GHANA:4 Ways mobile money is threatening banks

The fast penetration of mobile money service is threatening the use of banks as the choice for transferring small amounts of money within the country, a new study has revealed.

The finding supports figures from the Bank of Ghana which suggest that the total value and volume of mobile money transactions have outstripped all other non-cash transactions, except cheques, with total mobile money float balances at the end of June this year reaching about GH¢680 million ($172 million), compared to about GH¢341 million over the same period last year. 

Registered agents also reached 108,000 within the period, compared to about 36,000 for the same period last year, confirming the growing acceptance of mobile money across the country and contributing to banks losing their lustre as the preference to domestic funds transfers.

The number of mobile money (MM) transactions increased substantially from 18 million to 266 million, with the value of transactions soaring from GH¢594 million to GH¢35 billion, within the same period. As of June this year, the total mobile money float balances reached about GH¢680 million, from GH¢548 million at the end of 2015.

This came to light in the 2016 Banking Survey conducted by accounting and advisory firm PricewaterhouseCoopers (PwC) and launched on August 25. The survey of chief executive officers and chief finance officers of banks brought out four areas of banking where the mobile money revolution is strongly impacting the most.

Besides the funds transfers, the mobile money business also comes as a threat to bills payments solutions, the operation of current accounts and deposits as well as the automated teller machines and debit cards.

Presenting findings of the survey, Mr Thomas Kyei-Boateng of the PwC explained that the use of mobile phones made fund transfers instant and convenient as against across bank transfers which, until recently, could take a few days, saying “all one requires to execute a mobile money fund transfer is their mobile phone.”

Payment solutions 

The bank executives surveyed also believe that MM was significantly threatening the payment solutions offered by banks, particularly the both bill payment services and point of sale (POS) payment offerings. 

“Mobile money is now used to pay for utility bills, in store purchases and even in historically cash-based transactions such as payments for goods in local markets. Bank executives believe that should current trends continue, banks will soon command a smaller portion of the payments market compared to mobile money operators,” Mr Kyei-Boateng stated.

Current accounts (deposits)

With mobile money wallet allowing fund deposits, withdrawals and transfers, it has essentially become a current account and most bank executives are of the view that MM threatened their various current account products as it diverted deposits from the traditional banking system to the various mobile money operators. 

The convenience, ease of setting up mobile money agents and the ability of the mobile phone to adapt to various systems (device agnostic) is fueling the threat they pose to the banks.

The survey pointed out that while the mobile phone could work with various systems, it was difficult to make interbank transactions and it even requires some length of time to comply with the relatively more stringent requirements of banks.

For instance, since the Ghana Interbank Payment and Settlement System (GhIPSS) introduced an instant transfer last year, none out of the 28 banks in the country has readied their systems to be able to participate in the instant interbank transfers.

Again, Mr Kyei-Boateng said the expanding product and service offerings of mobile money was also making it appeal more to the general public. MM started with airtime purchases and domestic remittances for small amounts. 

Overtime, the service has expanded to cover bill payments, POS payments, fund transfers in larger amounts, and deposit collection by some savings and loans companies, micro-insurance and what is being discussed now is mobile money credit.

Collaboration, not competition

The bank executives, the survey points out, remain positive that collaborating with telcos would provide a win-win outcome.

They, therefore, see investments in technology as well as good regulation by the central bank to create a level playing field, as part of the surest ways of banks tapping into the newest explosion in the financial services space.

The President of the Ghana Association of Bankers (GAB) and Managing Director of Stanbic Bank, Mr Alhassan Andani, said MM was not a threat to the banking system, but it was important to identify all the blocs that form the financial technology ecosystem.

“The issue about the ecosystem is that we discover it bloc by bloc. And anytime you discover a bloc, the system is better for it. So MM and all the e-payments is just a bloc we have discovered in the economic landscape and we should make use of it,” Mr Andani told the GRAPHIC BUSINESS.

The chief executive of Stanbic Bank believes that “as the banks make use of the new financial technology systems it would promote financial inclusion which was necessary for growing the gross domestic product which would eventually again be of interest to banks.

“If the GDP improves, banks have much more value adding products and services to do and money that we would deploy to reach out would be saved, providing them with cheaper ways of serving customers. We can now use that capital to deal with much more complicated deals that the economy would require,” he stated. — GB

SOURCE:GRAPHIC