The tremendous popularity and consequent growth of mobile money in Ghana may be coming to an end as Ecobank introduces two new products that could make mobile money obsolete. TOMA IMIRHE examines the new products, their implications for mobile money and what Ghana’s banking industry will do next to completely win back the rapidly growing market for mobile cash transfers and payments.
Even as Ghana’s banks have leveraged a combination of technological advancement and the increasing sophistication of the banking public to introduce digital banking as their replacement for cumbersome and physically inconvenient cash based financial transactions, their counterparts in the mobile telecommunications industry have all but trumped them at the lower, more basic end of the market with their own offer of mobile money services. Thus while virtually all of the country’s 34 banks are struggling frantically to outdo each other with regards to e-banking products and services that do anything and everything from allowing customers to transfer monies to each other to enabling them pay for goods and services with smart cards at up market retail outlets, they have all been thoroughly outdone by four of Ghana’s six mobile telecoms network operators who not only allow people to transfer monies between each other through their mobile phones but also let them give themselves and third parties actual cash, available on nearly every street in urban Ghana and lots of places in remote areas too, some of which the banks do not even know exist.
The result is that both the number and the value of mobile money transactions are growing at several times the pace of both traditional and electronic (digital) banking transactions, much to the banks’ chagrin. Instructively, a survey conducted by PriceWater House Coopers last year revealed that 57% of bank chieftains in Ghana regarded mobile money as a clear and present danger to the fortunes of the banks they lead.
All this is not just about to change though – it already has started to change as Ecobank leads a charge that looks inevitably set to restore the banks as the most popular and busiest providers of mobile electronic payments and funds transfers. Indeed, Ecobank Ghana may just have sounded the death knell for what has been the most phenomenally growing financial service in Ghana’s history.
Mobile money was introduced into Ghana by MTN in 2009 and which remains the dominant service provider despite competition from Tigo, Airtel and most lately Vodafone since then. In 2015 mobile money transactions worth GHc35.4 billion were carried out in Ghana, this being more than three times higher than the GHc11.2 billion worth during the previous year. Altogether there were 216 million mobile money transactions in 2015.
Although complete statistics for the whole of 2016 are not yet available, it is evident that the growth in mobile money usage has continued unabated. During the first quarter of 2016, transaction value amounted to GHc13.76 billion, well more than twice the GHc5.94 billion recorded in the corresponding period of the previous year. Instructively, for the whole of 2016, MTN which is still far and away the dominant service provider, claims it executed GHc56 billion in mobile money transactions on behalf of 8.5 billion subscribers. Instructively, this is about three times the number of people with bank accounts in the country.
Banks have been hard put to grow their respective retail customer bases for money transfers and payments by anywhere near this. Until now.
The basic problem, apart from the relative complexity of the mobile financial apps offered by banks, has been that between them they have less than 1,000 ATMs where customers can turn their electronic money holdings into cash whereas the telecom companies that offer mobile money services between them have nearly 8,000 active agents that perform this purpose. Customers of digital banking face similar constraints in actually paying for goods and services directly from their electronic wallets since the point of sales (PoS) devices required for this are so expensive – a typical PoS device costs up to US$300 – that only up-market merchant outlets can afford to install them.
Since late last year however, Ecobank Ghana has been working with eminent success at solving these problems and the country’s entire banking industry now stands to benefit from that bank’s ingenuity.
Ecobank’s solution comes in the form of two new products, which, when used in tandem offer a service that mobile money simply will not be able to match, even for the lowest market segments.
One of them is its Ecobank Initial QR Code, otherwise known simply as mVisa or Master Pass. This is an app that can be downloaded onto one’s mobile phone (whether smart phone or indeed the older, cheaper types) which enables the user pay for goods and services at merchant outlets, but which does not require a PoS device. Rather, all the merchant needs is an e-token – a code that looks like an ordinary diagram, printed on an ordinary sheet of paper. The customer simply scans the paper with his or her phone, which results in the payment being okayed as long as the customer has the funds to pay in his or her bank account. Importantly, customers of banks other than Ecobank can use the system too as long as they have a Visa card, MasterCard or Union Pay International Card sufficiently loaded or connected to an account in any bank anywhere in the world with sufficient funds for the transaction.
By eliminating the need for a PoS device, any one selling a product or service can afford to connect to the system and accept payment through the platform – the cost of obtaining the printed token is about GHc1 or less. Indeed, even taxi drivers, roadside sellers and the likes are signing up say Ecobank chieftans.
Importantly, Ecobank is now arranging to sign up thousands of agents, including all the major petrol stations and lots of shops and other retail outlets, who will perform the same service that mobile money agents do, by performing cash in and cash out duties. When that process is completed, expectedly before the end of this year, people will be able to convert their electronic money holdings to cash at any of those agencies just like with the mobile money services.
For now electronic payments accruing to merchants go directly into their Ecobank accounts; very soon they will be able to get cash at the closest nearby agency. Similarly, customers themselves either need an Ecobank account themselves or if they are using an account with any other bank anywhere around the world, they require one of the three aforementioned debit cards, the securing of which could be a bother itself.
To get around this problem, Ecobank has put its ingenuity to further use: the other of its two innovative products is called the Ecobank Express Account which is a normal bank account but which is opened simply by using one’s phone and the already registered SIM card it runs on. Here Ecobank has been able to convince the Bank of Ghana that if SIM card registration satisfies its know your customer (KYC) requirements for mobile money transactions it should be the same for bank account opening. Now therefore customers can open a bank account with Ecobank with one simple phone call.
Instructively, the sheer simplicity of this, added to the benefits of having an Ecobank account for users of the bank’s MasterPass payments app (whether as a merchant or as a purchasing customer) has resulted in some 120,000 new bank accounts being opened with the bank by phone since the system was introduced in November last year. Indeed this is one reason by Ecobank passed up on the opportunity to acquire selected assets and all the liabilities of UT Bank and Capital Bank when given the chance by BoG recently, an opportunity taken up subsequently by GCB Bank, its closest rival adjudged by size; the bank simply decided that it can obtain all the growth it wants in customer base and consequent business volumes from its new products.
Expect this growth to accelerate phenomenally going forward – and at the expense of the now severely threatened mobile market service industry – for several reasons.
The key one is that as other banks develop similar platforms – which they certainly will now that Ecobank has shown them the way – there will sooner than later be more merchants willing to use this platform than those willing to accept mobile money as a mode of payment, especially if MTN puts impediments in the way of the impending interoperability of mobile money systems in order to defend its currently overwhelmingly dominant market share as many analysts suspect it may try to do, at the initial stages at least.
Secondly, the service charges demanded by Ecobank – and all its eventually emergent bank competitors – are much lower than the 1% to 2% currently charged by the mobile money operators.
Thirdly, Ecobank’s new platform, which will serve as the model for emergent competing ones, link the customer’s electronic mobile wallet directly to the customer’s bank account. This means customers will not be subject to the daily value limit for transactions set by BoG regulations (currently GHc2.000 for wallet holders and GHc500 for non wallet holders) that customers of mobile money services offered by the telecom networks are subjected to, nor the account balance limit of GHc10,000.
All that is left now for mobile money services offered by the telecom operators to become uncompetitive is for Ecobank, and the other banks that will sooner than later follow suit in offering these new products, to secure a network of cash out agents to add to their ATMs as a channel for customers to convert their electronic money holdings into cash. With Ecobank hoping to have done this by the end of this year, and other banks now looking up at Ecobank with grateful, but envious eyes, that may not be far off.
Source: Toma Imirhe || Businessweek