Essay: E-payment

The growth of modern civilization hinges on payments. Systems of payment have substantially metamorphosed over time, from the stone age barter system, through to coins and to virtual payment ( Ferguson, 2008) Ejisi Volume 15
According to (Kumaga, 2010, p. 22) Electronic payments in most African countries is very limited in use or virtually absent. In most African countries the required groundwork, legal as well as the enabling regulatory framework for electronic payments are lacking (Taddesse & Kidan, 2005). Particularly, electronic-payments infrastructure such as internet and mobile networks are not widely accessible in Africa. Moreover, financial institutions are not adequately automated to enable e-banking and e-payment (Kumaga, 2010)
Electronic payments are financial transactions made without the use of paper documents such as cheques. Electronic payments include credit card, debit card, smart card, electronic-wallet, electronic-cash, e-cheques among others. E-payment systems have received different level of acceptance world over; some methods of electronic payments are highly accepted while others are quite low. (Rachna & Singh, 2013)
According to (Rachna & Singh, 2013) There are two types of payment systems as far as e-payment is concerned: Internet ‘Based payment system and Electronic Transaction-Based payment system
The use of electronic payments (e-payments) has expanded rapidly in recent years, thanks to technological innovation and falling costs in computing and telecommunications. The spread of electronic-payment usage vary unequally between countries partly due to differences in factors such as quality of regulatory framework and readiness of telecommunication groundwork. New payment services based on the Internet and mobile phones flourish in the advanced economies. The use of electronic payments in the marketplace for retail payments, including the Electronic Fund Transfer at Point-of-Sale (EFTPOS), E-banking, telephone banking, Internet banking, E-debit, and E-money, has become a common and well conventional practice in the advanced countries that have extensive and well developed telecommunication network and infrastructure. On the other hand, in the some of the developing economies the rate of development of e-payments appear to be less clear. (Hataiseree, n.d.)
2.1.1 mobile money
The definition of ‘mobile money’ varies across the industry as it covers a wide scope of overlapping applications. Mobile money is the services that allow electronic money transactions over a mobile phone. (Young, 2009) It is also referred to as mobile financial services, mobile wallet and mobile payment. In this research mobile money is defined as a broader term that includes all types of monetary transactions executed via mobile phones.
A wide range of mobile money applications have developed throughout the years. Some major groupings include:
Mobile banking which is the use of a mobile phone to remotely access a bank account, primarily for account balance checkup and bill payment services
Mobile money transfer (remittance) is a peer-to-peer application making use of a mobile phone to send money to relatives and friends, primarily across international borders
Mobile commerce (payment) is the use of a mobile phone to make financial transactions for either purchases or sales, remotely or on-site, retrieve promotion information or coupons, and deliver gift items.
Mobile financial services and mobile commerce are not new concepts in the telecom industry. Mobile network operators started exploring the concept of mobile payments in 2000 with little success. Recent advances in handset functionality, chip and mobile network know-hows, and upgrades to point-of-sale infrastructure have however dramatically improved the environment for mobile money solutions, bringing together different industry groups, such as banks and operators. (Young, 2009)
According to an analysis by Ernest and young 2009, there are five key enablers to successful delivery of mobile money and e payment adoption for that matter as shown by Figure 1 Key enablers driving the delivery of mobile money.
Key enablers driving the delivery of mobile money
Ernest and Young identifies the delisted as the main enabler for successful delivery of money: Technology, market , regulation, risk and infrastructure
2.1.2 Challenges of Electronic Payments
Electronic payments despites it numerous benefits comes with its own challenges even in the developed world. The identified challenges as revealed by previous research works are infrastructure, security, regulatory and legal issues and socio-cultural challenges.
The Security of Information and data is critical in all Information systems. Information security is the practices, procedures as well as technology put in place which ensure that information is protected from alteration or accidental change (integrity), unauthorized access (confidentiality), and is readily available (availability) to authorized users on request.
An unsecured e-payment system may not get trust from its users. Trust is very important to ensure acceptance from users. According to (Worku, 2010) , e-payment and e-banking applications represent a security challenge as they highly depend on critical ICT systems that create susceptibilities in financial institutions, businesses and potentially harm clients. It is vital for banks to understand and address security concerns in order to leverage the potential of ICTs in delivering e-banking applications (Worku, 2010). A secure electronic financial transaction has to meet the following requirements: Integrity and Authorisation
Integrity is defined as the accurateness, completeness and validity of information in accordance with business values and expectations (CISM Review Manual, 2006). In other words integrity of payment systems means that no money is taken from a user unless he authorizes a payment. In addition, users might require not receiving any payment without their explicit consent; this is desirable when users want to avoid uncalled-for bribery. (Asokan et al, 2000) Confidentiality
Confidentiality according to (CISM Review Manual, 2006) is the protection of sensitive or private information from unauthorized disclosure. Some parties involved may wish confidentiality of transactions. Confidentiality as far as this research is concerned is the restriction of the knowledge about various pieces of information related to a deal; the identity of persons involved, content of items bought, monetary value etc. Mostly, parties to transactions want to ensure that communications are private (Asokan et al, 2000). Where parties wants to ensure that the transaction so taken is anonymous or untraceable, the requirement may be to limit this knowledge to certain subsets of the members only (Asokan et al, 2000). Availability and Reliability
One of the main features of a secured system is the assurance that information will be readily available as and when it is needed. The information so retrieved should also be very reliable to aid in making of decision. (Asokan, et al., 2000) sees availability making sure that information systems and data are ready for use when the need arises. Availability demonstrate as the percentage of time that an information system can be used for productive work.
Reliability on the one hand is the decision usefulness of the information. Enhancing E-payments Security
According to (Taddesse & Kidan, 2005), cryptographic based technologies such as encryption and digital signatures are the most common method of securing e-payments. The application of these technologies however reduces speed and efficiency which is the hall mark of e-payment system in relation to the manual system of payment. In this regard a compromise will have to be made between efficiency and security. Under listed are some of the technological means to secure e-payments:
‘ Secure Electronic Transaction (SET): This is an open standard developed by Master Card and Visa to provide a solution to security problems for online credit card payment system (Ullah, 2010). This is achieved by providing digital certificate for both customer and merchant. According to (Taddesse & Kidan, 2005), this was not accepted because it was complicated and required both customer and merchant to download and install 5MB of software.
‘ 3D Secure is Visa alternative to SET. The 3D does not require certificate to authenticate (Ullah, 2010).
‘ Smart Card Security: Data stored on a smart card is encrypted and cannot be read without password/ PIN and this provides strong security. Taddesse & Kidan( 2005) is of the opinion that magnetic strip cards like debit cards, credit cards etc are being replaced by smart cards.
Proper policies, procedures and suitable Government laws must also be put in place to warrant technologies provide maximum security. For security to work in the E-payment environment support from Government is very essential. Infrastructure
Infrastructure is necessary for the successful implementation of e-payments. Proper groundwork for electronic payments is a challenge. (Taddesse & Kidan, 2005) For electronic payments to be successful there is the need to have reliable and cost effective infrastructure that can be retrieved by majority of the population.
Electronic payments communication groundwork includes computer network such as the internet and mobile network used for mobile phone. Additionally, banking activities and processes need to be automated. A network that links banks and other financial institutions for clearing and payment confirmation is a key requirement for electronic payment systems. (Taddesse & Kidan, 2005)
Mobile network and Internet are readily available in the developed world and users usually do not have problems with communication arrangement. In Africa, however, mobile networks and internet are not easily available. ‘Poor communication infrastructure is one of the reasons hindering the e-payment system in Africa’ (Elizabeth Agyeiwaah, 2014). According to (Worku, 2010) low level of internet permeation and poorly developed telecommunication infrastructure obstruct smooth improvement and developments in electronic commerce in Ethiopia. A study by Microfinance Nigeria showed that efforts by the Nigerian government and other financial and ICT stakeholders to move Nigeria’s payment system from a cash-based platform to the globally acceptable electronic-driven alternative may be hindered by absence of critical telecommunication infrastructure. In emerging countries many of the rural areas are unbanked and lack access to critical infrastructure that drives electronic payments. According to (Microfinance Policy Framework for Nigeria, 2011), some of the debit cards technologies like Automated Teller Machines (ATMs) are still seen by many as unreliable for financial transactions as stories told by people suggested that they could lose their money through fraudulent deductions, debits and other lapses for which the technology had been associated with by many over the last few years.
In a related work, by (Mishra, 2008) in Nepal, Telecommunication and electricity are not available throughout the country, which adversely impact on the development of electronic-payments. Mishra further reiterated that the development of information and communication technology is a major challenge for e-payments development. Since ICT is in its infant stages in most developing countries, the country faces difficulty endorsing e-payment development. Regulatory and Legal issues
National and international set of laws, rules and other regulations are essential requirements for the successful operation of e-payment schemes. Some of the major elements include rules on money laundering, supervision of commercial banks and electronic money institutions by supervisory bodies, payment system oversight by central banks, data and consumer protection, cooperation and competition issues. (Taddesse & Kidan, 2005). According to (Taddesse & Kidan, 2005) the virtual and global nature of e-payment also raises legal questions such as which jurisdiction will be competent and about applicable laws in disputed cases, validity of electronic contracts and electronic signature. A legal and regulatory structure that builds trust and confidence supporting technical efforts is an important issue to be addressed in implementing e-payments. As indicated by (Worku, 2010), absence of appropriate legal and regulatory framework for e-payment in Ethiopia, an African country is a challenge. According to (Worku, 2010) Ethiopian current laws do not accept electronic contracts and e-signatures. Ethiopia has not yet enacted legislation that deals e-payments and e-commerce concerns including enforceability of the legitimacy of electronic contracts, digital signatures and intellectual copyright and restrict the use of encryption technologies. In a related work, Mishra (2008) argues that no laws and regulations have been propagated to cover the legal status and issues of e-payments. This matter has been given high priority and a legal framework is expected soon (Mishra, 2008)
National regulatory and legal framework that aligns with regional and international agreements is crucial in creating a certain and reliable environment (Taddesse & Kidan, 2005).
Adopting model laws at the global level such as UNCITAL Model law on e-signatures (2001) can help the purpose. Socio-Cultural Challenges
Cultural and historical differences in attitudes and the use of different forms of money (e.g. use of credit card in North America and use of debit cards in Europe) complicate the task of developing an electronic payment system that is applicable at international level (Taddesse & Kidan, 2005). According to Taddesse & Kidan (2005), difference in the degree of the required security and efficiency among people of different cultures and level of development aggravates the problem.
Consumer’s confidence and trust in the traditional payments system has made customers less likely to adopt new technologies. New technologies will not dominate the market until customers are confident that their privacy will be protected and adequate assurance of security is guaranteed. (Taddesse & Kidan, 2005). New technologies also requires the test of time in order to earn the confidence of the people, even if it is easier to use and cheaper than older methods.
(Rachna & Singh, 2013) Also see the challenges of e-payment to be lack of usability, Lack of security, Issues with e Cash and Lack of trust Lack of Usability
According to (Rachna & Singh, 2013, p. 27) Electronic payment system requires large amount of information from end users or make transactions more difficult by using complex elaborated websites interfaces. For example credit card payments through a website are not easiest way to pay as this system requires large amount of personal data and contact details in web form. Lack of Security
Online payment systems for the internet are an easy target for stealing money and personal information. Customers have to provide credit card and payment account details and other personal information online. This data is sometimes transmitted in an un-secured way, (Kalakota & Whinston, 1997 ). Providing these details by mail or over the telephone also entails security risks (Guttman, 2003, Laudon and Traver, 2002) Issues with e-Cash acceptability
The main problem of e-cash is that it is not universally accepted because it is necessary that the commercial establishment accept it as payment method. Another problem is that when we makes payment by using e-cash, the client and the salesman have accounts in the same bank which issue e-cash. The payment is not valid in other banks. of Trust
Electronic payments have a long history of fraud, misuse and low reliability as well as it is new system without established positive reputation. Potential customers often mention this risk as the key reason why they do not trust a payment services and therefore do not make internet purchases (Lietaer, 2001)
2.2.0 Challenges of Electronic payments in Africa
In a research work by (Taddesse & Kidan, 2005), the following have been identified as barriers for the introduction, adoption and growth of Electronic payments in the African Context:
‘ Most banks in Africa do not deliver credit cards. People usually have to open bank account outside the continent in order to get a credit card.
‘ Behavioural constraints: The fact that African Society is cash-based, people are accustomed to using cash for most of their transactions.
‘Attitudes of Banks: African banks are very unadventurous; they use very few innovative products and marketing techniques.
‘ Lack of confidence in the system: Security issue is one of the major challenges in the development of e-payments in Africa.
In a related study by Worku(2010), under listed are some of the challenges Ethiopia faces in implementing electronic payments and electronic banking:
‘ Low level of internet penetration and ill developed telecommunication hinder smooth development and improvement in e-payments and e-commerce.
‘ Lack of suitable legal and regulatory structure for e-payments: current laws do not accommodate electronic contracts and signatures.
‘ Inadequate banking system
‘ Economic and political volatilities in neighbouring countries: Political fluxes certainly disturb smooth operations of business and free flow of goods and services.
‘ High rates of illiteracy: Lower literacy rate is a serious obstacle to adoption of e-payments as it hinders the accessibility of banking services. To fully enjoy the benefits of e-payments, citizens should not only know how to read and write but also have basic ICT literacy.
High cost of Internet: The cost of Internet access in relation to per capita income is a critical factor. Compared to developed countries, there are higher costs of entry into the e-payments and e-commerce market. These include high start-up investments costs, high costs of computers and telecommunication and licensing requirements.
‘ Frequent power interruption: Lack of reliable power supply is a key challenge for smoothly running e-payments and e-banking
‘ Resistance to changes in technology among customers and staff due to: Lack of awareness on the benefits of new technologies, Fear of risk, Lack of trained personnel in key organisations, tendency to be content with the existing structures and People may be resistant to new payment mechanism.
According to (Microfinance Policy Framework for Nigeria, 2011), urban dwellers are not receptive to the efforts of ICT investors to migrate payment system through substantial investments in crucial infrastructure like Point of Sale (POS) terminal in thousands of supermarkets, fuel stations, hotels, recreational centres and many others.

(Ofori-Dwumfour & Dankwah, 2013). It has been generally argued that electronic banking makes it easier for customers to compare banks’ services and products and increase competition among banks, which allows banks to penetrate new markets and thus expand their geographical reach. For some scholars, electronic banking is an opportunity for countries with underdeveloped financial systems to launch into developmental stages (Bassey, 2008).

2.3.0 Benefits of Electronic Payments
According to a study by (Fiallos & Wu), the advent of the internet has taken electronic payments and transactions to a different height. Consumers could purchase goods from the internet and send unencrypted credit card numbers across the network, which did not provide much security and privacy. But a wide variety of new secure network payments schemes have been developed as consumers became more aware of their privacy and security.
Digital money has significant benefits for financial institutions, banks and merchants (Fiallos & Wu, 2005).
Digital Money is an electronic payment technology, which can provide anonymous flexible electronic payment, like paper cash, but with added security requirements needed for internet transactions. In a related work by (Lee, et. Al, 2003), a secure electronic cash system can guarantee anonymity of legitimate users but also provides traceability about illegally issued cash or laundered money. If illegal activity did take place, it can cancel anonymity of the digital cash in order to protect the bank (Lee, et. Al , 2004) added that since digital money can trace double spending, and double spending protects content by exposing the double spender’s identity, digital cash is a fool proof way of guarding against illegal redistribution of intellectual property and materials. Digital Money can also be used to deter illegal content copying and distribution by inserting tracing content factors into the digital cash payment scheme that prevents users from individual replication activity (Lee, et. al.,2004). By using this function, legal, anonymous purchasers can spread contents to other paying anonymous users while abiding by copyright laws. Using digital money in industries like digital entertainment can increase the demand for products through easier and safer dissemination channels. Digital Money can trace who is illegally reproducing and distributing copyrighted intellectual material, therefore increasing security for authors and at the same time deterring lost revenue and sales for digital media entertainment companies (Lee, et. al., 2004).
Digital Media entertainment, as well as intellectual property providers and distributors, can also implement this technology and its safety features in order to ensure greater copyright compliance between consumers (Fiallos & Wu, 2005). By adopting such a method of payment and distribution, software and intellectual property piracy can be halted and eventually eliminated.
Digital Money can provide financial institutions with decentralized structures, faster transaction and decision making processes, and more cost effective ways of doing business. (Fiallos & Wu).
Electronic Payments as argued by (Cobb, 2005) have a significant number of economic benefits apart from their convenience and safety. These benefits when maximized can go a long way in contributing immensely to economic development of a nation.
Automated electronic payments help deepen bank deposits thereby increasing funds available for commercial loans ‘ a driver of all of overall economic activity. According to (Cobb, 2005), efficient safe and convenient electronic payments carry with them a significant range of macro-economic benefits. The impact of introducing electronic payments is akin to using the gears on a bicycle. Add an efficient electronic payments system to an economy, and you kick it into a higher gear. Add better-controlled consumer and business credit, and you notch up economic velocity even further.(Cobb, 2005)
While the high level of cash transactions creates an opportunity for the electronic payment industry, it also imposes a cost on local economies. Cash has to be minted, securely transported, counted and reconciled, kept secure and maintained for re-use time and time again. The per-payment cost is high, and will always remain high whereas the costs of electronic system are fixed. Once the infrastructure has been built, the costs per-transaction is very low (Cobb, 2005).
When cardholders use their cards at the point of sale they are helping to keep money in the banking system. EPS can help displace shadow economies, bring hidden transactions into the banking system and increase transparency, confidence and participation in the financial system. (Cobb, 2005).
As also mentioned by (Al Shaikh, 2005), there is a correlation between increase in point of sales volumes and rise in demand deposits. ‘Automated electronic payments act as a gateway into the banking sector and as a powerful engine for growth. Such payments draw cash out of circulation and into the bank accounts, providing low cost funds that can be used to support bank lending for investment a driver of overall economic activity. The process creates greater transparency and accountability, leading to greater efficiency and better economic performance’ (Al Shaikh, 2005).
In a similar narrative by (Hord, 2005) electronic payment is very convenient for the consumer. In most cases, you only need to enter your account information — such as your credit card number and shipping address once. The information is then stored in a database on the retailer’s Web server. When you come back to the Web site, you just log in with your username and password. ‘Completing a transaction is as simple as clicking your mouse: All you have to do is confirm your purchase and you’re done’ (Hord, 2005).

Over the same two decades, $C 60 billion of the increase in Personal Consumption Expenditures was directly attributable to electronic payments, with credit card holding a commanding share of this growth ($C 49.4 billion) over debit cards ($C 10.4 billion). (Visa Canada, 2004).
According to (Ackorlie,2009), Ghana has lagged way behind most of the world (including many of its peers in Africa) in the general quest to boost micro economic activity by reducing the role played by physical cash in daily transactions and by encouraging the creation of a cashless society.
However, experts in the financial sector have stressed that unless something radically innovative, functional and savvy is introduced, which accounts for attitudes as well as the huge un-banked population, the country’s dream of building a functionally cashless society in the shortest possible time could be elusive (Ackorlie, 2009). (Kumaga, 2010)

2.4.0 Technology types in e-payment systems
According to (Kumaga, 2010) E-Payment can be performed on-line, involving an authorization server (usually as part of the issuer or acquirer) in each payment, or off-line, without contacting any third party during payment.
The obvious problem with off-line payments is how to prevent payers from spending more money than they actually possess. In a purely digital world, a dishonest payer can easily reset the local state of his system after each payment to the state before the payment. Therefore off-line payment systems that prevent double spending require tamper-resistant Hardware, such as smart cards at the payer end (Asokan, et al., 2000)Often, tamper resistant hardware, such as security modules of point-of-sale (POS) terminals, is also used at the payee end ‘ it is mandatory in the case of shared-key systems and in cases where the payee does not forward individual transactions but only totals.
On-line systems obviously require more communication, but not necessarily tamper-resistant hardware (Asokan, et al., 2000). In general, they are considered more secure than off-line systems.
Given the level of infrastructural development as far as ICT is concerned, coupled with the erratic nature of power supply in Ghana an of line method will be more suited for developing countries like Ghana
2.5.0 E Payment and the unbanked
According to (Kumaga, 2010)) as many as 80 per cent of Ghana’s population neither has nor operate a bank account, although the majority of the “un-banked” are economically active in either the formal or informal sectors of the economy (Ackorlie, 2009). This is the case for most African and developing nations. (Anderson-Porisch, 2006) explains the unbanked to be the person who does not have a current or savings account .
Some of the reasons for the unbanked in the United states of America were enumerated by Anderson- Porisch to be:
‘ Lack of understanding of the banking system and expectations for having a bank account
‘ Past negative banking experience
‘ Lack of appropriate identification and/or documentation needed to open a bank account
‘ Unstable living situation
‘ Cultural conflict including bank practices that varies with personal beliefs.

(Kumaga, 2010) quoted Visa and Global Insight as saying, more than two billion individuals age 15 and over are unbanked. According to (Commonwealth Business Council & Visa, 2004) Electronic payment systems can help the unbanked join the banking system with significant benefits to them and to their societies .
‘The Mystery of Capital’ by Hernando de Soto mentioned that a large percentage of business assets held in the informal economy of many developing countries reduce the size and productive capacity of their total official economies. In a similar way, a cash based society is a diminished society. The informal economy runs on cash outside of the banking and official economic systems. When cash remains outside the banking system, the possibilities for supplying productive capital to the economy are muted. (Commonwealth Business Council & Visa, 2004). Data from Global insight indicates a direct correlation between a specified shift of currency into lendable reserves and increases in GDP. Bringing cash into the banking system generates an equal increase in bank reserves, enabling banks to facilitate more consumer and commercial loans, thereby stimulating business growth and consumption. The total value of the loans is several times that of the original deposits. Global insight estimates this to 10 to 15 times the amount of the deposit.

2.6.0 E-payment System and Economic Development
The development of the nation depends on the revenue that are generated from tax system of a nation. Ghana like most developing countries is battling with revenue mobilization from the informal sector in this regard E-payment system will go a long way to improve revenue mobilisation from the informal sector and hence boost the economy as a whole.
The emergence of credit, debit and prepaid card systems gives the unbanked an important option for bringing cash into the formal economy. Prepaid cards are particularly interesting, because the funds are actually on deposit at a regulated financial institution, but the process of establishing and managing accounts is much more cost effective and less risky that traditional debit accounts for smaller levels of deposit (Commonwealth Business Council & Visa, 2004).
(Anderson-Porisch, 2006) argued that technology provides the opportunities to transition the unbanked population into a banking relationship. According to her paper, ‘the Debt Collection Improvement Act of 1996 required that recurring federal benefit payments be made electronically through electronic funds transfer (EFT) as a low-cost account for those who cannot qualify for or afford a checking account. As a result, there has been an increase in people using this option for receiving federal benefits.
Hord (2005) further accentuates the fact that electronic payment lowers costs for businesses. The more payments that is processed electronically, the less money is spent on paper and postage. Offering electronic payment can also help businesses improve customer retention. A customer is more likely to return to the same e-commerce site where his or her information has already been entered and stored . (Hord, 2005) This also affirms the confidence level of the customer as far as dealing with the site is concerned.
Cobb, (2005), sees electronic payments as having the potential of bringing down transaction cost, enhancing higher consumption and Gross Domestic Product. E-payment can also increase government efficiency, boost financial intermediation and improve financial transparency. Cobb further added that Governments play a critically important role in creating an environment in which these benefits can be achieved in a way consistent with their own economic development plans.
(Humphrey, et al., 2002)also support the fact the introduction and use of electronic payment instruments holds the promise of broad benefit to both business and consumers in the form of reduced costs, greater convenience and more secure, reliable means of payment and settlement for a potentially vast range of goods and services offered worldwide over the internet or other electronic networks. One such benefit is that electronic payments enable bank customers to handle their daily financial transactions without having to visit their local bank branch. Electronic payments products could save merchants time and expense in handling cash (Appiah & Agyemang, 2007).
According to (Humphrey, et al., 2002)the resource cost of a nation’s payment system can account for 3 percent of its GDP. Since most electronic payments cost only about one-third to one-half as much as paper-based non-cash payment, it is obvious that the social cost of a payment system could be considerably reduced if it is automated (Appiah & Agyemang, 2007). Automating and streamlining electronic payments made from self-serve channels such as ATMs, branch office terminals and point-of-sale (POS) systems can reduce paper-based errors and costs.
A research work carried out by Visa Canada Association in collaboration with Global Insight revealed that electronic payments provide transactional efficiency to consumers, merchants, banks and the economy. Electronic payments have contributed $C 107 billion to the Canadian economy since 1983 and represents nearly 25% of the $C 437 billion cumulative growth in the Canadian economy over the same period.

The Commonwealth Business Council also argues that payroll, pension and benefit cards can be effective entry-level instruments for banking and subsequent mainstream financial services- and they allow a greater proportion of funds to remain within the banking system until they are spent.
Teenagers and young adults are often ineligible to open a bank account. But because of employment, stipends or transfers from their parents or guardians, they may possess a sizeable amount of money. Prepaid card products for young people can teach them vital money skills, while keeping their funds in the banking system. One such solution is a re-loadable prepaid card that features financial literacy tools and allows parents or guardians to monitor transactions online (Commonwealth Business Council & Visa, 2004). This has been used in the US, Brazil, Mexico, Puerto Rico, Indonesia and Jordan. In Ghana the government is considering using the E-zwich for payment of student’s loan and national service allowance.
In an attempt to make populace who are not into banking to have dealings with the bank, financial institutions could issue prepaid cards to customers, including those who currently do not have a banking relationship, enabling them to receive funds safely and conveniently. Depending on the type of card, recipients can withdraw cash at an ATM or buy goods and services at merchants (Commonwealth Business Council & Visa, 2004). In developing countries, remittances represent one of the primary source of foreign exchange and contribute significantly to consumer spending. Ghana being a developing country is no exception. For example, foreign remittances to Nicaragua are estimated to total nearly 30% of GDP (Inter-American Development bank, 2004). However the majority of these remittances are held in physical cash and for that matter is in circulation within the informal economy and therefore being kept outside the banking system. These remittances do not contribute as strongly to formal economic growth as they could. Prepaid cards described above can help resolve this issue.
(According to Ackorlie, 2009) the active population is now hurting under the burden of the inconveniences and constrictiveness of having to endure heavy, cumbersome and usually unsafe cash-based payments in their day-to-day affairs and transactions.
The use of any electronic transaction as a common platform for the financial sector would reduce physical circulation of cash.

The use of Information Communication Technology (ICT) products to simplify and speed up financial transactions has become part of everyday life in the developed world, but the developing world is yet to reap the full benefit that comes with e-payment system. (Ackorlie, 2009).
The use of the electronic transactions system to do business is indeed not common in Africa. In the advanced economies, physical circulation of cash is limited because most people use electronic means to buy and pay for goods and services. The physical handling of money currencies is therefore reduced and the advantage here is that the government does not spend huge sums of money to print new currencies to replace worn out ones.

2.7.0 Forms of E-payment systems in Ghana.
2.7.1 E-Zwich
Introduced in April 2008, the E-Zwich smart card has been operational since then and seeks to reduce the risk at which ATM card theft was on the ascendancy a while ago. The Ghana Interbank Payment and Settlement System (GHIPSS) Limited, an establishment of the Bank of Ghana, is the issuer of the E-Zwich smart card. E-Zwich is the brand name for the common platform (the National Switch) that links the payment systems of all banks, savings and loans and rural banks in Ghana (Haruna, 2012, p. 2), p. 1). (Elizabeth Agyeiwaah, 2014)

2.7.2 MTN Mobile Money
MTN Mobile Money uses Fundamo’s STK based technology which is considered the most secure mobile payments technology standard because all SMS communication from the SIM card is encrypted using 3DES encryption. While the Mobile Money registration menu is pre-loaded to all new MTN SIM cards, upon successful registration the full banking menu is loaded ‘over the air’ to the SIM card. The benefits of STK technology do come at a price. STK menu loading ‘over the air’ is notoriously unreliable and this was experienced by the consultants whom themselves registered for the service. Having the Mobile Money menu on the SIM/Phone is a positive feature of the technology because it allows for a relatively intuitive usage of the features.

Customers in such countries can access services more easily from banks abroad and through wireless communication systems, which are developing more rapidly than traditional “wired” communication networks (Khan & Karim, 2010).
2.8.0 LEAP reviews

2.8.1 Social pprotection
Social protection is defined by the International Labour Organization (ILO, 2006) as the set of public measures that a society provides for its members to protect them against economic and social distress that would be caused by the absence or a substantial reduction of income from work as a result of various contingencies (sickness, maternity, employment injury, unemployment, invalidity, old age, and death of the breadwinner); the provision of health care among others. Depending on the number of individuals or households that are simultaneously affected, risks are either idiosyncratic (individual) or covariate (aggregate) (World Bank 2000). (Joha, 2012)
There are a number of success stories from other countries including Brazil, Turkey, South Africa and Mexico among others provided the impetus for adopting social grants (also known as cash transfer) schemes as a mechanism for addressing extreme poverty in Ghana. Cash transfers have been proven to contribute immensely to the achievement of the totality of the Millennium Development Goals (MDGs) in these countries (MMYE, 2007).

The LEAP programme started in 2008 with 1,640 beneficiaries. As of June 2014, the beneficiary households had increased to 73,047 across the country.

Through the programme, the government assists the poorest families with basic needs, including food and improved health.

People who qualify under the programme include orphans, vulnerable children, the aged and the elderly from 65 years upwards and severely disabled persons who cannot work.

Under the programme, a household with one beneficiary is expected to receive GH??48, two beneficiaries receive GH??60, three beneficiaries GH??72 and four or more receive GHc90 every two months. (Asare, 2015)

2.8.2 Principles of Cash Transfers Under the LEAP project
According to DFID Cash Transfer Literature Review 2012 cash transfers should be guided by the following principles:
‘ Cash transfer should be very predictable both in time and amount to be received: ‘help delayed is help denied’. The amount of money and the time of collection should be predictable so that beneficiaries will be able to plan their lives and those of their dependents. Where cash transfers are linked to children’s education and health, it must be noted these needs cannot be postponed, and unpredictable transfers just aggravate the condition of children who needs the help.
‘ Per unit cost should be very minimal to make the option cost efficient to the implementers and should not build more cost for the beneficiary. Any cash transfer program, to the extent possible should get close to the beneficiary to avoid beneficiaries paying heavily for transportation and other expenses to have access to their money
‘ It should make use of existing local financial infrastructures to avoid heavy subsidy in operationalization
‘ Again the distance involved for beneficiaries to access their cash should be less time consuming for the beneficiary. Beneficiaries should not spend too much time on to and from cash collection point, and time spent at the collection point should equally be reasonable such that beneficiaries who can engage other economic activities will be able to continue their activities uninterrupted.
‘ Efficient use of labor: too many hands should not be involved so as render the option less efficient
‘ Should not leave loopholes for fraud: Transferring liquid cash to beneficiaries involves a huge risk. The possibility of the money going into the hands of unintended end-users/beneficiaries (herein called fiduciary risk) is high. It is therefore a high priority to minimize the risk of money going into wrong hands.

2.8.3 Characteristics of LEAP Manual Payment through Ghana Post Company
LEAP currently employs the services of Ghana Post as its payment agency. In reality, the expected 6 payment cycles per year have not been implemented in full since the inception of the program, although the frequency of payments has seen some recent improvement (cash was delivered on 2 occasions in 2011 and 4 times in 2012). When payments are missed, they are either postponed (done later and separately) or they are added to a future process and delivered in lump sums (paid as arrears).

An assessment done for World Bank by (Kilfoil, 2010), established that the payments processes handled by the Ghana Post Office (GPO) is purely manual and thus demands lengthy lead times of over two calendar weeks, three days for actual payments to be made and thereafter one or two months for reconciliation.
1. Printed payment schedules (referred to as vouchers), grouped by community districts, are physically delivered to the GPO HQ in Accra two weeks prior to payments occurring.
2. The GPO posts the vouchers to the respective regional offices which in turn distribute the vouchers to the district offices.
3. DSW makes a deposit of funds into the GPO HQ bank account that corresponds to the total amount to be disbursed.
4. GPO HQ in turn transfers funds to the regional office Bank accounts
5. On receipt of funds, Regional offices inform the District offices of the targeted payment date. Cash is withdrawn from the regional bank accounts on payment day and in the company of a police official the cash, together with the voucher sheets are delivered to the district communities for disbursement at the local pay-point.
6. On payday, the GPO postman in the presence of the local DSW officer and CLIC (Community LEAP Implementation Committee) members validate the identity of household caregivers and pays out the required amounts to them where an ink finger print is captured on the voucher sheet as receipt of funds.
7. The DSW Officer countersigns the voucher sheet as the amount paid out to beneficiaries.
8. The voucher sheets and balance of funds are then returned to the Regional GPO for reconciliation.
9. Once the regional voucher sheets are collated and reconciled they are sent to the GPO HQ for further recompilation before such results are presented to DSW.
10. DSW reconciles payments made and then captures every receipt of payment in the DSW single register manually per line item

After five years of implementation, an assessment by UNICEF in 2011, on manual payment through GPO identified a lot of challenges. Specific findings with regards to challenges in the payment cycle include the following:
Inefficient financial systems and processes: The process of reconciliation and liquidation after payments is inefficient, slow and completed at irregularly defined intervals. Liquidations are done manually at district, regional and national levels, thus the process takes over a month to complete. Consequently, reports and liquidations arrive late at the LMU, and delay the start of the following payment cycle – this does not allow the LEAP program to provide the payments on regular and predictable basis. Indeed on some occasions, DSW has had to begin subsequent payments without processing the previous payment’s liquidations, and while this was done in the interest of the beneficiaries, it is not ideal for the financial viability of the program and for the arrangement for fund transfers with donors.

Low Geographic penetration of Payment Agency: Ghana Post was selected as the payment agency because of its nationwide coverage and decentralized structure, especially at the district and sub-district level. However, in practice, Ghana Post’s regional offices directly distributed cash to the beneficiary households, bypassing its decentralized network. In doing so, the Ghana Post was not using the network’s comparative advantage, as the same human and logistical resources single-handedly covered all the districts and communities within that region.
Joint DSW-Ghana post distribution of cash transfers: Although the DSW has contracted Ghana Post to deliver cash payments, DSW district officers have to accompany Ghana Post officers to deliver cash to all beneficiaries. This is an inefficient use of time and resources for DSW.
High program costs: The possibility of delivering cash to extremely poor and vulnerable households at a relatively low cost is one of the reasons why Social Cash Transfers (SCT) program are being implemented in many developing countries. The current costs per head of delivering the cash to beneficiaries, as compared to international standards, are high under the manual payment system.
Inadequate security: The security of the resources to be delivered to the beneficiaries is not always guaranteed. Cash has to travel long distances before it is delivered to the beneficiaries. LEAP’s Operational Manual states that a police officer should be part of the payment team to ensure the safety of the officers as well as the security of the money transfer. However, the capacity of the Ghana Police to support the payment mechanism in all the LEAP communities on bi-monthly basis is limited.
Inconvenient Payment conditions and verification of beneficiary households: The travel distance and transportation cost for the beneficiaries during payments are currently not standardized. In addition, conditions relating to the waiting areas and time, queuing (especially under the sun or the rain) and crowds management are unclear and unenforced. This opens up the possibility that some poor families could be put under undue strain during payments. The issue of the identity of the person receiving the money is also a major concern and additional efforts need to be made to ensure the targeted households receive the cash.
Poor Information flow: Throughout the payment process, the beneficiary households are the last and the least informed about the details of the each payment ‘ this is especially with regards to dates, times and locations. Additionally, they do not receive clear information on the amount that they are supposed to receive. This is aggravated by the recurrent delays in the delivery of cash, especially lump sums to cover missed payments. Given that the benefit level is not the same for every beneficiary household, lack of information increases the risk that some beneficiaries could be under or over-paid.
Lack of Complaints Mechanism: An important aspect of quality service delivery is the opportunity to provide feedback, issue complaints and receive responses from the payment agency. There is currently no official mechanism to receive and answer complaints on payments.

2.8.4 Advocate Alternative Payment Options
Given this background, the Ministry decided to test alternative electronic cash transfer options to deliver cash to the beneficiary households. The Ministry selected 3 service providers including MTN, to perform an e-payments pilot to test a range of electronic cash delivery mechanisms for LEAP beneficiaries over 3 consecutive payment cycles. This pilot was to provide the Ministry with evidence as to the efficacy and efficiency of different electronic methods of delivering cash, the relative merits of different solutions and their impact on the beneficiary households. In addition, it will give interested Payment Service Providers (PSPs) the opportunity to prototype, test and refine an electronic cash transfer mechanism that could potentially be contracted to reach more than 200,000 beneficiary households by 2016.

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