The Electronic Payments System in Ghana

Electronic cards be them ATM, Debit or Credit cards are used worldwide for a variety of purposes and reasons but the most common use is for withdrawing cash and paying for goods and services. In Ghana, ATM Bank cards and debit cards are the most common form of electronic cards. This industry has undergone and is undergoing fantastic changes.

I will highlight these changes and what the future holds and then start a debate as to why we never use our cards for anything else apart form withdrawing cash.

Types of Electronic Cards in Ghana

Stored Value Cards

Stored value cards also called e-money have been available in Ghana for sometime and were the first type of electronic funds available. SikaCard® by SG-SSB (then know as SSB) and Mondex® by GCB are examples but they have never been popular and are not prevalent.

ATM / Debit Cards

I have chosen to group ATM and debit cards together as most Bank issued ATM cards in Ghana now double as a PIN based debit card. The development of the ATM system in Ghana started in 1980 when the Trust Bank introduced the first ATM. A disparate and unconnected network of ATMs sprung up as other banks installed their own ATMs until the creation of the Ghana National Net Settlement Service (GNNSS) by VISA® International (also called the Visa Horizon network). All ATM / Debit cards issued in Ghana currently are therefore VISA® branded with VISA Electron® being the most common brand (issued by 7 out of 23 banks). United bank for Africa(UBA) is accredited but does not currently issue cards.

It must however be noted that two banks, Intercontinental Bank and Ghana Commercial Bank are set to soon release MasterCard® branded ATM and debit cards.

This might increase competition and reduce the high transaction charges for use of these electronic cards which currently stand at ¢2,500 (GH¢0.250) at your banks ATM, and ¢7,500 (GH¢0.750) for transaction on other bank ATMs and also other EFTPOS terminals, an assumption.

It is also interesting to note some ATMs allow use of Value Added Services like ; fund transfer between accounts and purchase of prepaid mobile units.

Credit Cards

Ecobank Ghana Limited currently issues the only credit card called the Ecobank Gold Card which VISA® branded. I do not know the criteria for assessing credit worthiness as there is currently no credit bureau formally established in Ghana, although there are hints the Bank of Ghana (BoG) will grant licences soon.

The Current State

The BoG as the regulator of the financial sector in collaboration with the financial institutions, especially the banks are currently implementing or formulating policy on various issues which will improve the use of electronic cards for more financial transactions.

The most relevant to this discussion is the Ghana Interbank Payments and Settlement System (GIPSS). The GIPSS is an independent entity established in an agreement between the BoG and the Ghana Association of Bankers, to be responsible for the different components of Ghana’s payment and settlement system infrastructure and would include the following:

1. National Switch (the Common Platform)
2. Biometric Smart Card
3. Cheque Clearing
4. Codeline Cheque Truncation
5. Real Time Gross Settlement System (RTGS), and
6. Automated Clearing House (ACH)

This is an exciting proposition and the most important factors for the ordinary bank user and Ghanaian are the following;

1. A national switch means you can use your ATM card in any ATM in Ghana to withdraw cash. It would no longer require your ATM be ‘branded’ as all banks would be connected to the platform either directly or through other member banks as the costs involved may be considerable for smaller banks.
2. The Biometric Smart card directly moves to the newest and increasingly preferred choice of electronic systems which involve using unique biometric data as opposed to PIN and signatures. It also provides the advantage of NOT requiring numeracy and literacy skills a situation which would allow unbanked illiterate Ghanaians to become a part of the electronic and digital age.

The GIPSS is on schedule and a contract was awarded to Net1 U.E.P.S. Technologies, Inc, a Johannesburg based company on June 26, 2007 for the supply, development and implementation of the National Switch and Smart Card Payment System and is scheduled to be completed in 9 months. The intention of NET1 is to connect all 23 banks in Ghana by December 2007.

"Net1 provides its universal electronic payment system, or UEPS, as an alternative payment system for the unbanked and under-banked populations of developing economies. This system uses secure smart cards that operate in real-time but offline, unlike traditional payment systems offered by major banking institutions that require immediate access through a communications network to a centralized computer. This offline capability means that users of Net1's system can enter into transactions at any time with other card holders in even the most remote areas so long as a portable offline smart card reader is available. In addition to payments and purchases, Net1's system can be used for banking, health care management, international money transfers, voting and identification."

(Source: www.secureidnews.com . Read FULL article)

The Future

The next few months are going to be an exciting period in the electronic payment industry in Ghana. Its is finally feasible to invest in adopting electronic payment infrastructure for companies that offer financial services and products such as pre-paid utilities, money transfers, loan and insurance management, savings accounts, and third party payments in anticipation of payment instrument that can be issued to all Ghanaians regardless of their financial status or dwelling location.

There is also a need for all local business to gear up to accept the new payment instrument and IT solution providers and suppliers of electronic products must plan and strategise how to effectively supply, train and maintain these systems for local business (Young entrepreneurs this could be your business model).

It had also been a puzzle to me why VISA International has been inactive in advertising the use of VISA® branded debit cards as a retail purchase instrument. I was therefore pleasantly surprised when sometime this month Standard Chartered Bank and SG-SSB in collaboration with VISA® International started a radio campaign promotion the use of VISA® branded cards.

The Debate

A VISA Electron® branded ATM / Debit card can be used at any VISA branded ATM, Retail Point-of-Sale (POS) or any Electronic Funds Transfer at Point of Sale (EFTPOS) Terminal displaying the VISA logo. For VISA Electron® cards discretion for use in online transactions lies with the Issuer of the card, that is the banks. Cedi account cards currently cannot be used online but there are arrangements for cards drawn on a foreign currency to do so at some banks.

Question: Why are we so reluctant and unwilling (If you have please post a comment of How and When) to use our VISA cards to buy goods and services?

I have been trying to come up with answers and I believe these are some reasons.

• Limited acceptance points: Most of us procure goods and services from merchants who do not provide this facility and we therefore do not come into contact with the facility anyway.
• High transaction costs: Assuming the ¢7,500 (GH¢0.75) for use at different bank branch ATMs apply to use on a POS device or terminal, then 2 transactions a day means ¢15,000 (GH¢1.50) which translates to ¢105,000 (GH¢10.50) a week! Minimum daily wage is around ¢19,000 (GH¢1.90) Ouch!
• Limited of information and advertisement: There is not enough of an information and advertisement drive by the issuers of cards, retail merchants and the others who provide the facility about the services offered. I believe by making such information as ubiquitous as possible, interest and use will increase.
• Limited service offerings: The number of services which can be paid for with an electronic card is limited to mostly shopping at convenient stores and buying food. Important as these industries are; what about utility payments, cash back options, purchasing prepaid units for all types of situations, mobile phones, internet access, et cetera which provide real value to us consumers. The service providers should innovate and excite us with ‘real’ services.
• Lack of System Reliability and Customer Care: I have nicknamed this ‘The Nightmare Scenario’ as mot of us have experienced trying to access an electronic service and being told the ‘system is down’, not with a smile but with contempt by the service provider. Imagine trying to buy prepaid electricity units at 9pm at the last ATM en route home and to be told the system is down!

Notwithstanding all the above mentioned, why could I not make myself pay for stuff at GAME® with my Ecobank VISA Electron card when the VISA Logo is boldly displayed? I simply felt "some way"! I think the most significant barrier to all of us is psychological! What do you think?

I am proud to say the Bank of Ghana is my favorite National Institution as they are really doing their work as the independent Central bank excellently.

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One Laptop Per Child (OLPC)

I have been gearing up to write about this for sometime but I was delaying it because most of what I had originally planned was unflattering not about the OLPC but about its possible adoption (actually lack of adoption) into the New Education Reform sectors ‘focus’ on ICT. I have always complained that the people in power seem not to keep up with these issues especially when it comes to ICT and thank goodness I’m wrong. I am totally fired up since I learnt from Justin that the Ghanaian Government (His Excellency John Agyekum Kuffuor) has made pronouncements on adopting the OLPC.

The One Laptop per Child association (OLPC) is a Delaware, USA based, non-profit organization created by faculty members of the MIT Media Lab, set up to oversee The Children's Machine project and the construction of the XO-1 "$100 laptop"

The OLPC project is an initiative to provide the almost 2 billion children of developing and third world ( I so dislike this word) countries with no little or no access to educational tools with the XO laptop, a children's machine designed for “learning learning” and “tap into the children's innate capacities to learn, share, and create on their own”. The laptop was originally priced at $100 dollars but is currently being offered at around $175.

I must first make the point that as with any such project it has both its good points and also its criticisms. I will however focus on the good points here as I am convinced the idea in general is laudable.

In my search for articles on the OLPC project and its Ghanaian connection I stumbled upon (Again!) a really interesting blog detailing how the OLPC reached the eyes of His Excellency President Kuffuor, who has endorsed the program and announced that he planned for every ‘Class One’ (1^st Grade) student in Ghana to have a laptop. Read the article “The Week Everything Changed”. It is quite an interesting and long entry so please read it using the link provided.

I believe if the ‘jaw-jaw’ becomes action and a good education model is built around the use of the XO laptop for learning, it would be fantastic. Education in Ghana as we all known is too theoretical and boring and making it more playful for the young ones will grow their minds, so much more (This is not a DSTV advert).

There are several ideas on educational content and educational models for using the XO laptop effectively to fit into the educational systems. Most of the ideas are based on “constructionism” which basically is “a philosophy of education in which children learn by doing and making and explore and discover instead of being force fed information”. The main proponent of this philosophy is Seymour Papert whose ideas are deemed to have influenced Nicholas Negroponte to start the OLPC and therefore most of the educational models have constructionism at their very foundation. The field notes from the test of the XO laptop in Thailand is a must read to see just how exciting and refreshingly different this can all be.

PS. Read more about the technical aspects of the XO laptop

PSS. If you don’t already use a newsreader like GoogleReader, please sign up for one. It makes it easier to subscribe to different blogs,website feeds,news feeds etc and you know if any new content has been posted. You can keep up with you favorite stuff much easier this way.

The Truth behind the 'Digital Divide'

Have you ever really wondered why monthly costs for internet access in so expensive in Ghana and most of Sub-Saharan Africa. I mean most offers for monthly access are quoted in US Dollars and compared to charges in UK and US (which I can totally afford) we are paying an arm, leg and maybe a little of our hearts.

I stumbled upon an article and I am not referring to stumbleupon.com but stumbling in a literal sense, which is how I find most juicy stuff on the net. The article is called The Halfway Proposition and highlights the most important issue in the eyes of African ISPs as to what creates high end-user costs for internet access, 'Reverse Subsidy'. ‘Reverse Subsidy’ refers to African ISPs paying for both direction of traffic over the internet backbone.

The Problem
Obtaining upstream connectivity requires African Internet Service Providers (AISPs) to purchase bandwidth from International Backbone Providers (IBPs). Typically 90% of an AISPs upstream cost is the physical link from them to the IBP’s country and 10% is the cost of purchasing IP Bandwidth once they get there. Whether the service is purchased as a bundle or separately the AISP pays 100% of the International carrier to get from Africa to the IBP network and then 100% of the Internet bandwidth cost. This amounts to a reverse subsidy of IBP connectivity costs by AISPs.

When an end user in Kenya sends E-Mail to a correspondent in the USA it is the Kenyan ISP who is bearing the cost of the International connectivity from Kenya to the USA. Conversely when an American end user sends E-Mail to Kenya, it is still the Kenyan ISP who is bearing the cost of the International connectivity, and ultimately the Kenyan end user who bears the brunt by paying higher subscriptions. Simply put “If you (AISP) want service you have to come to me, if you don’t want to come to me – that’s fine, I’m not paying to come to you…."

The Solution
The Halfway Proposition is a strategy that borrows the experience of Asia and adapts it into a realistic strategy for Africa. Redressing the balance through regulation by the ITU is not the way forward. It would be far better to allow the process to be driven by the private sector.

Step 1 – Create Traffic Aggregation within Africa
i. Through the creation of Internet Exchange Points
ii. Through the emergence of Regional Carriers facilitating regional peering

Step 2 – Create Digital Arteries to carry the traffic
i. Regionally. Regional Fibre Optic Infrastructure to reduce the costs of regional peering
ii. Internationally. International Fibre Optic Infrastructure to reduce the costs for IBPs to establish Point-of-Presecence at Points of Aggregation in Africa.

Since the article and the idea was conceived in October 2002 it has been almost 5 years and progress has been made.

Hip Hip Hooray

Step 1 – Create Traffic Aggregation within Africa

• Internet Exchange Points (IXPs) have been created in 10 countries with some like South Africa and Nigeria having more than more IXP. Ghana launched its IXP called GIXP on Tuesday 18th October 2005 at the Ghana India Kofi Annan Centre of Excellence. The GIX is run and operated by the Ghana Internet eXchange Association (GIXA www.gixa.org.gh), an independent non-profit corporation establish by the Ghana Internet Service Providers Association (GISPA, www.gispa.org.gh) and other stakeholders interested in joining and growing the GIX.

• Regional Carriers have been selected by the African ISP association, AfrISPA, in response to its Request for Service for data transport between the different ISP members of local Internet Exchange Points. Transtel, a division of Transnet Limited and Africa Online/SkyVision are the two bidders that successfully met the Request For Service (RFS) criteria to provide an African Regional Internet Traffic solution. The peering point design can be extended to allow additional Internet Exchanges to join the network with ease at any time in the future.
  

Step 2 – Create Digital Arteries to carry the traffic

Regional and International Fibre optic Infrastructure. The existing SAT3/WASC/SAFE able is fast running out of bandwidth to support access and several new initiatives have arisen.

o Teams (The East African Marine System): Kenya has awarded an $82m undersea internet c able project to the French-American company Alcatel-Lu cent.

Teams will be owned by the Kenya Government (up to 40%), while Etilsat of the United Arab Emirates will hold a 20% stake. Private investors - yet to be secured - will hold 40%. The cable will run from Fujairah in the UAE to Mombasa, Kenya.

o EASSY (The East African Submarine Cable System): This is an initiative of various telecom companies in eastern and southern Africa

o The SEACOM marine cable system: The planned 13,000 km undersea fiber optic network will provide connectivity between South Africa, Madagascar, Mozambique, Tanzania, Kenya, India and Europe. Owned by the American Heracles Telecom, SAECOM’s planned commissioning date is the first quarter of 2009.

o The NEPAP Broadband Initiative Network is also currently underway after it broke away from the ESSAY initiative

In conclusion, unfair and unjust arrangements for upstream connectivity to the internet which made end-user costs in Africa high, have spurred great innovation and cooperation between the private and public sector to obtain our own internet backbones, this in the long-term is more beneficial. It must however be noted that most of these projects have been delayed due to differences in opinion on the business model to be used for operation and lack of ratification by all the possible participant countries. Politicians will always be Politicians.

Is Broadband in Ghana really Broadband?

This article is inspired by recent articles on the BBC website discussing Broadband speeds, what you get, what you don’t and why ISP’s should become more responsible in reporting ‘speeds’ of the connections they provide. Ofcom which is the regulator of stuff internet in the UK and other private tech firms and agencies are all concerned about the way in which ISP’s handle advertisement and marketing of their service offerings as most invariably customers will never achieve the speed advertised especially using ADSL which is the common way to access these days.

ADSL as a cable based technology delivers different speeds dependent on several factors of which distance from the exchange, number of people using the internet connection, quality of wiring within the home or premises all affect performance and I do concede that the technology has limitations as such..

Where do we draw the line? I have NEVER seen the connection in my office reach above 30Kbps (we’ve never reached 30Kbps) and I am sure our connection (BroandBand4u subscription) is at least touted to be a 128KBps connection. Half that is 64 Kbps and I do not think it would be too much to expect at least 50% of the purported max speed to be achieved most of the time. My office is less than or just about a kilometer away from the exchange.

This brings me to an important point. Who is looking out for the customer and ready to discuss such issues in Ghana? I do not know if the NCA which I assume is the regulator of ISPs in Ghana finds this issue as an important. I believe the ISPs can be pushed to deliver a better quality service or at least be made to present their service ‘fairly’ for customers to make a choice.

I believe the following recommendations (Some from Ofcom and other agencies) and some my own could make a difference especially since I sincerely hope ISPs have Quality of Service at the heart of their operations.

 The words ‘UP TO’ are required in advertising the speeds achievable, to signify the best possible connection speed.
 Advertise the typical speeds users would be most likely to experience in addition to the maximum speeds.
 Advise prospective customers on the best type of wiring and equipment that would enhance the user experience and not just sell the internet service.
 ‘Trial periods’ to allow customers to assess the service before committing to it on a long-term basis. (I’m really pushing it on this point, Ghanaian companies don’t think like that. I’d love to be proved wrong and shamed. GT, Internet Ghana, Zipnet any takers?)

To end I would like to say if the NCA or any regulatory body is willing to improve service delivery of ISPs it would enable more advanced use of the internet and open up great opportunities. Please contribute your comments and if your ISP is doing well tell us about it. I like being proved wrong in such cases since it would showcase good corporate values in my Ghana.