Behind the Curve

Ghana’s banks may find themselves undercut by MTN’s mobile money

By David Whitehouse

Posted on September 13, 2019 09:39

MTN has stolen a march on Ghana’s banks in the mobile money race.

A few years ago, Adovor says, he would have had to endure the traffic driving across Accra to pay cash. “Mobile money is facilitating business and that will increase as more and more people use digital platforms,” he says.

Backed by a supportive regulatory environment, mobile money has become the preferred payment method for Ghana’s small businesses.

According to the World Bank, Ghana is the fastest-growing mobile-money market in Africa. Mobile operators MTN, AirtelTigo and Vodafone currently lead the industry. Banks are pushing digital banking in Ghana, but with less success, according to a report from Tellimer in September.

  • Banks such as Ecobank, Fidelity, Zenith and Standard Chartered can use Ghana’s improving digital infrastructure to widen inclusion, Tellimer says.
  • But the firms points to downside for banks through possible loss of deposits and lower margins on digital products due to the competition.
  • Mobile money may lead to the “cannibalisation” of some banking products, Tellimer says. “Banks will have to fight for transactions and deposits.”

MTN is the dominant player with about 90% of mobile money transactions. The company, Adovor says, has “a good network of agents who facilitate the transfers – the banks haven’t figured out how to do this yet because they are probably more comfortable with bricks and mortar transactions.”

  • It will take other players a “lot of marketing and effort or very innovative strategies” to compete with MTN, Adovor argues.

Barrier to entry

“Most users of the technology have lost faith in banks and would rather keep their monies in their mobile wallet,” says Sheila Azuntaba, CEO at Innovative Microfinance in Accra. This will eventually make it difficult for banks to raise deposits, she says.

In contrast to Nigeria, Ghana in 2015 dropped the regulatory requirement that mobile-money adoption had to be bank-led.

  • According to Tellimer, about 45% of Ghana’s population now has a mobile money account.
  • Mobile technology could even become a barrier to entry for banks, Tellimer says.
  • The banks will need to “meet and surpass” mobile capabilities to attract customers.
  • At present, Tellimer says, local banks have underdeveloped digital infrastructure which leaves further scope for mobile penetration.
  • And, Tellimer argues, if mobile operators seek regulatory approval to establish themselves as banks, then banks are likely to loss deposits.

MTN Ghana is targeting 20m customers on its mobile money service in the next three years, from 13m in 2018. Risks, of course, remain. Emmanuel Anyihodo, a Ghanaian economist in Malta, points to ongoing scams and attempts to hack the system. And Azuntaba notes that deposits from the lower end of the pyramid are usually low in value.

But MTN’s financial muscle will be hard to compete with.

MTN paid interest rates of 5%-7% on mobile deposits in 2018, compared with a bank average of 4%. Adovor and Anyihodo both expect that MTN will be able to fend off any challenges to its status as the dominant player.

Bottom Line: MTN has stolen a march on Ghana’s banks, who will find it difficult to catch up.

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