A defining moment for a cashless economy

Electronic commerce (e-Commerce) is the buying and selling of products and services by businesses and consumers through websites or electronic mediums, without using any paper documents.

It generally involves the use of the internet, but any transaction that is completed solely through electronic measures can be considered e-Commerce.

This means e-Commerce can be business to business (B2B), business to consumer (B2C), such as Amazon and consumer to consumer (C2C), a perfect example being eBay and Tonaton.

In Ghana, the market is growing, particularly with online merchants. They include Tonaton, Zoobashop, Tisu, and Africa’s biggest e-commerce company, Africa Internet Group, which owns more than 10 targeted e-Commerce websites, including Jovago (for online hotels reservation), Jumia and Kaymu (consumer products) and Hellofood for food reservations and delivery.

Many of these online shops have not had a perfect logistical match to enable them evolve quickly. They are hampered particularly by the absence of an electronic payments system.

As has mostly been the case in Ghana, businesses and developments move ahead of the basic infrastructure, systems and laws that are required to facilitate them. Once again, the e-Commerce market is ahead of the systems and structures required to lift it.

The evolution of payment platforms
According to the doyen of internet and ICT bigwig, Dr Nii Narku Quaynor, the quest to develop e-Commerce has been on since the internet was introduced in Ghana in 1993.

“We used to have e-cash which was used on the Oxford Street (in Osu, Accra) but did not evolve. Others have come in various stand-alone forms,” he recounted.
The main challenge has been pervasive payment platforms (many different instruments and channels) to satisfy all transacting units. The predominant solution to this has been by transferring cash to accounts to settle or pay cash on delivery.

Addressing the payments challenge spurs growth in e-Commerce, experts argue. “This is because logistics for e-Commerce will evolve when there is a workable payments system in place,” Dr Quaynor said and explained that “if you don’t have payment you can’t have logistics.”

Until recently when international pay cards such as Visa and MasterCard was popularised by some individual banks, e-Commerce in the country has mainly run on cash on delivery. Again, quite recently when mobile money got in vogue, the online merchants quickly partnered with them as a convenient payments channel.

A few app developers have also found a way around settling payments by providing third party funds settlement platforms such as eTransact and mPower.

Here comes mobile money
Currently, the mobile money business appears to be the most pervasive means of making online payments. MTN Mobile Money alone grew from a subscriber base of about 5,000 in 2009 to about 4.8 million at the end of July, 2015. This enabled them to carry on the average monthly transaction in excess of GH¢18.5 million.

This will work out to over GH¢120 million a year for only one network.
The pervasiveness of mobile money comes in both physical presence and usage. There are over 19,500 agents of MTN mobile money alone, compared to 967 bank branches and 1,316 Automated Teller Machines (ATMs) nationwide.

Benefits of a cashless society
Ensuring a cashless economy is very crucial to improving floats (cash) within the banking system. This will ensure that many more people, rather than the current 44 per cent of adult Ghanaians (5.9 million individuals), which according to a 2010 financial inclusion survey are excluded from the financial system, are included in the banking system.

Financial inclusion: The FinScope 2010 survey indicated that only 56 per cent of adult Ghanaians or 7.5 million individuals are financially included.

The report also indicated that out of the 41 per cent adult Ghanaian who are included in the formal financial system, (5.5 million individuals), 34 per cent (4.5 million individuals) are in the banking system.

This low financial services coverage and savings culture come in spite of the eight per cent average growth rate recorded in the Ghanaian economy in the past 10 years.

The pervasive use of cards, conducting electronic transactions and generally ensuring a cashless society is crucial to curtailing inflation and achieving a pro-poor and inclusive growth in the economy.

Enter GIP and gh-link e-Commerce
A couple of weeks ago, the Ghana Interbank Payment and Settlement System (GhIPSS) launched two new products that are set to deepen efforts to promote a cashless economy. The gh-link e-Commerce is an upgrade of local cards issued by banks to make them compatible for online payments.

With the gh-link card, which already interoperates with almost all ATM machines in the country, customers can use it to make payments online for merchandise the purchase from e-commerce platforms.

The second product, GhIPSS Instant Pay (GIP), enables individuals and organisations to effect instant bank transfer of funds from an account to another, where the recipient can access the fund instantly. Until now, transferred funds could only be accessed within 24 hours and 48 hours.

This is, therefore, a great breakthrough in the quest to promote the use of electronic cash for transactions, removing the physical handling of cash which come with challenges. The challenges include the loss of money to robbery, high cost of printing new currency to replace worn-out notes and high incidence of armed robbery.

It is imperative to point out that the cashlessness of rich societies account for the low level of armed robbery in those countries, as the robbers there direct their energies to finding their booties at bank vaults or bullions.

The cash is locked up in bank accounts, insurance and long term investments and controlled by smart cards, on the Internet and direct instant transfers.

The Chief Executive Officer of GhIPSS, Mr Archie Hesse, said the products were in response to market requests. “The service is demand-driven as banks and their clients have been calling for it,” he said, adding that “at the moment we have the ACH direct debit, same day or next day, but we don’t have an instant pay and this is an opportunity.”

The gh-link e-Commerce also complements the ATM services with the online payment option.

Dr Quaynor, who introduced internet to Ghana, believes that the payments challenge would spur growth in other ancillary businesses.

“There will be companies that will see opportunities to do fast deliveries; the technical community will also become energised to develop solutions around the payments platform. Then there will be online merchants that will get onto the business,” he projected.

“It’s an exciting period in that a catalytic change is about to occur. Once you remove the payments as a barrier other things can follow,” he emphasised.
A number of online merchants have thrown their weight behind the two services that had been introduced.

Tisu is a Ghanaian online discount shop which sources from suppliers, wholesalers and retailers at discounts and post same online for merchandise. Its Head of Business Development, Mr Albert Boateng, told the GRAPHIC BUSINESS that their main challenge had been paying for sales made online.

“Currently, we operate on cash on delivery basis. But we also have partnership with mPower through which we accept international cards such as MasterCard and Visa Cards. We also give customers option to pay with Mobile Money. But with the introduction of gh-link, we have more options.

Mr Boateng believes that the gh-link e-Commerce service could make transactions faster and more secure. Tisu is hoping to work closely with banks to activate the GhIPSS Instant Pay (GIP).

The Chief Executive Officer of Zoobashop, Mr Albert Biga, also believes both services will greatly deepen e-Commerce since payments remained the biggest impediment to emerging business’ growth.

Thriving transfers market
Beyond working to make it a reality, the success and market acceptability of the two products are now said to be beyond the control of GhIPSS and lies with the market, the banks being the first port of call.

Again from the view of the Internet and information technology guru, “this is because once you have two problems preventing the emergence of a sector, if you remove one the chances are it would organically affect the introduction of the other.

Dr Quaynor said payment was a problem which had now been solved and that the expectation was the natural development of merchandise, technical expertise and logistics to join the network.