A little concession on the part of government, in the form of tax incentives to platform operators and possibly end-users, could be the catalyst for speeding up the process of introducing the cash-lite society Ghana deserves, George Babafemi – Chief Operating Officer eTranzact Ghana, an e-payment solutions provider – has said.
He told the B&FT that if the tax obligations of platform operators are reduced, the benefits could be passed on to end-users; and goods and services paid for electronically could be cheaper than the same services paid for by means of cash.
“Whether here or elsewhere, everybody wants to buy things irrespective of the medium of payment. So, if government wants to see more electronic payments for goods and services, it should be ready to offer tax incentives to both platform owners and consumers, and that will encourage people to use more of these electronic platforms,” he said.
With government aggressively pushing for a cash-lite society, which is expected to deepen financial inclusion, curb fraudulent activities and deepen transparency, the e-payment expert believes incentivising players and not burdening them with fees and charges is the way to go.
Even though e-payment platforms are on the rise, with the mobile money platform being the most predominant, some industry players believe the fees and charges are serving as a deterrent to achieving a cash-lite society.
The United Nations-based Better Than Cash Alliance, in a new report, noted that despite the massive improvements recorded in digital payments among individuals, businesses and government, cash still remains the predominant mode of payment in terms of value and volume.
The report, which was published this month, noted that 37 percent of the GH¢571billion in payments made during 2016 were done digitally. However, 98.72 percent of the 6.8 billion payments by volume are still being made in cash.
“The strong preference for cash in Ghana is the result of high costs for digital payments that are often passed on to users — i.e. charging customers a fee to use credit cards, and a lack of trust in, or familiarity with, digital payments,” it noted.
This report, under the theme ‘Building an Inclusive Digital Payments Ecosystem: The Way Forward’, assesses Ghana’s progress to date and sets out specific policy recommendations that can accelerate Ghana’s journey toward a more digital economy.
Out of the several digital platforms – including cards, Internet banking, mobile money and others – mobile money accounts for the largest proportion, representing 90 percent of all transactions initiated by digital payment instruments in Ghana for 2016, and over 77 percent of the value for all transactions initiated by digital instruments during that period.
“If government says any retailer or business owner who encourages the use of electronic payment platforms gets a certain amount of tax rebate, and due to that tax rebate reduces the cost of the good or service for consumers, who wouldn’t push it?” Mr. Babafemi asked.
The India move
India is one of the most cash-intensive countries in the world, with a cash-to-GDP ratio of 12 percent: almost four times that of markets such as Brazil, Mexico and South Africa.
That country in 2015 introduced a raft of incentive measures to spur increased adoption of electronic payments.
The incentives range from a charge on high value cash transactions to lower transaction fees for electronic payments, in tandem with tax benefits. The move represents attempts to curb the impact (and availability) of black-market money while encouraging more use of debit cards, credit cards and mobile payments.
One proposal is to offer sales tax rebates of 1 to 2 percentage points to merchants who report at least half of their transactions through online payments. Consumers could get an income tax rebate for electronic payment of a proportion of their expenses, the plan noted.
“With incentives such as these, many business owners would push consumers to pay with electronic platforms because they will then pay less tax. And if such benefits are transferred to consumers, the cost of the goods and services will reduce as compared to cash payments,” Mr. Babafemi noted.
“These days some people even hide point of sale devices, telling you it is not working because they feel that going through the stress of e-payment is not good enough when cash can be counted.”