The duopoly of international card schemes are working at odds with Ghana’s own payments plans, according to Archie Hesse, CEO of the Ghana Interbank Payment and Settlement Systems Limited (GhIPSS).
“Since we’ve started our scheme there’s been this battle between ourselves and Visa,” said Hesse, speaking on the sidelines of the HPS community conference in Marrakech. “Payment systems are meant to serve the country and you don’t have influence on the pricing and policies. If Visa decides to do something that is what they will do.”
Referring to a domestic issuer conference in Madrid in October last year, Hesse explained his surprise that these views weren’t only limited to developing economies.
“These same views were in the meeting in Madrid, not by African or Asian companies, but European companies like Germany and Italy. Spain six months ago launched their own domestic card scheme. And it’s all for the same reason. If Europeans are not seeing the benefit then we have to ask ourselves the same question.
“It is clear that everything is moving towards instant payments and a shift away from Visa and Mastercard who have dominated the card environment for a long time. But the time has come where a lot of countries are having their own proprietary card systems,” said Hesse.
The burden placed on Ghanaians is twofold according to Hesse, with a chicken and egg scenario between consumer card uptake and merchant card acceptance.
Initially, consumers are put off card usage from high ATM fees - as high as 5 Cedis ($1) per transaction. That comes down to the governance structure, said Hesse.
“You cannot look at payment systems as only technological things because, where I’m coming from, I’m looking at it as an economic development,” said Hesse, outlining his vision of hybrid ownership and governance of Ghana’s payment system, the National Switch, which is owned outright by Ghana’s central bank with representation of the country’s domestic banks.
Hesse believes this influences the second burden - that the high fees discouraging card usage have also led to merchant reluctance to invest in card payment acceptance, initiating a problematic and crucially, inert cycle.
“The banks have agreed that using bank cards at the point-of-sale (POS) is free in order to promote electronic transactions and the merchants in turn will pay the banks a particular percentage.
“Once we’ve explained the benefits of accepting card payments to merchants, that then encourages issuers to begin issuing cards and educating customers that they no longer need to pay cash,” he said.
Hesse also believes that greater uptake in card payments could help the economy in other ways, including an uplift in taxation which is currently a “very heavy burden on the country”. Only 10% pay tax in Ghana and Hesse proposes that innovation and mainstreaming of POS devices could be customised to draw a small percentage of tax.
“The volume, as soon as these types of businesses start paying is a huge amount and the whole country becomes efficient.
“If a country is cash dominated, it needs to find FX money to create policy and maintain it. We can take a quarter of the total amount to drive electronic transactions and use the reduction on education and health,” said Hesse.
If card fees have hindered the economy, Hesse believes that the future of card payments is heading into the virtual world, something that lends itself well to the mobile payments revolution seen in developing countries, although crucially, the funds are held in the banks - not by the telcos as is the case of Kenya.
“The technology is still EMV, “said Hesse. “That’s why we in Ghana are going to move away from the card QR code and developing our own QR code on the back of this card scheme.”
The wider regional issues around payment processing and settling that card schemes have historically played a key part, also come at a high price for the West African nations.
“At the end of the day, you have to trade with your national neighbours and you have problems because you are exchanging into dollars and back into the local neighbouring currencies - that process is very inefficient,” said Hesse. “Technologically we have integrated into the french west African countries like Nigeria which we have a lot of trade with - but how do we settle amongst ourselves? It means the central banks have to sit down and come up with a mechanism and this is an area that I believe blockchain can play a major role.
“Blockchain neutralises some of the problems you are facing once you leave the domestic arena,” he said.
Asked if he'd been in touch with blockchain based cross-border payments firm Ripple, Hesse said: “I’m happy to explore whatever they [Ripple] have and for them to come and educate our central bank.”