which we have about five different products and services, and have at least one become the market leader which cannot be shaken and have the rest of them be competing fairly well. Because of our technology backbone, once given the opportunity and once people understand what we do, we stand a better chance of winning. If it were for just making profit, we would not have ventured into this because it comes with so many different restrictions, certifications, and unknown factors. Our ultimate goal and the reason why we started this journey is helping the African economy, not only Ghana, and equipping them with possible factors and elements that will create credit in the market. I originally come from South Korea. I have naturalized as a Ghanaian. South Korea improved and they developed by the power of credit and America and Europe have all developed through the use of credit. The government is trying to increase the GDP with whatever policies they can formulate, but once credit is introduced in this market, no matter how small, to every individual and company, that small credit will double and triple the GDP in no time. We want to be used in equipping such credit one day. It is ambitious, but really, that has been the core.

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