CHAPTER ONE INTRODUCTION
Background of the study
A cashless economy is one in which all the transactions are done through electronic means such as debit/credit cards, online transfers, mobile money transfers, amongst others are used to transact business.
The recent development in the banking system has made it easier and safer to keep one’s money in a bank account. It is even easier to transact or transfer money from one account to the other globally using debit and credit cards in addition to innovations like banking apps. In the developed world for instance, debit and credit cards almost dominate financial activities. Moody’s Analytics (2013), studying the impact of card usage on gross domestic product (GDP) of 51 countries, found that electronic card usage added USD 1.1 trillion in real dollars to private consumption and GDP from 2003 to 2008. As Per the World Payments Report (2015), global non-cash transactions reached 358 billion in 2013, an increase of 7.6% over 2012. Further, European Central Bank (ECB) data on access and use of payment instruments and terminals show a steady graduation towards cashless payments. The total number of non- cash payments in the EU increased by 2.8% in 2014 over 2013 and by 6.0% in 2013 over 2012.
This development is not far-fetched in developing world as Sub Sahara Africa (SSA) recorded growth in the use of debit and credit cards, for instance in Ghana, Bank of Ghana, the regulator of the banking industry through Ghana Interbank, Payment and Settlement
Systems (GhiPPS) introduced e-zwich card, where Ghanaians will feel comfortable in using the card to transact business rather than using physical cash (Sarpong, 2013).
Another innovation on going in Ghana by the bank of Ghana is the introduction of electronic payment system for cocoa farmers, Known as the cocoa sika payment platform. This system is to help facilitate rapid and secure payment of monies to farmers for beans purchased.
The move toward Cashless has been enhanced by the introduction and dominance of Mobile Money (MoMo) operated by telecommunication giants like MTN and Vodafone in the region. The concept of MoMo is to attract both banked and unbanked sector of the economy as it provides another platform of transacting digitally. This has made Africa a global leader in mobile money-cashless electronic payment that use mobile phones as the main payment mechanism, rather than using a smartphone only as a channel to a user’s bank or credit card account. According to Frost & Sullivan (2014), the MoMo market in SSA generated $656 million in revenue which was as a direct result of increased patronage.
Ghana, which is seen as the gateway to Africa, has embarked on pragmatic steps in catching up with the trend. PWC (2016) highlighted significant growth in MoMo users and volume and value of transaction between 2012 and 2015. Banks like Ecobank, GT Bank, and other universal banks have improved digitisation experience for their customers by introducing mobile apps to help reduce movement of physical cash. Again, government initiatives like digital address system, MoMo interoperability, paperless port, national ID system, smart driver licences, e-business registration and certification, and digitisation of land record are geared towards Ghana going cashless. Educational institutions are not left out in the wake of cashless system in Ghana, the University of Ghana for example the university introduced a card for students enrolled on the master’s program, the card was both a student identification
and as an ATM card .This served as both identification purpose and wallet to save money on and reduced the issue of having carry physical cash on them to help ensure safety at all times. This research was therefore tailored to broadly address the issue of the prospects and challenges of the Cashless economy in Ghana. This study objectively traced and analysed the prospects and challenges of the cashless economy in Ghana.
Problem Statement
Ghana’s readiness for cashless economy has been a major discussion on various platforms like television programmes (good evening Ghana), websites, print media and radio talk shows etc. Whereas some stakeholders like the central bank, office of the president, Ecobank, Ghana commercial bank GT bank just to mention but a few believe the country is ready, others hold the opposite view such as pressure groups. However, the recent push by Bank of Ghana (BOG) towards the implementation of Payment and Service Bill, 2017 has been lauded by stakeholders as the positive move towards digitisation of payment system. The Bill seeks to promote the availability and acceptance of electronic money and other forms of payment services as retail payment medium. Secondly, major stakeholders (players) like retail shops, banks, utility providers (Ghana Water Company), and telecommunication networks of the economy have embarked on sudden swift towards technology by developing Apps, which are downloadable on Apple Store and Play Store to aid in payment of goods and services. Apps like Slydepay, Ecobank App, ExpressPay, ZeePay, Hubtel, myGHPay, GTpay, UMB SpeedApp, etc. can easily be downloaded by users to effect transactions. Again, the impact of MoMo transactions on the economy cannot be overlooked as it played critical role leading to the implementation of MoMo interoperability to enhance users’ digital experience.
These developments are meant to promote and/or provide easy and convenient ways of transacting across various sectors of the economy. However, the country faces massive
setbacks: The first is illiteracy rate. According to the Ghana Statistical Service, the literacy rate in Ghana stands at 67.3% in 2013 (GSS, 2013). Secondly, there is high infrastructure deficit for example in information technology, education amongst others which could impede efforts to go cashless. The Africa Infrastructure Diagnostic Report for 2015 states Ghana requires $1.5 billion each year for the next decade in order to meet its infrastructural deficit. Again, vices that are threat to cashless system like Scam, identity theft, corruption, hacks, among others are prevalence in the region.
Although Ghana seems to be getting ready to migrate to cashless system, there still remain major roadblocks that could impede its efforts to achieve this target. In the past, researchers have delved into Ghana mobile money growth and overview of Ghana’s readiness for cashless system, but not much research have been done on the detailed analysis on the economic benefits to GDP growth and challenges the country may encounter during the pre and post implementation era.
Objectives of the Study
To identify the economic prospects of cashless system in Ghana. To determine the challenges of steering towards cashless.
To ascertain stakeholders readiness towards cashless system.
Research Questions
What are the economic benefits of cashless system in Ghana? What are the challenges of cashless system?
How are stakeholders prepared to embrace a cashless system?
