Can banks survive mobile money threat? The Springboard debates pros and cons

The Chief Executive Officer of Dream Oval, Mr Derry Dean Dadzie, has said the mobile money operations pose as a threat to banking sector.

He said if not checked, the growth of mobile money could outpace that of banks, resulting in challenges to the banks’ bottom-lines.

He explained on the weekly motivational radio programme, the Springboard, Your Virtual University on Joy Fm last Sunday, that banks, at the moment, were having some challenges and their situation could be aggravated by the operations of mobile money.

He, however, admitted that the Bank of Ghana was aiding  the banks with various policy initiatives.

“Without the central bank, I do not think banks will survive because the central bank is putting in place measures and policies that will make the sector exist and for that the banks should thank it for aiding their survival at these challenging times,” he said in contribution to the programme, which was hosted by Rev Albert Ocran.

This week’s programme was a debate on the topic “The Continuous Rise of Mobile Money and E-payment Systems Confirms the Death of Traditional Banking” and was aimed at exploring the contributions and challenges of mobile money to the economy and the financial sector in particular.

Mr Dadzie was speaking for the motion while technology consultant and CEO of Pop-Out, Mr Maximus Ametorgoh, spoke against the motion.

The General Manager of MTN Mobile Money Limited, Mr Eli Hini, was a resource person on the show, providing industry data on the operations of mobile money.

Concept of banking

Mr Dadzie explained that despite the emergence of mobile money, the concept of banking would continue as people would have to move money, deposit money and make investments.

“The question, however, is: are we still going to do these things through the same old traditional methods that we know or new channels, new models, new customer needs are going to drive the way people do banking,” he asked..

He said one of the challenges of traditional banking was the evolving needs of customers.

This, he said was because people were now determining the way  banks served them, unlike in the previous years when banks determined how customers accessed their services.

“Customer are looking for more convenience and do not want to walk to the bank. So, if you are a bank who is building more branches to appeal to customers, then you are on the wrong foot,” he stated.

He added: “Your biggest branch is not the place where people go and do banking but the channel that people use at any point in time.”

He said the how, where and when people access financial services was now key to the survival of banks and thus advised banks to take these things into consideration when fashioning out solutions for customers.

Mr Dadzie also pointed out that mobile money and other e-payment systems were virtually rendering cheque books needless, something he said banks should be wary of.

Maximus disagrees

Taking his turn, Mr Ametorgoh said nothing showed that mobile money was capable of killing traditional banking services in the country.

“Money comes in different forms and so is the means of using the money. I believe mobile money is just one of the many forms that money can be taken and used,” he said

As a result, he said traditional banks rather than mobile money operations were giving mobile money their life support.

This, he said was due to the fact that the monies from mobile money operations would still sit at the traditional banks.

“Even the interest that they are paying to customers now are interests are coming from the banks,” he said.

Mobile money, he said was just a retail arm of traditional banking that will facilitate growth in banks.

“Mobile money is just a small aspect of banking, where you can move only small amounts of money. Mobile banking is yet to grow to catch up with traditional banking,” he said. 

History of MOMO

The GM of Mobile Money at MTN , recounted that mobile money (MOMO) operations started some seven years ago, when the BoG introduced the branchless banking guidelines

At the time, he said the consideration was for banks to lead the space and grow the mobile money innovations.

He said along the line, however, things started evolving and interest in the space started growing. 

“There were a lot more dynamics that ensured that we needed to take a second look at the model and so last year, we had EI guidelines and agents regulations by the BoG and this gave some flexibility and lots of room to some institutions like telecoms to play in the space a lot more than what happened in the past,” he said.

He attributed the interest shown in MOMO to hard work by all stakeholders.

Within the period, he said active wallets on MOMO had grown into 7.2 million by the end of the first half of 2016 against four million in the same eriod last year.

This represents a growth rate of 83 per cent growth within the one-year period.

“This phenomenal growth is what is transforming the sector,” Mr Hini said.