E-payment in Ghana

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ELECTRONONIC PAYMENT SYSTEMS IN GHANA


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CHAPTER ONE: INTRODUCTION

Research Background

It has become increasingly clear that the use of technology in todays businesses is

inevitable. This is because new IT business opportunities, as well as threats, are coming

at a faster and faster rate (Reynolds p.4). This upsurge in the use of information and

communication technology in businesses today has been attributed to two broad causes,

demand and supply, by Graham and David. On the demand side they wrote the

complexity and volatility of market forces mean that businesses require more targeted

and more current information to gain a competitive advantage and survive

(Graham&David, p.2) and on the supply side the development of faster, cheaper and

more flexible technology for information processing (computers) and information

transmission (telecommunications) has enabled the information sector to grow

((Graham&David, p.3)

The application of the technology in the business world has become a major trend in

practice and generated a hot stream of research/debate both in industry and the

academia. (Petten, 2009) wrote the evolution of ICT has kept researcher and

practitioners alike busy. This trend is expected to continue with an increasing intensity

every year (p.50). Since its introduction and use in the corporate world, information

technology has changed its shape and form and continues to change as various aspects

of business are streamlined to facilitate automation. Various information systems are

used to facilitate business processes, mass use of the internets across the diverse

functions of organisations, the use of databases and database systems are among other

forms that quote most firms today are gravitating towards the digital firm. The reach of


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digital technologies is vast and wide. Technology touches your personal life every day.

Equally so, digital technologies have dramatically altered the competitive landscape of

business. Fifty of the Fortune top 500 companies in 2006 (thats one in every 10) were

digital technology companies (Haag & Cummings, p. 4).

Though with its concomitant shortcomings, the deportment of technology has

innumerable gains that are viewed to surpass its shortfalls. According to Laudon and

Laudon (2012) the increasing investment in technology is to reach six businesses ends:

operational excellence; new products, services, and business models; customer and

supplier intimacy; improved decision making; competitive advantage; and survival.

One business model which has gained much ground in contemporary and facilitated by

technology is e-commerce. The backbone of this e-business is electronic payment.

Research Problem

It is not uncommon these days to walk into a shop which has electronic payment facilities;

though on a broader scale consumer purchases are still on cash bases.

For instance The reality of the current UK payment system is that it is primarily paper

based with more than 80 % of all individual payment transactions taking the form of cash

payments, cheques or other paper credits. (Cred, p.29)

The inertia in adopting e-payment by majority of the consuming public, which has delayed

the transformation of payment systems, is attributable to various factors. Hence the role

of government in hastening the transformation process must be emphasized While the


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move towards electronic money appears to be unstoppable, the speed of change will

depend on the ability of governments to put in place - in cooperation with e-money

issuers, merchants and consumers - a favourable legal and regulatory environment

(Andrieu, p.503).

In the near future, with all firms gravitating towards the digital firm, retailers as well as

buyers of retail goods must come to terms with this emerged phenomenon without

hesitation.As Andreas (1998) puts it, The future vision is of increasing volumes of

business transacted on the Internet using electronic methods of payment and eventually

electronic money in the form of electronic-cash (p. 26).

Whiles retailers will have to embrace electronic payment due to their desire for higher

levels of profit, consumers risk in carry cash around and the convenience of holding cash

in cards makes a stronger case for e-payments.

Research Purpose

The purpose of this study is to evaluate the impact of electronic payment systems, some

emerging issues as well as challenges of its applications in the retail business sector. To

analyse existing payment systems and to propose an improve framework for efficiency in

electronic payment.


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Research Objective

This study seeks to investigate the influence of electronic payment systems on non-

traditional shops-who have adopted electronic payment technology as against their

counterparts, the local market sellers-who do not have this technology. And to

investigate the challenges with existing electronic payment systems

Research Questions

What is the process involved in initializing and completing an electronic payment in

shops?

What are the challenges of electronic payments in Accra?

How has electronic payment affected business sales in retail shops?

Research Methodology

Qualitative methodology will be adopted for this study as it provides thick, rich description

of people and situations being studied, captures what actually takes place and what

people actually say, and provides pure description of people, activities, interactions, and

settings (Lofland, 1971). Specifically, the case study approach will be used. Two retail

outlets with different sizes will be looked atShopRite and total mart. The case study

approach will be used because


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Electronic payment is still viewed as an emerging phenomenon and has not permeated

the commercial constituencies deeply. Hence the population universe and sample will be

too small for any efficient quantitative analysis. Time constraint is a factor for the choice

of case study. But most importantly, as (Zikmund et al.., 2011) puts it, a primary

advantage of the case study is that an entire organization or entity can be investigated

in depth with meticulous attention to detail. (p.140).

The population of the study is all consumer retail shops in Accra, from which the sample

frame, consumer shops in the Ga-East Municipality, was chosen. The sample elements

were chosen via a nonprobability sampling specifically using convenience sampling.

Data was collected using multiple methods such as observation, interview and

questionnaires.

Significance of Research

The significance of this study has be categorized into three:

Research-previous work by other researchers on the topic has generally tended to

unearth the cause of the low proliferation of e-payment in the Ghanaian society. Or to

sugeest way in which the adoption of epayment will benefit the economy. However, this

study is moving away and beyond what most of the previous research has sought to

address in that it is aimed at conceptualizing the current processes adopted by retailer

and buyers who use electronic cards for their transaction and to develop a new model

which will arrest the bottlenecks associated with what is currently being done.


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Practice- practically, the results of this work will be a useful literature for business as well

as policy maker who might consider e-payments in the line of their operations and

functions.

Secondly it will be a significant document for firms wishing to adopt epayment systems as

into their business process and to old firms (those already accepting epayments) which

wish to upgrade and improve their existing processes.

Policy- this study will enable policy makers, such as the bank of Ghana-whose Ezwich

launch could not catch up with the purchasing public till date, get a clearer understanding

of what actually goes at the sales points so as be informed about weakness that may

affect for instance tax preparations as well as the much talked about nationwide cashless

economy vision.

Research Limitations

The research could not look at those retail outlets that do not accept electronic cards. The

response of these groups of people could have been of immense use in explaining why

the pace of epayment in Ghana has been sluggish.

More so, the research will not include any interaction from buyer who are direct parties to

any e-payment process.

Furthermore, the outlets did not keep structured data on epayments-such data, if

available, could have been an immense source of trend analysis and historical inference.


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CHAPTER TWO: RESEARCH METHODOLOGY

Research Framework

The theories explained in this chapter deals with the how and why retailers adopt

electronic payment and whether this can alleviate some of the problems inherent in the

traditional payment schemes (i.e. cash payment). As explained earlier in this study, there

are no single or widely accepted theories that explain the adoption of electronic payment

instruments. We will develop our own theories which would be used to analyze how

electronic payment mechanisms have been adopted in shops and whether it has reduced

or eliminate the problems associated with cash payments in Ghana. Payment methods

based on electronic instruments have undergone many changes recently. This chapter

will also provide a brief overview of the recent trends and map the current situation.

Definitions of Electronic Payment Systems

Due to the nature of electronic payment systems, there have not been a widely or

universal definition for it. But we have attempted to bring some few notable definitions

given some writers. These range from now-familiar automated teller machines (ATM) to

Internet bill payments. According to Humphrey et al (2001), electronic payment refers to

cash and associated transactions implemented using electronic means. Typically, this

involves the use of computer networks such as the Internet and digital stored value

systems. The system allows bills to be paid directly from bank accounts, without being

present at the bank, and without the need of writing and mailing cheques. E-payment can

be defined as payment by direct credit, electronic transfer of credit card details, or some

other electronic means, as opposed to payment by cheque and cash. (Agimo, 2004) It

was also defined as a payers transfer of a monetary claim on a party acceptable to the


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beneficially. (European Central Bank, 2003) According to Kalakota & Whinston (1997, p.

153), electronic payment is a financial exchange that takes place online between the

seller buyer and the seller. The content of this exchange is usually the form of digital

financial instrument (such as encrypted credit card numbers, electronic checks, or digital

cash) that is backed by a bank or an intermediary, or by a legal tender.

For the purpose of this thesis, the term electronic payment refers to as convenient, safe,

and secure methods for payment of bills and other transactions by electronic means such

as card, telephone, the Internet, EFT, and etc. Electronic payment gives consumers an

alternative to paying bills and debts by cash, cheque, money order, etc. Its main purpose

is to reduce cash and cheque transactions.

According to Pariwat & Hataiseere (2004), for the achievement of effective and efficient

retail payment systems, the following considerations that shape the choice of payment

method for consumers and businesses should be taken into account; the convenience,

reliability and security of the payment method, the service quality, involving such features

as the speed with which payment are processed; the level and structure of fees charged

by financial institutions; taste and demographic; and technological advances which have

improve the speed, convenience and flexibility of different payment systems.

Customers Wealth/Levels of Income

Consistent with Kwast and Kennickell (1997) research, wealth has an important role to

play in terms of consumers decisions on payment choice. Consumers wealth may

influence payment choice and the availability of payment instruments that one can

choose. For instance, while wealthy consumers may be able to fund their obligations

generally, consumers that experience brief financial shortfalls may not find electronic bill

payment desirable as a payment instrument. (Mantel, 2000) In such a situation, the


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consideration of the risk factor will let some consumers to avoid using pre-authorized

electronic bill payment.

Educational Level

On the bank customers survey, we also focused on education, because this might affect

the demand for electronic banking products. For example, Kwast and Kennickell (1997)

have illustrated how education play important role in determining household use of e-

money products. Kwast and Kennickell concluded that the US market for such products is

still highly specialized, with the demand coming almost entirely from higher income,

younger, and more educated households that have accumulated significant financial

assets.

Educational levels of customers determine whether consumers will adopt electronic

payment or not. Studies have shown that highly-educated people patronize electronic

payment products than less-educated people. The technicalities involved in some

electronic payment transactions discourage less educated customers to patronize its use.

(Annon, 1999)

Employment Levels

Those employed who receive their pay through the banks are more likely to use

electronic means of payment. Employees, through their constant contacts with banks are

more exposed to payment products, and are therefore, likely to patronize the products.

According to Ferguson (2000), more than half of the workers in the US, in 2000 receive a

direct deposit of their pay through the Automated Clearing House (ACH).

Personal Preferences

Another factor influencing payment instrument choice pertains to customers personal

preferences. The following six general consumer preferences were identified: (1) control


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bank accounts to merchant accounts when making purchases. It uses a debit card to

activate an EFT process. (Chorafas, 1988) It actually comprises two distinct mechanisms:

debit and credit cards.

Credit Cards

This is a plastic card that assures a seller that the person using it has a satisfactory credit

rating and that the issuer will see to it that the seller receives payment for the goods or

items delivered.

This represents the automated capture of data about purchases against a revolving credit

account.

(Pierce, 2001)

Debit Cards

These were a new form of value-transfer, where the card holder after keying of a PIN,

uses a terminal and network to authorize the transfer of value from their account to that of

a merchant. Introduced more recently, debit together with credit cards represent the most

rapidly growing method of payments in several OECD countries. (Pierce, 2001)

When a payment is made through a debit card, the funds are immediately withdrawn from

the purchaser's bank account. The advantage is that the buyer has the funds to make the

purchase and paid for right away, so there's no credit card shock when the statement

arrives in the mail.(Pierce, 2001)


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Online/Internet Payments

This is the means by which customers transact business with a bank through the use of

the Internet network. Customers can access their bank accounts and make transfers

through a web site provided by the bank and complying with some rigorous security

checks. The Federal Reserve Board of Chicagos Office of the Comptroller of the

Currency (OCC) Internet Banking

Data Collection and Analysis

The study sought to evaluate the effectiveness of how electronic payments are effected

(done) at various pay points across the capital as well as its contribution to the bottom-

line of retails and what challenges hinder the success of electronic payments. The case

study approach was used in order to obtain an in depth appreciation of the subject matter

of electronic payments (Kalofet al.., 2008).

Initial questionnaires were sent to the two respondents: these they complete and handed

in within two days. The questionnaires created the foundation upon which the case study

proper was built one week later. The respondents were chosen based on

Principally, face-to-face semi-structured but open-ended interviews were used to collect

data. Information acquired via personal observation was marginally used as well. This

enabled us to gather empirical evidence and much confidence that the data we have

collected is primary and reliable.

The questionnaires were designed in such a wat as to give fore-knowledge to the

respondents about the type of questions to expect during the interview. The questions on


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the questionnaire were open-ended and precise, a bit of bio data was also collected via

the questionnaire. The sampling method used to choose

A follow-up interview was conducted for the respondents via phone exactly three days

after the face-to-face interviews. The purpose of this was to clarify some issues that came

up during the preparation of the reports and to reaffirm some the issues addressed in the

earlier interview.

Two retail outlets were selected namely

Shoprite, Accra Mall;

Pills and Tabs, Legon.

The two were chosen due to the uniqueness of their similarities and discrepancies. But

essentially the contrast between them is of is enormous capital to our finding as a creates

a case for shops that bear their feature.

Shoprite, Accra Mallis unarguable the most patronized retail outlet in Accra. It is the

most popular destination majority of shoppers in the capital and the brand is virtually a

household name.

Pills and Tabs, Legon, unlike Shoprite, is a quiet small shop located at Legon, outside

the University of Ghana. The flow ofshopper traffic is very minimal and its popularity

concentrated within its catchment area.

It is these variations in patronage, popularity, size, that we wished to make incumbent in

our study. The cases were then analysed for themes frequency (Zikmund et al,p.140)


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CHAPTER THREE: RESULTS AND FINDINGS

Findings

At the ShopRite, it was estimated that only about 9% of sales is accounted for by

electronic payments while it is about 7.5% at Pills and Tabs. Hence on average

8.25 of weekly purchases was paid for by card.

Shoprite estimated that about 90% of their card holding customers are not

Ghanaian nationals while Pills and Tabs estimated same to be about 45%.

Therefore on average, 67.5% of card buyers are foreign nationals.

Generally, no formal training is conducted for persons designated to over the

processing of electronic payments.

That e-payment is not seen as a source of competitive advantage but rather

considered as some extra service rendered to the benefit of customers alone.

Consequently conscientious investment into the development of equipment and

operations are largely nonexistent-that usually such equipment are provided by the

card issuing institutions.

Case finding

CASE ONE:

We spoke to Miss B (pseudonym), a sales supervisor at Shoprite, Accra mall.

Bio Data


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Name: Miss B

Job title: Sales Supervisor

Length of employment: 3years

Educational level: Diploma in Business Administration

She disclosed that the process of e-payment starts upon completion of the selection of

items by customers. The actual process of effecting payment from a customers card via

a card reader is done by person other than the person sitting at the payment point who

checks all items bought and receives payment. The procedure and type of receipt differs

depending on the type of card

Miss B disclosed that the card types frequently used by customer include (but not in any

particular order) Ezwich, Visa, ATM Card, MasterCard.

However, and upon further interrogation, we found out that operationally these cards are

categorise into two. Thus we have

1. Those that carry the magnetic stripe- herein referred to as Swipe cards

2. Those that are accessible via a PIN - herein referred PIN cards

Customer involvement in the processing of payments from swipe cards is minimal relative

to the PIN cards. Passing the swipe card under the sensors of a card reader will reveal all

the personal and financial details of the customer- and if the cashier is satisfied with the

identification and financial details of the buyer, he/she proceeds debit the customer by the


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Discussion of Findings

In Figure A above, we illustrate a summary of the payment process as it pertains in the

two shops as there are no existing designs. We structured the existing process into three

activities namely

PrePurchase Activity

ProcessPurchase Activity

PostPurchase Activity

The PrePurchase stage involves all activities leading up the cashier picking the electronic

card from the customer. The activities are

Selection of items from the shelves,

Submission of items to the cashier

Submission of appropriate e-card for payment

Once the cashier picks up the card from the customer, the next process effectively begins

i.e. ProcessPurchase stage which involves:

Cashier swipes card or allows buyer to enter PIN

Buyers details on the card verified

Buyer account debited

Receipt issued to buyer

Duplicate receipt filed by cashier.


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The last stage of the process which effectively terminates the buying and selling process

is herein referred to as PostPurchase and involves

Customer pick card from cashier

Collects all items bought

Checks account from card issuer

When a customer receives his account statement from the card issuer, he/she may be

dissatisfied if there are inconsistencies between the receipt of purchase and the

statement. To address this, the customer will have to report back to the shop to initialize a

process of correcting the anomaly.

See Figure B is an improvement of this existing system and our suggestion for effieciency

in the electronic payment process.


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Like in fig. 1, the payment process is activated at the point of payment when a customer

submits collected items to the cashier. As an improvement from the old system, specific

booths are dedicated to card holding customers; this will ensure they do not join the long

unwinding queues that develop in front of the normal cashiers. In the not too long run,

such a demarcation will redirect the attention of some patrons to the use of electronic

cards for payment.

After the submission of the items the cashier quickly adds up the cost and begins to

process the customers card. This is the next stage in the framework (fig 2) called card

verification. The verification of the card depends, to some extent, on the type of card.

After the initial verification which tries to prove authenticity and account level, and upon

satisfaction, the cashiers send a request to the card issuer. Upon receiving clearance

from the card issuer, the system move s to the next state i.e. printing of receipts.

At this stage, a printout of items bought prices including all charges is generated and

given to the customer. Here again, there is simplification if you compare with fig1. Only

one receipt is printed out which is the one for the customer thereby eliminating the

second receipt printed and filed by the cashier. The cashiers evidence of sales and

payment is automatically entered into a database which accompanies the payment

system. This speeds up the payment process and saves cost.

Upon completion of this stage, the cashier then presses an exit button before attending to

the next customer. Once this button is pressed, a summary of the payment details are

forwarded into the accounts department automatically. This enables the accounts

manager to track payment transaction by the minute.


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CHAPTER FOUR: CONCLUSION

This study has covered some issues associated with payment transactions, instruments,

and systems prevailing in the retail subsector in Accra. It contains a description and

analysis of the electronic payment process and instruments from the viewpoint of the

seller. Furthermore, it looked at the relational entities involved in a typical complete

electronic payment process with an improved relational model for the enhancement of

electronic payment process in Accra. Finally, it included a description of innovations in

electronic retail payments in Ghana. As underscored earlier in this study, the electronic

payment in Ghana over the years has been under patronised but is currently gaining a

marginal popularity among certain classes of people but that transactions have remained

highly paper-based. The results of the study shows that, on the average, sales via

electronic payments have been very low compared to its cash based counterpart which

evidence has been adduced for the low investment by shop into electronic payments and

the inertia by most retail outlets to adopt epayments as well. This conservatism on the

part of both sellers and buyers to embrace payments via electronic cards has deprived

and continues to deprive individual consumers, businesses and the larger economy the

numerous benefits associated with the electronisation of transactions.

As the world around us is all going digital and international transactions becomes

rampant retailing in Ghana must keep up with the pace and intergrate itself quickly into

the bigger digital world one in which nearly all of the organizat ions significant business

relationships with customers, suppliers, and employees are digitally enabled and

mediated (Laudon & Laudon p.11 to).


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The system, therefore, must make a conscious effort to provide innovative, simple and

efficient electronic payment solutions that can entice both buyers and sellers to electronic

payments and begin a revolution away from the age old cash only economy to the much

talked about cashless economy. The role of commercial banks cannot be underestimated

if the dream of creating a cashless economy is to be realized soon. As discussed earlier

in this study, banks are the largest issuers of electronic payment cards hence any efforts

targeted at improving electronic payment must recognize them as key stakeholder.

Perhaps the two main challenges facing the electronic payment process in retail outlets is

lack of publicity and inadequate training for processing staff. Which problems if dealt with,

will be a first step toward removing the cloud of doubt which stifles consumer interest in

electronic payment systems and compel sellers/retailers to want to go for the gains that

accompanies electronic payment.

We can conclude by saying that consumers have a propensity to show rational payment

preferences and behaviours based on the analysis of the consumers survey. It was

observed that consumers behaviours are consistent with their preferences, which vary

but may include convenience, incentives, control, privacy, security, and personal

involvement. The study showed that, one of the significant impacts pertaining to payment

instrument choice on consumer decision-making is consumers financial positions and the

nature of specific transactions.

If the right steps are taken, based on scientific market evidence, we are convinced that

many people are going to flock to electronic payments as it becomes easier to use.


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Because of its ease of use, convenience and safety, it will be a credible alternative to the

present phenomenon of cash.

However the road to this destination does not look simple from afar and near because we

still have a large chunk of Ghanaians who cannot use computer and so do not have any

confidence whatsoever in the digital world. Additional, a greater majority of the population

belong to the unbanked: according to the Chronicle newspaper only 5% of Ghanaians

had bank accounts by 2004. Currents estimates puts the figure at about 27%- which is till

way below what is desirable. Therefore, there is the need to create more awareness to

entice the unbanked people into the banking system. The result demonstrate low user

acceptance of existing payment products a pivotal factor in determining the success or

failure of any payment system.

An area that is worth for further research is,

the role of commercial banks in changing consumer attitude towards electronic

payments

an enquiry into the reluctance of consumers to hold cash in cards


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regulatory framework to deal with digital business in general and electronic payments in

particular will go a long way to removing what is currently a major obstacle to the

expansion of general business activities. The emergence of an electronic payment

system which is easy to use, cheap to process, and boost trade, is likely to have a range

of only partly anticipated side effects. For example, it could result in the creation one

currency for the Economic community of West African States (ECOWAS) which the

countries are yearning for.

There is the need for banks to get actively involved in the process leading up to the

enlargement of electronic transactions. Banks should educate consumers about all of

their payment system options and whip up confidence in active as well as would be users

of electronic payment system electronic payments about the gains of changing to

electronic payment systems. Consumers will need to be informed about the potential

liability for the use of new types of electronic payment, so they can understand how it

differs from cash. Although retailers in Ghana can learn valuable lessons from the

experiences of retailers in other countries, the retail sub-sector must develop its own

payment system. Simply importing another countrys electronic payment system without

adjusting for geography, infrastructure, banking and legal structures, business practices,

culture, and needs could lead to a suboptimal system.Thus framework (fig. 2) presented

earlier in the study demonstrates the foundational parameters needed for any such

systems and can be used as a generic prototype for design of electronic payment

systems.

Shops should introduce their own cards


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Investments in e-payment systems

Training of staff

Reduce post purchase lag

Reduce purchase lag

Provide prepurchase information


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E-payment in Ghana

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