Analyzing the evolution of Ghana’s FinTech industry

Financial technology (FinTech) has radically transformed our financial system. The power of FinTech is reflected in how it is rapidly changing an age-old financial system that is deeply rooted in tradition. Ghana's FinTech sector is mirroring the growth and development of global advancement of FinTech.

Currently, the FinTech space in Ghana is organized around actors, namely FinTech firms, regulators, industry associations, service providers, and customers. Regulation of the FinTech sector strands several regulators, including the Bank of Ghana, National Pensions Authority, National Communications Authority, National Insurance Commission, Data Protection Commission, and The Securities and Exchange Commission. The Bank of Ghana plays a lead role since most FinTech services and solutions are directly under its regulatory oversight.

To drive a progressive regulation of the FinTech sector, the Central Bank set up a dedicated FinTech and Innovations office to support the FinTech sector.
Also, the bank has in place a strategic plan termed the "National Payment Systems Strategic Plan (2019-2024)", which "sets forth the policy direction and guidelines that will promote an enabling environment to develop the Ghanaian payment and financial systems. It leverages on opportunities provided by digital technologies to promote competition, efficiency, innovation and financial inclusion within the payment ecosystem".

Currently, there are over 12 laws and regulations guiding the FinTech sector covering areas such as payments, e-money, electronic payments channels, cyber and information security, branchless banking, anti-money laundering. The notable law governing FinTech in Ghana is the Payment Systems and Services Act, 2019 (Act 987), with provisions on payment service facilities and issuing of electronic money, which paved the way for regulations of FinTech entities. In 2020 the Ministry of Finance launched a national policy in to guide the evolution of digital finance as a whole and Fintech in particular.

The FinTech industry in Ghana can be categorized under two broad areas; licensed and unlicensed. Together, these firms offer a myriad of services and solutions. It is essential to point out that beyond FinTech firms, the existing traditional financial institutions such as banks, insurance, pension and other financial services are also leveraging the power of Financial Technologies to roll out their current services or offer new ones. The industry is seeing direct competition by FinTech against traditional financial institutions such as FinTech offering mobile money wallet, which competes with traditional bank accounts. In the same breath, there is a partnership where a mobile money wallet is linked to a traditional bank account to enable interoperability. Overall, the FinTech firms are leading this space especially mobile phone type solutions; therefore some traditional financial service providers are now playing catch up in terms of how they can effectively deal with the power of FinTech.

The FinTech industry is made up of a lot of moving parts; therefore, it is relatively difficult to segment the sector into distinct schemes since there is a lot of cross-over as well as multiple financial technology applications used in any given service. However, we can state the following broad categorisation based on the services they offer (payments companies, payment aggregators retail solutions, micro billing platforms), by the technology they are predominately build their services on (mobile money lead solution, blockchain and mobile apps) and by primary sector (remittances, lending, insurance, banking, finance real estate, pension, wealth management).

There are currently 26 regulated FinTechs by the Bank of Ghana (https://bit.ly/3Ds77rD) and an estimated 300 other companies operating in Ghana's FinTech ecosystem. In assessing the size of the ecosystem, FinTech firms can be classified based on their evaluations and the funds they can raise in venture capital. The pre-seed funding phase will be the starting point for a new company's foray into the investment arena. Typically, founders with friends and family constitute investors in the business. The second phase, seed stage, is when a business idea as a "seed" is planted, commencing the official equity funding stage. The pool of investors expands to include incubators, venture capital, especially "angel investors," and others. Some startups may progress to a more significant investment phase known as Series A investments, where the investor takes up more risk but for a better equity price. In contrast, for Serie B, it comes with less risk, attendant lower equity price, and these are typically more matured entities. At the Series C funding phase, the firm is more established, and funding is needed to scale up and grow the business successfully and rapidly.

In Ghana majority of the FinTech firms are at pre-seed, and the seed phase, with a recent significant Series A investment in Ghanaian FinTech space going to Zeepay Gh Ltd, valued at US$7.9 million in June 2021. Other prominent actors include IT Consortium, Hubtel, MFS Africa BitSika, Emergent Payments, Cube Robotic, PaySwitch, BezoMoney, iPay solutions, Express Pay, Kwidex, SlydePay, Interpay, iPay, PennySmart, Nvoicia, etc.

The ultimate valuation in the space is "unicorn," which describes a privately held startup company with over $ 1 billion. There is currently no Ghanaian FinTech that has attained the status of unicorn yet, however, based on the rapid growth rate, it is only a matter of time for Ghana to produce one soon. On the African continent, there are unicorns, including Interswitch – $1-billion (Nigeria), Flutterwave – Over $1-billion (Nigeria), Andela – $1.5-billion (Nigeria) Wave – $1.7-billion (Senegal), and OPay – $2-billion (Nigeria)

Ghana's FinTech industry is now firmly established; therefore, there is a need for a supportive regulatory environment backed by a vibrant, innovative national capacity and Ghanaian FinTech firms need to put in an effective international strategy to enhance their reach and value, especially if they want to attain unicorn status.

In conclusion, the global fintech space is fast-moving and aggressively competitive. Ghana is making strides, and industry actors must be innovative at the speed of light to stay ahead of the curve.

The writer, Kwami Ahiabenu, II (Ph.D.) is a Technology Innovations Consultant
E-mail: [email protected]