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Business News of Tuesday, 7 February 2017


The e-payment evolution and Ghana's modern payment regime

The current Payment system in Ghana refers to the entire matrix of institutional infrastructure arrangements and processes in a country set up to enable economic agents (individuals, businesses, organisations and Government) initiate and transfer monetary claims in the form of commercial and central bank liabilities.

According to Bank of Ghana records, Ghana's payment system has improved significantly since 1997 when the MICR cheques were introduced, and continues to evolve to meet the developmental needs of the country. The current trend in Ghana's payment systems development is being driven by economic, financial, public policy factors as well as a growing local ICT industry and global trends in payment systems development.

The development of payment and settlement systems in Ghana has been premised on objectives including the prevention and or containment of risks in payment, clearing and settlement systems; the establishment of a robust oversight and regulatory regime for the payment and settlement systems; the application of efficiency to fiscal operations of the Ghana Government and the ability to deepen financial intermediation.

The rest are the discouragement of the use of cash for transactions whilst encouraging the use of paper-based instruments for payments as part of the short-term development plan, the promotion of financial inclusion without risking the safety and soundness of the banking system; and the development of an integrated electronic payment infrastructure that will enhance interoperability of payment and securities infrastructures.

The global picture

In the 9th World Payments Report (WPR) from Capgemini and The Royal Bank of Scotland (RBS) which anticipated and valued resources for the payments industry, it was reported that globally, the non-cash payments market volume accelerated significantly in 2011, with developing markets again fuelling the rise. It said volumes grew 8.8% to reach 307 billion transactions in 2011 and $333billion in 2012(8.5%).

The Central Europe, Middle East, Africa (CEMEA) and Emerging Asia regions each grew by more than 20%, while Latin America also recorded above average growth of 14.4%. Mature markets of North America and Europe recorded mid-single digit growth rates but remain the largest non-cash payments markets, together accounting for about two-thirds of global non-cash transaction volumes.

The report identified three forces that were helping drive growth in mobile and electronic payments transactions - increased penetration of smart phones and internet usage, advances in technology, and innovative products and services.

The Payment system regulation
To ensure a tight regulation and supervision of the payment sector, Parliament of Ghana passed into law the Payment Systems Act - 2003 (ACT 662), section 1 of which states clearly that the Bank of Ghana may establish, operate, promote and supervise payment, funds transfer, clearing and settlement systems, subject to such rules as it may publish; and
(b) designate any other payment, funds transfer, clearing and settlement systems, operating in the country which, the Bank considers to be in the public interest for the Bank to supervise under this Act.”

Section 2 of the same ACT states that:
The Bank may give access to any system established under section 1 subsection (1)(a) to a bank, financial institution or other institution whose participation the Bank considers to be in the interest of efficient operation of the system.

What is the Payment Switch?
A Payment Switch is a system that can interface with any POS system, Automated Teller Machine (ATM), Mobile Payment System and Internet based commerce portals, consolidate all electronic transactions and then intelligently channel them to one or more payment processors for authorization and settlement.

How does it work?

A payment platform or gateway authorizes electronic credit card and Automated Clearing House (ACH) payments to provide seamless payment processing for businesses. It is similar to a POS terminal found in many retail establishments.

Payment gateways encrypt and store sensitive data, including credit card numbers, ACH account numbers, AVV and CVV2 information, ensuring that confidential information is safe while processing payments. These gateways are also responsible for transferring payment information to the customer’s acquiring bank. Payment gateways reduce a business’ liability and ensure that payments are processed securely.

You can automate payment processing by having a secure software vendor communicate with the payment gateway and the acquiring bank to provide seamless payment processing. Your customers will be prompted with a secure payment page during checkout. Several steps take place during the transaction process, which takes only a couple seconds. It all starts when a user submits a payment from a business’ website, ERP or third party application.

Examples of switches/gateways in Ghana

In Ghana, there are some examples of payment systems who perform outsourced duties of government agencies. For instance, GcNet, E-transact, GhISPS and Subah. They assist in the Ghana Customs, Ghana Ports & Harbours, Banks and other financial institutions and the Ghana Revenue Authority and National Communications Authority in managing the respective services and monitor service in and outflows.

What is the Ghana Retail Payment System (GRPS)?

The GRPS is a new platform created by the Bank of Ghana to among other things serve as a single window for all e-payment transactions with the aim of applying advanced technology to increase penetration and enhancing payment delivery channels through efficient monitoring.

It is simply known as the Sibton Switch and just like other switches, the Sibton platform will be operated by a private company, Sibton Switch Services Limited (SSSL). They are required to build a financially inclusive switch made up of state-of-the-art software and hardware, robust enough to secure the integrity of the entire system and against cyber-attacks. This requires a substantial investment but absorbs the consumer from high cost of services, even though quality and standards will be guaranteed.

Who pays for the Switch?

The Sibton Switch is a Build, Own & Operate (BOO) system which places greater obligation on the private operator to ensure the highest integrity. The Bank of Ghana only grants the permission or licence. It does not spend any money on this service. An estimated investment of about $4.6billion will come from the private company and its investors.

They are willing to invest such a whooping amount because they intend building an ultramodern infrastructure which will be robust, resilient and can stand the test of time. If they fail to build a strong system, they will bear the blunt and not the central bank. The operator is not supposed to transfer any costs onto the consumer. Instead, it is enjoined to at broadening the scope on the platform, because the bigger the size, the less cost to customers. Cost affordability to the consumer is key.

What are benefits to the consumer?

With this Switch, consumers will pay lesser than what pertains in the current pricing scheme. If you do a mobile money transaction worth GHC 1,000 you will pay GHC 7.50 and not the current GHC 10 charge. Costs and other expenses incurred by the operator will not be transferred to the consumer, rather as platform is expanded, the cost decreases.

Why BOG deserves commendation

Even though this platform is long overdue, the central bank deserves commendation for exercising the will within its legal remits to commission it. it will no doubt, solidify gains made and attain some more. Again, the investors behind this Switch also deserved commendation for their desire and willingness to invest such a colossal amount into the local economy and supporting efforts to ensure financial inclusion.

The complex, highly technical and sophisticated nature of the industry requires decisive investments. The task does not require few millions to execute. It is a serious business which requires serious investments.