“Now I have multiple streams of collection for my business and do not have to bear the burden of carrying bulk cash with all its insecurities. Financial transactions for my business are conducted seamlessly using my mobile device anywhere I am.” – Auntie Maggie, Owner of Multiple Stores at Makola Market
Ghana’s economy, as reported in the PwC’s Global Economy Watch for 2018, is expected to grow even faster than that of China, which has been predicted would grow by 6-7%. The World Bank estimates that Micro, Small and Medium Enterprises (MSMEs) contribute significantly (circa 70%) of this growth in the form of employment and business productivity. One key factor to the success of these projections is the development of an effective system on how purchases of goods and services are paid for and how payments for sales are received.
The MSME can be categorised into these:
Consumers in our local market places prefer cash as a means of payment for goods and services. As a result, sellers sometimes would have to count large sums of monies in situations where the transaction is of high value and then balancing to confirm for accuracy and completeness, which could be very cumbersome. Now the ability to manage these cash transactions in an innovative way, both instantly and efficiently, is critical to business growth.
Ghana is a cash-reliant economy with over 99% of payments being cash based. To this extent, there are several activities and policy statements being drafted to turn the country into a cash-lite economy. Financial players, therefore, need to take the front row seat to steer the conversation towards consumers and businesses and the benefits of going digital or having a strategy in this digital world.
Today, technology is unearthing new channels and inventions of making payments electronically. But while digital is undoubtedly on the rise, a cash payment is still prevalent. The responsibility is on organizations to push for enhanced payment systems to make business transactions seamless.
The emphasis is on payments, but it is critical we involve the MSMEs in these conversations since payments and collections are an essential component of their business. The consumer as the purchaser is improving the use of international cards and wallets as alternative sources of payments. The collector or the seller, on the other hand, should be ready and trusting to accept these emerging payments that will solve the problem. It is the most apparent encapsulation of how a cash-lite economy should look like or rely on.
It has therefore become important for businesses to also be in the position to accept these payments; hence emerging payments come with emerging collection tools to holistically deal with the cycle of buying and selling. The MSMEs in the same vein need to rely on these emerging payments for settling and running of their businesses.
The digital payments landscape is characterized by the following:
These collection mechanisms, with emphasis on their collection attributes, will benefit not only the digitally savvy but also the not so digitally inclined as it can be defined and used on mobile phones, MPOS or POS or QR code. You just need a phone and it can be turned into a multipurpose collection hub to the banks and wallets.
A major benefit and reason why MSMEs should take advantage of digital payments and revitalize their businesses is the inherent security they come with. Payment is made directly into a bank account or wallet. No cash handling risk.
It is also cheaper for a sector with minimal margins to use better improved simple, secure and faster tools and means to collect payments or make payments.
One other benefit that can be considered as intangible is the role digital payments play in ensuring the implementation of good governance principles which ensures sustainability of the MSMEs. A sole cash reliant business will find it difficult to distinguish the business from the owner and also foster trust in the business environment.
Again, it breeds confidence which encourages investors (angel investors, equity partners or banks) to pay attention and assist business growth as the possibility of diversions is reduced and ring-fencing is reinforced.
Seamless collection processes create client loyalty as customers are happy to have options when shopping and the simplicity of using their mobile phones or cards to make payments.
Finally, access to market is noted to be one of the key challenges of every MSME and changing collection and payment method from cash is one step closer to the local, sub region and international markets.
One will be tempted to allude to cost as a depriving factor but as indicated in one of the benefits, this rather saves money as the security it fosters might not just be quantifiable but sustains the business.
As financial institutions, the benefits of using client’s transaction pattern, data and information to make bespoke collection tools for the benefit of MSMEs is a focus and our digital payments drive is geared towards just that. This is a field that has enormous benefits to the MSME and one would say it is more aligned to the demographics and dynamics of MSMEs.
The case is evidently strong for the use of the mobile device closer to being at least 98% cashless and MSMEs will reap the benefit of running the businesses seamlessly and save cost and time.
By Pearl Nkrumah
Head - SME