By Alix Murphy, senior mobile analyst
Mobile Money is growing in popularity around the world, but Ghana has experienced growth surpassing that of other markets over the past 18 months.
This month Ghana celebrates Mobile Money Month.
Kicking off with a series of nation-wide events hosted by MTN under the theme “Let’s go cashless with Mobile Money”, the celebrations aim to highlight the role this innovative service has played in the daily lives of Ghanaians.
It’s been a remarkable journey. Nearly one in five Ghanaians today is an active user of Mobile Money, more than double the total just one year ago.
In June 2016 the Central Bank released figures showing that Mobile Money transactions in Ghana had grown 20% since the end of 2015,reaching GHC 679.17 million ($177.9 million).
Mobile Money is a digital financial service that lets people store, send and receive money on a basic mobile phone, without requiring a bank account.
Services like MTN Mobile Money, Airtel Money, Tigo Cash, and the most recent newcomer Vodafone Cash, offer Ghanaians a simple alternative to making these transactions in cash.
Ghana is a booming economy, but a large urban-rural divide makes it a prime location for domestic remittances.
How has Ghana achieved such success in such a short time-span?
With just 15 million adults, this small West African country is used to punching above its weight.
Consistently ranking in the top 10 biggest economies on the continent as home to some of Africa’s largest oil and natural gas reserves, over 50% of a diverse economy is made up of the service sectors.
The healthcare sector has been internationally praised and the country has one of the highest school enrolment rates in all of Africa.
The word Ghana apparently means “Warrior King” in Mande, but it seems the country has little to be hostile about. In 2011, Forbes magazine ranked the nation in the top 12 friendliest countries, based on feedback by a cross-section of travelers.
So it shouldn’t be surprising that Ghanaians are embracing all things digital.
When the first MM service launched in Ghana in 2009, the market was probably a little early for fully mobile financial services.
Around 70% of the population was unbanked, according to the World Bank, but only an estimated 35% of the population owned a mobile phone.
However, the urban-rural divide was a clear market opportunity for low-cost domestic remittance services, as many Ghanaians moved to the urban centres in search of work hoping to send money back home to their relatives in the villages.
With their agent networks spread throughout the country, telcos were better able to serve customers in rural areas.
At first, Mobile Money operated in a similar way to a traditional money transfer business, but with a twist – the telcos operated a network of agents who would help customers process a money transfer via the agent’s own mobile money account.
For example, a customer would go to an MTN agent to process a transfer on their behalf.
The money could instantly be sent either to the recipient’s registered account, or – if the recipient didn’t yet have an account – they would receive a message telling them to collect their cash at their nearest MTN Mobile Money agent.
As the services grew in popularity and mobile phones became more easily available, the telcos were able to register more people with their own Mobile Money accounts.
Walk around Ghana today and you’ll see MTN agents everywhere, explaining the service, showing how it works.
The services were allowed to flourish with the support of the Central Bank, who recognised the opportunity to help improve the rate of financial inclusion among the unbanked population.
According to the most recent Financial Inclusion Insights (FII) survey, access to formal financial services in Ghana increased by 41% between 2010 and 2015, largely thanks to the uptake of Mobile Money.
In part, the business model makes it easier to serve mass market needs.
Banks on the other hand need to operate brick-and mortar branches, which makes it difficult to serve rural and low-income customers.
Mobile telecoms operators like MTN, Airtel and Tigo, with their mobile airtime agents spread throughout the country, were more easily able to fill this gap.
In 2015 MTN Mobile Money agent stalls alone outnumbered bank branches in the country by a factor of almost 20:1, according to the Bank of Ghana.
Mobile Money and banks compete for business on Oxford Street in central Accra
But the latest surge in Ghana’s Mobile Money success has come more recently.
In 2015, new e-money regulations set by the Bank of Ghana introduced favourable changes to the way Mobile Money providers were allowed to operate, including simpler registration processes for customers and simplified rules on the business model.
The telcos were able to invest in building out their services to new parts of the country and to add more offerings to customers as the market grew more competitive.
Today Mobile Money is increasingly being seen as a payment tool for other things, such as utility bills and school fees, groceries and even online shopping.
Ghana was among the world’s first countries to launch contactless NFC payments via Mobile Money with Airtel’s “tap and pay” service last June.
Airtel later launched a micro-loan product called Airtel Money Bosea, which allows customers to borrow up to GHC200 instantly, with up to a month to pay back through deductions via their Airtel Money accounts.
International remittances were highlighted last year by the government of Ghana as a key contributor to Mobile Money’s growth, as new partnerships enabled customers to receive international money transfers directly into their accounts.
You’re never far from proof of the ubiquity of Ghana’s telcos
Yet perhaps the most exciting thing to come out of the new regulations is the approval by the Central Bank for Mobile Money customers to earn interest on the balance held in their account.
As of early 2017, customers will be able to receive interest of between 1.5% to 7% every three months. So far, just one other country allows this – Tanzania, where three Mobile Money providers now offer interest dividends on customer accounts.
Understandably, offerings like these have raised eyebrows among some of the nation’s banks, who question whether telcos should be offering financial services that traditionally fall under the banking sector.
It’s all part of a wider discussion around the role of digital services in providing much needed financial services to unbanked and hard-to-reach customers.
So far Ghana’s banks have mostly recognised the opportunity in partnering with telcos, to gain access to a new customer base and supporting Mobile Money’s role in helping Ghana move towards a cashless economy.
It’s taken some time and a realisation that slow and steady wins the race, but Ghana is well on the way.