Is Ghana Ready for a Cashless Economy?


4 June 2013

Various economies of the world are moving from the use of cash to a situation where digital  is applied. Is Ghana ready for this new revolution? FRED YAW SARPONG report.

It is getting clear that many countries in the world are switching from doing businesses by using physical cash to a situation where all transactions will be done by digital means. This is mainly common in developed countries and many other developing countries too have started implementing it. Cashless economy is what many call it.

It is an economy without cash, it uses digital money instead, and transactions are made easily. Or a cashless economy is one in which the purchase of goods and services and the payment of debts and remittances are done through electronic money media, (via credit cards, and debit cards, direct transfers from one account to another, visa cards, smart cards, mobile payment systems, and other technologies, etc.). In some years back, cashless society based mainly on barter, gift economics and debt, and then evolved to the use of money. In some countries like United State of America (USA), majority of the people use cards while little as 29% are still with cash. In Australian cash use still at 64% while in UK, cash use is projected to drop to 45% by 2018.

Ghana, as a developing country in West Africa has taken the initiative to introduce a system where businesses can be done without using physical cash. Bank of Ghana, the regulator of the banking industry through Ghana Interbank, Payment and Settlement Systems (GhiPPS) introduced e-zwich card, where Ghanaians will feel comfortable in using the card to transact businesses rather than physical cash.

Even though there has been several effort to educate the masses about the product, the education on this e-zwich have not go well with many Ghanaians. A lot of the citizens as of today do not even know there is something called e-zwich card. With a population more than half of it been illiterate, there must be a thorough education where all Ghanaians will understand and use the platform.

In Ghana, some of the common cards we can identify are such as Sika Card by SSB, Visa Horizon by Standard Chartered Bank (Stored Value cards), deployment of Automated Teller Machines (ATM) and ATM cards by banks eCard (CAL Bank, Ecobank) and among others. Advantages of using these platforms are that it reduces the cost of printing currency notes. It’s also cost less in transporting cash along the value chain from the Central Bank to banks to businesses and consumers.

According to Nigerian Central Bank Governor, Sanusi Lamido Sanusi, direct cost of cash management to the Nigerian banking industry is estimated to be N192 billion (approximately US$1.9 billion by end of 2012). The Central Bank of Nigeria introduced a new policy on cash-based transactions which stipulates a ‘cash handling charge’ on daily cash withdrawals or cash deposits that exceed N500,000 for Individuals and N3,000,000 for Corporate bodies. The new policy on cash-based transactions (withdrawals & deposits) in banks, aims at reducing (Not Eliminating) the amount of physical cash (coins and notes) circulating in the economy, and encouraging more electronic-based transactions (payments for goods, services, transfers, etc.).

It reduces the risks associated with transporting currency notes, both for banks and individuals (robbery, loss from fire or flood, etc.). Survey conducted by MTN Ghana office, indicated that 4 in 10 Ghanaians carrying cash more risky; 6 in 10 during travel and 1 in 10 Ghanaians using informal services had money stolen.

The use of this platform formalising informal transactions; transparency helps combat crime and corruption; record keeping reduces room for tax avoidance (eGhana); increased service options for consumers – accessibility 24/7. The net effect on business and economic growth through e-commerce, promote and enhanced productivity.

One area which stakeholders in the financial sector and for that matter the central bank have not done well at all is the Mobile Money Payment platform. Kenya is perfect example where over 80% of the Kenyans use M-PESA mobile money transfer. Many of the Kenyans are transacting businesses through this platform rather than using physical cash. Mobile Payments are defined as chain of payments that are initiated using mobile handsets and other devices, either to directly purchase or to authorize payment for goods and services. Mobile Payments has the potential to serve these unbanked and underserved segments of the society. Globally, just 37% banks provide some form of mobile banking service.

By the end of 2012, there were over 1 billion mobile banking users, conducting 47 billion transactions annually and generating over US$600 billion worth of financial transactions in the world, according to Ericsson survey.

At a forum recently in Accra to discussed cashless economy, the Managing Director of Ghana Commercial Bank (GCB), Mr. Simon Dornoo said the country will needs about 290,000 Point of Sale (PoS) terminals, valued at US$145 million to  push the country into the arena of a cashless economy. PoS terminals, which have been identified as critical to achieving the objective of e-electronic payments system, are electronic devices that enable customers to make payment to merchants in exchange for goods and services. He stated that a research had shown that globally, leading countries with e-payments system had an average of 2,200 PoS terminals per 100,000 adults.

“How do we finance this investment and what is the appropriate role of each stakeholder in the development of the electronic payments system,” he asked participants at the forum. “The payments infrastructure has expanded and banking systems are now interoperable so the conditions are right to move a lot faster to join those countries that have made significant progress towards this goal.”


Ebenezer Asante, MTN Sales and Distribution Executive recently said in a statement that given the benefits a cashless society affords us, it is important that we continue to do all we can to encourage a cashless economy based on technology. However, there are challenges we must resolve in order to chart a clear path forward.  We must focus on a number of key areas in the short and medium term. Some of these challenges involve policy, infrastructure and others.

Policy — We need clear policies in place that would allow us to follow a structured advance towards achieving the full benefits of a q2cashless economy, including a national policy that encourages more electronic-based transactions, while discouraging physical cash usage and circulation. He said a policy that prescribes a structured approach is a step in the right direction to a well thought-out, properly sequenced cashless economy implementation.

Infrastructure – We need to expand our infrastructure and systems to the point where we are ready for a cashless economy, and electronic transactions are truly ubiquitous and sustainable; so that everyone – retailer, service provider, consumer or business – can have the option to transact electronically regardless of location, or even time. According to him, this means that the technology coverage must be adequate, as well as other supporting structures such as energy availability for consistent connectivity and reduced downtime.

‘This tells us we must have a singular focus on educating people about the full benefits of a cashless economy. The benefits afforded them as well as the benefits afforded the country as a whole.  This is something that must be done by all stakeholders because as a country we all benefit,’ he added.


Perhaps government should consider using its own purchasing power to radically promote cashless payments as a first step. He explained that ‘when we consider the history of money, we realize that what we have today is the result of many years of innovation; innovations that have been in response to the changing needs of mankind and the need to find solutions outside our limitations.’ Comparing centuries ago and now, technology now offers us the opportunity to go back to being a cashless economy, albeit a more efficient one that is not based on barter and gift economics, but allows us fast, safe and convenient transactions.

‘We already carry our phones and our wallets wherever we go; why not use the telephone device and other smart cards as the medium of financial transactions, for the efficiencies we get from the ability to transfer money seamlessly, pay our bills and purchase goods and services without having to carry money around?’


Finally, he stated that Mobile Operators will facilitate each of these transactions directly or indirectly. Mobile Payments actually promotes financial inclusion. It has great potential to reach entirely new segments. Its lower costs make it profitable to serve poorer clients and no physical outlets make it possible to serve more remote clients.

In Ghana instead of the central bank adopt a policy and allow the banks in the country to take the challenge in handle mobile money; the telecom operators rather are championing it. And it has not been effective because only three operators out of six telecom operators are offering the services and there has been no policy direction with regard to these services. Among the six licensed telecom operators in Ghana, it is only MTN Mobile Money, Tigo Cash and Airtel Money are in operation.

With a clear policy in place, this initiative can be link to the rural banks in the country and it will become a nationwide project like M-PESA from Kenya. These platforms provide cash management solution which offers flexibility, total security and convenience of accessing your money on your mobile phone wherever you are. It offers a fledged bank account on your mobile phone which allows you to easily and safely manage your cash in real time.

With some of the platform you can send and receive money safely, pay your utility bills, TV subscription, buy airtime, pay for goods and services and buy a life insurance. They are currently partners with almost all the banks in Ghana. You can get a bank which is connected to one of these platforms. In total over 4.5 million are having services from these operators. The Mobile Money solution is based on Banking Industry security standards. Accounts are password protected, data is encrypted, user authentication is required, authorization is profile specific, and account holder confidentiality is assured. With these platforms, mobile money wallet opening is made to conform to Know Your Customer (KYC) requirements. The wallet will only be opened by Authorized Mobile Money Merchants.

In order to ensure that Mobile Money transfers are secured, a multiple authentication system is employed by the sender to validate a transfer. This involves the use of the Mobile number, transaction number and Personal Identification Number (PIN). The beneficiary will access the transfer with a unique and own profile. To access his/her wallet a user must authenticate that he/she is the account holder by entering a PIN. After consecutively entering wrong PIN three times (seizures of wrong PIN), the wallet is temporarily blocked. Before a subscriber interacts with a customer service officer, the subscriber will be required to identify himself/herself by answering unique authentication questions or by entering PIN on mobile.

Value proposition is based on four Pillars. They are convenience, accessibility, cost-effectiveness and trust. 

Despite all these positives about mobile money platform in Ghana, it challenges are lack of clear regulatory policies; partner banks involvement and support is low; lack education, awareness and acceptance of this mode of banking; most Ghanaians generally do not carry ID’s. This slows down registrations, especially in the rural areas; and limit on transactions.

Looking ahead we need clear policies as a country in place that would allow the operators to follow a structured advance towards achieving the full benefits of a cashless economy. It also needs Central Bank and the Government support in promoting this on relevant platforms. As a country we need to expand our infrastructure and systems to the point where we are ready for a cashless economy, and electronic transactions are truly ubiquitous and sustainable. The initiators and handlers need to be ensure with adequate security to avoid pitfalls i.e. cyber fraud is critical. Cultural resistance and education endorsement from Central Bank and Government will be of help.


Source: Fred Yaw Sarpong