Financial Sector Development in Africa: Opportunities ... - World Bank

Mobile Financial Services in Africa: The Next Generation 67
Box 2.3
Regulators Drive Interconnection: The Bank of Ghana and a
National Payments Switch
Starting in 2000, Ghana initiated various reforms of its payment system, resulting
in the passage of a Payment System Act and in setting up a real-time gross settlement
system at the Bank of Ghana (BOG). BOG then encouraged banks to establish
a national switch that would interconnect retail devices such as ATMs and
point-of-sale (POS) devices. However, early discussions resulted in little progress,
so BOG decided to go ahead anyway creating, in 2007, a separate subsidiary
named Ghana Interbank Payment and Settlement Systems (GhIPSS). GhIPSS has
the mandate of providing and managing infrastructure for electronic payments
systems in the country.
While procuring the technology for a national switch, GhIPSS was drawn to a
solution that offered additional features, including the issuance of smart cards
that would allow biometric authentication of clients (thought to be useful for
illiterate clients) as well as the capability to operate offline, which was useful in
areas without mobile coverage (at that time, only a third of the population were
mobile subscribers). This new retail payment system, called eZwich, was seen as a
means of enabling banks to bank unbanked people and people in areas beyond
the reach of mobile coverage. Launched in 2008, eZwich was not fully interoperable
with existing ATMs or Europay-Mastercard-Visa (EMV)-compatible devices,
which banks have subsequently rolled out.
Drawing on its powers as a regulator, BOG mandated that all deposit-taking institutions
had to issue eZwich cards to their personal customers and had
to deploy eZwich POS devices at all branches and agencies. All existing bank switches
had to integrate to eZwich, and all future switches had to be eZwich- compliant.
The Bank of Ghana, therefore, adopted a much stronger approach to interconnection
than do most central banks, not only funding and operating a retail payment
switch but also mandating that banks connect to that switch.
Two years after launch, the record of eZwich was mixed. All Ghanaian banks
had connected to the eZwich, but not all had issued smart cards by early 2010.
Despite GhIPSS’s high-profile marketing and promoting eZwich to the public,
only 323,000 cards had been issued at the end of 2009 (an estimated 3.5 million
people were banked), and banks had deployed eZwich POS devices at 2,425 merchant
locations. Banks’ lack of enthusiasm about deploying the cards and devices
reflected the lack of a business case: the cards and devices were more expensive
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