Ghana’s Financial Technology (FinTech) state of play 2022
Ghana’s Financial Technology (FinTech) is growing by leaps and bounds. The FinTech ecosystem in Ghana can be characterized as experiencing rapid transition from the “introduction to growth stage”. In the introduction stage there was a major lack of collaboration and interoperability was a far-off dream, with each FinTech working in a silo and jealously guarding its territory and trade secrets.
The industry is now fully established with key institutional arrangements, capital flow, rising visibility as well as the entrepreneurship drive in place needed to sustain and grow this sector.
The anchor of growth in the sector is placed squarely on the unmet demand for banking and financial services, the promise of solving financial inclusion challenges and achieving the goal of a cash-lite society in the short to medium term.
Ghana’s FinTech industry is now contributing to the growth of Ghana’s economy with the potential of becoming a major driver to economic transformation given its significant power to enable an increased efficiency across all spectrum of the society.
This report was based on extensive stakeholder consultations, census of FinTech firms, and a review and analysis of relevant data sources culminating in the generation of a visual map of the sector. For the purpose of this report, we broadly define FinTech as an evolving industry which is offering technological service and support to the financial sector, providing digital mediated financial services and offering a new pathway for the financially excluded to participate in the formal financial services sector.
Ghana’s Fintech sector is dominated by payments, with mobile money being the dominant tool for most players in the area. In terms of classification, the sector can be segmented into licensed actors and unlicensed actors who do not need licenses per se to deliver their services or rely on third party licenses to facilitate their operations.
Due to the dominance of payments in the sector, the dominant regulator is the Bank of Ghana, which currently licenses FinTechs under 5 main categories namely; Dedicated Electronic Money Issuer, Payment Service Provider (Scheme), Payment Service Provider (Enhanced) Payment Service Provider (medium) and Payment Service Provider (standard).
Other regulators are the Security and Exchange Commission, the Pension Authority and the National Insurance Commission (which recently launched the Innolab Accelerator Programme to spur innovations in Ghana’s insurance sector).
Beyond payments providers, there are other actors in Ghana’s FinTech sector working in thematic areas such as insurance, pensions, blockchain, security trading and assets management, agriculture, buy now and pay later, loans and property. It is important to emphasis that some of the fintech companies provide multiple services therefore putting them into neatly defined categories is challenging. However, our classification provides an overview of how the sector is organized and explains the offerings by the sector’s main actors.
Based on our census, we estimated the number of FinTech companies in Ghana to be over 100 companies. See full listing at https://www.knowledgeinnovations.com/directory/. In term of classification, we developed 16 categories to segment actors in Ghana’s FinTech Ecosystem 2022. It is important to note, this classification is providing a big picture of players in the sector, however, it is important to note, this is not straight jacketed since firms could be serving multiple market segments, for example, a payment service provider could be providing varied services in pensions, insurance, etc
Global FinTech index 2021 placed Ghana at a rank of 71 out of 83 countries on the Fintech performance index with a minus thirteen (-13) growth. In the Middle East & Africa regional rankings, Ghana ranked 11 out of 19 countries surveyed. These figures show that there is a lot of room for improvement if Ghana’s Fintech sector is aiming at become a regional or global leader. The sector also needs a lot of innovation and collaboration to make it a robust player in the global FinTech industry.
Main Licensed categories (based on Bank of Ghana licensing regime)
- Dedicated Electronic Money Issuer
- Payment Service Provider (Scheme)
- Payment Service Provider (Enhanced)
- Payment Service Provider (Medium)
- Payment Service Provider (Standard)
SERVICES, APPLICATIONS AND SUPPORT
- FinTech Support and value-added services
- Payment processing & switching
- Insurance & Pensions Crowdfunding, AgroTech and Proptech
- Remittances/ currency exchange and cross border
- Savings/investments & personal finance
- Securities trading & assets management
- Crypto currency/Blockchain
- Digital lenders and credit
- Buy now and pay later
- Mobile money support services, agency and informal banking
- Digital Bank
See below, Ghana’s Fintech Firms map
Ghana’s Fintech Space Key highlights
There is no unicorn in Ghana that is Fintech company valued at 1 billion dollars. Jury is still out there when Ghana will produce a unicorn, however, there is an agreement on the fact that an internationalization strategy is key to a fintech company in Ghana attaining unicorn status.
The trend in the past shows Ghanaian traditional financial companies and banks were not able to establish branches abroad and the prediction is that the Fintech sector will be able to set up more international operations reversing this trend, as there are currently a number of Ghanaian Fintech firms operating internationally.
Fintech firms are mostly located in the national capital of Accra with few attempts at having regional nodes. However, these Accra based firms are able to service customers across the country using agents. Having geographical offices outside Accra can help in brining services to the door steps of the unbanked who are mostly found in rural Ghana.
The industry is made up of a mixed bag of time-tested tech companies who later evolved into Fintech operations and new start-ups cutting their teeth in the sector. We estimate the average age of the Fintech firms to be 5 years.
Ownership structures show that while some Fintechs are set up with Ghanaian and foreign capital, a majority of entities in the sector are Ghanaian owned. The highest major publicly announced investment in a Fintech firm in Ghana stands at $17 million investment in Float.
Only a few fintech companies are listed on Ghana’s stock exchange market (not many of the others qualify to be listed). This is a shame as a listing on the GSE would open up financing source and help with raising capital.
Ghana’s Fintech sector is churning out of lot of innovations which are mostly ideas from elsewhere but modified to solve local challenges. The sector is yet to produce a major radical innovation of its own.
Collaboration is the norm in the industry largely due to how services and products are configured; demanding interconnection between various entities working to deliver solutions. There is no evidence of an industry led support mechanism such as research and development; and deep collaboration to enable innovations which cannot be done at the firm level.
Competition is fierce in the industry given the market size and high number of companies operating in the sector. The key question becomes what is the optimal number of licensed FinTech for our current market size?
The Fintech sector is working hard in terms of its contribution to solving the financial exclusion quagmire in Ghana; however, the sector needs to do more in terms developing solutions to enable more digital payments instead of informal cash transfers enabled by mobile money.
The development of a collective voice for the industry is a work in progress, for example, the industry has not spoken on the “e-levy” an electronic tax expected to be imposed on core transactions by the industry especially its impact.
Support for start-ups such as incubators, accelerators and funding need significant and intentional push, currently there are few and dispersed efforts which is not far reaching enough. Evidence points to the fact that, countries who have achieved great heights in innovations do so by enabling innovation and building capacity through research and development, the use of incubators, accelerators and funding mechanisms.
Lack of affordable human capital remains one of the key challenges confronting the sector coupled with a lack of capital flow especially for start-ups. Although the amount of integrity capital for fintech licensing are in 5 tiers, namely Dedicated Electronic Money Issuer 20M GHC (3.3m USD), Payment Service Provider (PSP) Scheme 8M GHC(1.3M USD), PSP(Enhanced) 2M GHC(333,333 USD), PSP (Medium) 800,000 GHC( 133,333 USD) PSP (Standard) no capital required, the cost of licensing is prohibitive for some start-ups.
Licensing regime has introduced better governance in the running of fintech as have the directives to adhere to international standards such as ISO/IEC 27001: information technology — security techniques — information security management -requirements offered by the International Organization for Standardization( ISO) and International Electrotechnical Commission( IEC). Another requirement is the Payments Card Industry Data Security Standard (PCI DSS) which is a set of security standards for all companies that accept, process, store or transmit card information.
Given the fast pace nature of the industry, regulatory reviews should be the norm rather than an exception. Regulators, especially the Bank of Ghana, are yet to provide the Fintech sector disaggregated performance and reporting data to help in the understanding of Ghana’s Fintech industry, access its growth or its development trajectory.
There is a heavy emphasis on digital payments due to its perceived attraction of generating fees and commissions, meaning other financial technologies innovations areas are orphaned. Beyond digital payments, Ghana Fintech actors must extend their reach to innovate in other related areas to build a genuinely vibrant innovative Fintech ecosystem.
In conclusion, Ghana’s Fintech space is bubbling with a lot of new players, interesting solutions and innovations all of which have great potential and place it in line to become a major contributor to the GDP of Ghana, create jobs, help solve the challenge of the huge numbers of unbanked individuals and support Ghana’s drive towards a cash lite society. In other words, the building blocks are in place for a major takeoff if an enabling environment is sustained and roadblocks are removed.