eCedi: BoG to empower banks and curtail Mobile Money?

Bank of Ghana Governor, Dr. Ernest Addison

Some key financial sector stakeholders are concerned that signals in the Bank of Ghana’s eCedi Design Paper that the central bank is seeking to restore the dwindling influence of banks in financial transactions intermediation, currently dominated by mobile money.

A one stakeholder wrote to Techgh24 on grounds of anonymity, saying “It seems BoG is worried about the dwindling influence of banks in the financial intermediation of transactions within Ghana; especially made worse by the continuous growth of mobile money.”

He added that it appears BoG sees eCedi as a way to “curtail the growth of mobile money” in order to get banks back in full control of all financial transactions in Ghana.

The expert said his position is based on two very intriguing statements in the 32-Page eCedi Design Paper.

He noted that in the document, BoG made statements like “mitigate potential risks for the banking system disintermediation”, in Chapter 5 – eCedi Vision, and “The architecture model for the eCedi proposed by the BoG was developed with the aim of preserving the existing financial service landscape in view of the critical role of banks,” in Chapter 7 – Design Principles.

Indeed, the document stated that even though eCedi will be issued by banks, it will make extensive use of existing payment infrastructure and ride on the services of payment service providers and specialized deposit-taking institutions.

But according to the concerned industry stakeholders, those two statements quoted above were enough indication that the BoG is on a mission to use the eCedi to empower banks over mobile money, particularly in the area of financial transactions intermediation.

Another industry player said “I’m all for eCedi [but] I just think BoG needs to engage more on it, particularly when it comes to rollout.”

He explained that the expectation for such a very sensitive implementation will be that it must be rolled out very carefully, with strong engagement of all players and strict milestones  and timelines.

“So far none of that has happened. Everyone in the financial sector is on wait-and-see,” he said. “We are all not sure what to expect as the intentions haven’t been made very clear in BoG’s digital roadmap. That’s what is more worrying.”

He was however quick to point out that, in reality, BoG leading on financial intermediation is best for all because the key benefits are lower fees and a much better settlement mechanism for all licensed players.

Meanwhile, the document spells out the expected benefits eCedi has for Consumers, Banks, FinTech, Merchants, Government and the BoG itself.

Find the full details of the benefits below:

A digital currency, issued by the central bank, accepted in the relevant jurisdiction as legal tender and easy to use would provide great benefits to the users. BoG believes the following aspects of the eCedi will promote its usage from a consumer perspective:

• An interoperable means of payment that can be used by everyone and anywhere in the country;
• Access to digital payment services at the last mile (inclusiveness);
• The simplification of access to and usage of a digital form of cash, will engender competition and ultimately make it easy for service providers to deliver more consumer-centric innovative products and services;
• The efficiency gains from the entire financial sector operating with a digital form of cash are expected to translate into a lower cost of service delivery.

Although CBDC carries a potential risk of shifts from deposit money to digital currency, the eCedi will be implemented to complement, preserve and strengthen the existing role of commercial banks as financial intermediaries and key service providers to consumers. Currently, commercial banks are threatened by the rise of large global payment service providers like Paypal, which might lead to a loss of direct client interaction. According to the results of the 2021 PwC Ghana Banking Survey1 95% of the respondents believe the eCedi will positively impact the banking sector.

The architecture model for the eCedi proposed by the BoG was developed with the aim of preserving the existing financial service landscape in view of the critical role of banks. Functions banks are expected to perform in the eCedi ecosystem include:

• CBDC distribution between the central bank and consumers
• Provision of innovative technology services such as wallets, applications, and other services for consumers to use the eCedi; products and services for merchants to accept
and utilize the eCedi; develop and brand new services e. g. programmable money and machine to machine based payments.

Mobile money operators and non-bank financial institutions such as microfinance institutions, rural and community banks, savings and loan companies, finance houses, finance and leasing companies, remittance companies, and credit unions play important roles in Ghana’s financial sector. The combined use of their services has been higher
among the typically excluded population and have contributed the most to financial inclusion.

The eCedi ecosystem can further boost financial inclusion by potentially curing existing pain points; specifically, liquidity challenges with deferred net settlement of mobile money interoperability transactions.

It is also expected to open new opportunities for FinTechs as follows:
• provide wallets, applications, and other services to consumers for the eCedi;
• build upon the existing infrastructure and without having to rely on the fee-paying
infrastructure of big private players;
• develop products and services for merchants to accept and utilize the eCedi;
• provide innovative services such as programmable money and machine-to-machine
based payments to further the digitisation of financial services and commerce.

Currently, intermediaries in the payment market charge merchants a percentage of the transaction value. Similarly, merchants pay for cash handling services. These two charges which have been the bane of growing merchant acceptance of digital payments can be reduced with the eCedi on the following grounds:

• eCedi as an additional instrument for retail payments brings competition to the Ghanaian
payment ecosystem thus leading to lower merchant fees;
• The simplification of the payment chain has the potential of reducing the cost of payments.

The implementation of the eCedi would benefit the “Digital Ghana Agenda” sufficiently by introducing possibilities for innovative services:

• Automated payments from customers to the Government (customs, fees, etc.);
• Programmable social welfare payments;
• Transparent taxation.

Regulators, globally, are confronted with new challenges owing to technology-driven accelerated changes in the financial service industry. Ghana is grappling with similar challenges and anticipates leveraging the eCedi to:
• Promote financial inclusion;
• Spur competition in the payment system;
• Strengthen the efficient monetary policy transmission mechanism;
• Maintain monetary sovereignty;
• Improve transparency;
• Improve financial stability;
• Bring down the cost of issuing currency


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