INNOVATION IN FINANCIAL PAYMENTS SYSTEM IN GHANA: A CASE STUDY OF
MTN MOBILE MONEY
CHAPTER ONE AND TWO
BY
PRINCE PENIEL N.K. QUARTEY
, CHAPTER ONE
INTRODUCTION
1.0 Background to the Study
Globally, the financial services sector has experienced significant transformation in the last
decade not only due to the deregulation of the sector but innovation in products and services
spurred on by the evolution of information and communication technology (Aboal and Tacsir,
2018). Foremost in this technological innovation in financial services is mobile money: a
transformational financial product that offers low cost transfers, payments, and financial services
(Aron, 2015; Dodgson et al., 2015). Mobile money is therefore “a financial innovation that
provides transfers, payments, and other financial services at a low or zero cost to individuals in
developing countries where banking and capital markets are deficient and financial inclusion is
low” (Pelletier, Khavul, and Estrin, 2019:1).
Prior to the wide diffusion of mobile money operations in developing countries, the transaction
costs of both providing and using financial services was deemed high (Mas and Klein, 2012;
Weil et al., 2012). Further, informal financial services providers that were prevalent in less
developed countries was prone to leakage costs due to the reliance on middlemen and the
informal system of money transfers that were costly, and insecure (Aron, 2015, 2018) leading to
theft and fraud.
Moreover, the traditional branch banking business in developing countries had limited network
and lacked the agility needed to provide services within certain regions in these countries.
Without a doubt, the geographic and population coverage of bank networks was concentrated in
2
, a few large cities and served individuals of high net worth or formal businesses (De Castro et al.,
2014). This was largely due to the fact that the costs of setting up and running a branch-based
banking network increases substantially as the population density falls which is a common
phenomenon in developing economies. In addition, banks have always emphasised a focus
strategy of delivering financial services to narrow segments of the population (Teece, 2019).
The success and rapid growth of Kenya’s M-Pesa mobile money platform brought mobile money
to international prominence making it one of the most researched topics especially in studies on
financial inclusion (IMF, 2011). In 2017, ten years after the launch of M-Pasa, GSMA (2017a)
reported that there were 276 mobile money services operating in 92 countries with more than
174 million active registered accounts and over 44 million unregistered over-the-counter users.
They added that Mobile money is now operational in two-thirds of low- and middle-income
countries around the world with Vodafone alone deploying the M-Pesa Mobile Money platform
in Afghanistan in 2008, India in 2013, Romania in 2014 and Albania in 2015.
In Ghana like most countries with well-adopted mobile money service, the initial opportunity to
introduce mobile money was not taken up by the banks but rather the telecommunication firms.
Since the core capabilities of telecommunication companies differ from those of banks and the
incentives for exploiting the new mobile moneys technology created radically different
consequences in their business models (Teece, 2019). MTN Mobile Money, which is the market
leader, was launched in Ghana in the year 2009 as the first mobile money service in Ghana. The
company has since seen an astronomical growth in the uptake of MTN mobile money with a
3
MTN MOBILE MONEY
CHAPTER ONE AND TWO
BY
PRINCE PENIEL N.K. QUARTEY
, CHAPTER ONE
INTRODUCTION
1.0 Background to the Study
Globally, the financial services sector has experienced significant transformation in the last
decade not only due to the deregulation of the sector but innovation in products and services
spurred on by the evolution of information and communication technology (Aboal and Tacsir,
2018). Foremost in this technological innovation in financial services is mobile money: a
transformational financial product that offers low cost transfers, payments, and financial services
(Aron, 2015; Dodgson et al., 2015). Mobile money is therefore “a financial innovation that
provides transfers, payments, and other financial services at a low or zero cost to individuals in
developing countries where banking and capital markets are deficient and financial inclusion is
low” (Pelletier, Khavul, and Estrin, 2019:1).
Prior to the wide diffusion of mobile money operations in developing countries, the transaction
costs of both providing and using financial services was deemed high (Mas and Klein, 2012;
Weil et al., 2012). Further, informal financial services providers that were prevalent in less
developed countries was prone to leakage costs due to the reliance on middlemen and the
informal system of money transfers that were costly, and insecure (Aron, 2015, 2018) leading to
theft and fraud.
Moreover, the traditional branch banking business in developing countries had limited network
and lacked the agility needed to provide services within certain regions in these countries.
Without a doubt, the geographic and population coverage of bank networks was concentrated in
2
, a few large cities and served individuals of high net worth or formal businesses (De Castro et al.,
2014). This was largely due to the fact that the costs of setting up and running a branch-based
banking network increases substantially as the population density falls which is a common
phenomenon in developing economies. In addition, banks have always emphasised a focus
strategy of delivering financial services to narrow segments of the population (Teece, 2019).
The success and rapid growth of Kenya’s M-Pesa mobile money platform brought mobile money
to international prominence making it one of the most researched topics especially in studies on
financial inclusion (IMF, 2011). In 2017, ten years after the launch of M-Pasa, GSMA (2017a)
reported that there were 276 mobile money services operating in 92 countries with more than
174 million active registered accounts and over 44 million unregistered over-the-counter users.
They added that Mobile money is now operational in two-thirds of low- and middle-income
countries around the world with Vodafone alone deploying the M-Pesa Mobile Money platform
in Afghanistan in 2008, India in 2013, Romania in 2014 and Albania in 2015.
In Ghana like most countries with well-adopted mobile money service, the initial opportunity to
introduce mobile money was not taken up by the banks but rather the telecommunication firms.
Since the core capabilities of telecommunication companies differ from those of banks and the
incentives for exploiting the new mobile moneys technology created radically different
consequences in their business models (Teece, 2019). MTN Mobile Money, which is the market
leader, was launched in Ghana in the year 2009 as the first mobile money service in Ghana. The
company has since seen an astronomical growth in the uptake of MTN mobile money with a
3
