Impact of Mobile Money on the Payment ... - Bank of Ghana

1 bank OF GHANAPAYMENT SYSTEMSDEPARTMENTAUGUST, 2017 Impact OF Mobile Money ONTHE Payment SYSTEM IN Ghana :AN ECONOMETRIC ANALYSISIMPACT OF Mobile Money ON THE Payment SYSTEM IN Ghana :AN ECONOMETRIC ANALYSISIIIABSTRACT vCHAPTER 1 Introduction 1 Background of the Study 1 CHAPTER 2 Mobile Money Business in Ghana 3 Role and Motivation of Players in the MM Industry 3 Equilibrium Tariffs and Services 4 Choice of Economic Variables 4 Literature Review 4 CHAPTER 3 Methodology.

2 Estimation Procedures and Analysis 8 Choice of Econometric Approach 8 Estimation Procedures - Diagnostic Testing 9 Descriptive Statistics 10 Schwarz Selection Criteria 10 Correlogram of Variables 10 Stationarity of Variables 10 Cointegration Test 12 Vector Error Correction Model (VECM) 14 Variance Decomposition 16 Impulse Response Functions 16 CHAPTER 4 Conclusions and Policy Recommendations 18 Summary and Conclusions 18 Policy Recommendations 18 REFERENCE 20 APPENDIX 1 23 APPENDIX 2

3 25 APPENDIX 3 27 APPENDIX 4 29 APPENDIX 5 30 APPENDIX 6 31 ContentsDIAGNOSTIC TESTSD iagnostic Test 1: Trend Analysis to Check for Outliers 9 Diagnostic Test 2: Skewness, Kurtosis and Normality of Sampled Data 10 Diagnostic Test 3: Augmented-Dickey Fuller Test for LNMTV 11 Diagnostic Test 4.

4 Augmented-Dickey Fuller Test for LNMTVOL 11 Diagnostic Test 5: Augmented-Dickey-Fuller Test for LNPTV 11 Diagnostic Test 6: Augmented-Dickey Fuller Test for LNPTVOL 11 Diagnostic Test 7: Augmented Dickey Fuller Test for D(LNMTV) 12 Diagnostic Test 8: Augmented-Dickey Fuller Test for D(LNMTVOL) 12 Diagnostic Test 9: Augmented-Dickey Fuller Test for D(LNPTV) 12 Diagnostic Test 10: Augmented-Dickey Fuller Test D(LNPTVOL) 12 Diagnostic Test 11: Johansen's Cointegration Tests for LNMTV, LNMTVOL, LNPTV and LNPTVOL 13 Diagnostic Test 12: Two Co-integrating Equations 14 Diagnostic Test 13: Impulse Response Functions 17 Diagnostic Test 14: Wald Test to Dynamic Impact of Volume of Payment System Transactions 25 Diagnostic Test 15: Wald Test to Dynamic Impact of Value of Payments System Transactions.

5 25 Diagnostic Test 16: Wald Test to Determine Dynamic Value of Mobile Money Transactions 26 Diagnostic Test 17: Wald Test for Dynamic Impact of Volume of Mobile Money Transactions 26 Diagnostic Test 18: VECM Model 27 Diagnostic Test 19: VECM Model 28 Impact OF Mobile Money ON THE Payment SYSTEM IN Ghana :AN ECONOMETRIC ANALYSISVA bstractThis study investigates the Impact of Mobile Money on Ghana s Payment System. The result shows that there exists long-run stable relationships among the four variables under study. The study suggests that improvement in the Mobile Money sub sector leads to development of the Payment ecosystem, deepening of financial inclusion and promotion of cash-lite economy .

6 The empirical study also shows that factors that promote Mobile Money usage lead to deepening of the financial system and promote a cash-lite economy . The study therefore emphasizes the need for the bank of Ghana to continue to deepen the Payment system by leveraging on the widespread usage of Mobile phones as alternative channels for access to finance to help support improvement in the monetary policy transmission OF Mobile Money ON THE Payment SYSTEM IN Ghana :AN ECONOMETRIC ANALYSIS1 Chapter INTRODUCTION Generally, a well-functioning Payment system is imperative for ensuring the safety, stability, and soundness of a financial system.

7 Efficient Payment system facilitates timely completion of financial transactions to enhance job creation, economic growth and improved standard of living. Overall improvement in Payment systems reflects in the entire economy through its inter-linkages with the fiscal, external and the real Payment systems in Ghana consist of an array of institutional arrangements and processes that facilitate movement of monetary claims between two or more economic entities. These institutional arrangements and processes include Payment streams such as Real Time Gross Settlement (RTGS), Cheque Codeline Clearing (CCC), and Ghana Automated Clearing House (GACH) consisting of Direct Credit and Direct Debit.

8 Others are payments cards, E-zwich, Mobile Money (MM) and other Payment service providers. Background of the StudyMobile Money (MM) is gradually becoming a major means of Payment for the unbanked and the underserved in Ghana . The rapid growth in MM usage in Ghana is partly on account of increasing penetration and application of Mobile phones particularly in the rural areas. The widespread proliferation of MM among the unbanked and underserved is premised on recent advances in handset functionality, chip and Mobile network technologies, and upgrade in Point-Of-Sale (POS) infrastructure.

9 These developments have improved the environment for MM solutions, and brought together different industry players, such as banks and Mobile Money operators to establish MM businesses. The use of MM services as a means of Payment brings a number of benefits to the user including convenience, speed, flexibility and affordability (GSMA, 2013).MM may be described as electronic cash backed by equivalent amount of the bank of Ghana notes and coins stored using the Subscriber Identification Module (SIM) in a Mobile phone as an identifier.

10 MM is issued by Mobile Money operators (MMOs) who keep the electronic account on the SIM in the Mobile phone for the users of (2013) defines MM as a transformational service that uses ICT and non- bank retail channels to extend the delivery of financial services to clients who cannot easily be reached profitably withIMPACT OF Mobile Money ON THE Payment SYSTEM IN Ghana :AN ECONOMETRIC ANALYSIS2traditional branch-based financial services. Examples of MM services include electronic-wallets that are used to make peer-to-peer (P2P) transfer, or to receive salary and governments to person payments (G2P).