Financial Technology (FinTech) is a new technology that seeks to improve and automate the delivery and use of financial services in the world. The FinTech space is gaining momentum daily globally. Now more than ever, the disruption of technology in the financial sector is opening a marketplace for persons in Ghana as well as those from other jurisdictions to set up FinTech companies in Ghana. In order to ensure that the setting up of such companies in Ghana are thoroughly done and well structured, the regulator in Ghana has put in place the appropriate measures for setting up or registering a FinTech company in Ghana ( https://www.bog.gov.gh/news/bank-of-ghana-licenses-first-fintech/ ).
According to Section 3 of the Payment and Services Act, 2019 (Act 987), the regulator of FinTech in Ghana is the Bank of Ghana. The Act states that the Bank of Ghana shall have overall supervisory and regulatory authority in all matters relating to payment, clearing and settlement systems. As a result of the emergence of FinTech solutions, a lot of complexities have been introduced requiring the Bank of Ghana’s focus to understand and supervise FinTech activities effectively. Following this, the FinTech and Innovation Office of the Bank of Ghana was introduced in May 2020 to drive the Bank’s cash-lite, e-payments and digitisation agenda ( https://www.bog.gov.gh/wp-content/uploads/2020/05/Press-Release-Bank-of-Ghana-Establishes-FinTech-Innovation-Office-2.pdf ). The office is responsible for licensing and oversight of dedicated electronic money issuers, payment service providers (PSPs), closed loop payment products, payment support solutions and other emerging forms of payment delivered by non-bank entities.
This article provides the steps to be taken to set-up and successfully launch a FinTech company in Ghana.
The Regulatory Framework
The Payment Systems and Services Act, 2019 (Act 987) is the main regulatory framework which applies to banks, specialised deposit-taking institutions, payment service providers, dedicated electronic money issuers, and their affiliates and/or agents. It provides the requirements that need to be met by payment service providers, electronic money issuers, agency relationships and foreign participation.
Under the Act, in order to carry out a payment service business or to issue electronic money, a licence is to be applied for in the prescribed form and will be granted after taking into consideration that the governance arrangements, appropriate fees, technology, security and controls, adherence with the universal principles of consumer protection and appropriate complaint procedure have been complied with.
Updates on the Licensing Requirements
In order to operationalise the Payment Systems and Services Act, 2019 (Act 987) and also simplify compliance in Ghana, the Bank of Ghana issued NOTICE NO. BG/GOV/SEC/2020/07 (https://www.bog.gov.gh/wp-content/uploads/2020/07/Notice-No-BG-GOV-SEC-2020-07-Licensing-Application-Pack-for-Service-Providers.pdf ) on the updates to the licensing requirements for payment service providers. The updates comprise the licence categories, permissible activities, the respective applicable capital and fees and the licensing requirements.
- 1. Company profile
Before applying for a licence, the FinTech company must be a company incorporated under the laws of Ghana and must provide an overview of the company and attach the registration documents from the Registrar General’s Department.
- 2. Governance
The company registration documents should include the profile of shareholders indicating their respective percentage shareholding, nationality, copies of share certificate of the company attestation from a notary public confirming ultimate beneficial owner(s) with 10% or more of total share ownership and voting rights, profile of the Board of Directors and key management personnel required by Act 987, the organisational structure and profile of promoters where applicable.
- Business Plan
In addition to the company registration documents, the following information is required; business overview, market analysis, products and services to be offered with transactional limits, on-boarding process and fees or charges where applicable as well as five years financial projections for the proposed business.
- Systems and Technology
The following Information, Communication and Technology (ICT) Systems are to be employed:
• ICT Architecture diagram highlighting Security and Control
• ICT Policy Framework
• ICT Security and Control (including Transaction Monitoring Tool, Fraud Monitoring and Detection Tool and at least two-factor Authentication
• Business Continuity Programme (including Disaster Recovery Plan)
• Data Protection Certificate
• ISO 27001-2013 and PCI DSS certification and Certificate of Compliant where applicable
• EV-SSL Tool where applicable
- Enterprise Risk Management
There should be risk and mitigation measures covering operational, market, liquidity, money laundering, fraud, credit and funding risks where applicable, business impact assessment and an anti-money laundering / combating financing of the Terrorism (AML/CFT) policy.
- Consumer Protection Policy
The Consumer Protection Policy should be guided by the Consumer Recourse Mechanism Guidelines for Financial Service Providers (2017) and Act 987.
Licence Categories and Permissible Activities
- Dedicated Electronic Money Issuer
The permissible activities under this category include recruitment and management of agents, creation and management of wallet, P2P On Net/Off Net, cash-in and cash-out, wallet based domestic money transfers (including transfers from bank accounts), investment, savings, credit, insurance and pension products (partnership with banks and duly regulated institutions), mobile money merchant acquiring and termination of inbound International Money Transfer.
- 2. Payment Service Provider Scheme
Permissible activities for this category are domestic card brand associations (e.g. Gh-Link) and switching and routing of payment transactions and instructions.
- Payment Service Provider – Enhanced
The permissible activities include all permissible activities for PSP – medium licence and in addition, marketplace for financial services offered by duly regulated financial service providers, merchant acquiring and merchant aggregation, payment processing, printing and personalisation of EMV cards, inwards international remittances services, provision of 3rd party payment gateway services and limited use closed loop virtual cards (funded via refunds, rewards and user’s other accounts).
- Payment Service Provider – Medium
The permissible activities include connecting to an Enhanced PSP to offer, all permissible activities for PSP – standard licence, payment aggregation (connected to Enhanced PSP), biller or merchant aggregation, POS deployment, printing of non-cash payment instruments, mobile payment apps (with liability shift).
- Payment Service Provider – Standard
Permissible activities include connecting to an Enhanced PSP to offer mobile payment applications (liability shift on PSP enhance).
Application for Payment Systems Authorisation
According to Section 10 of Act 987, a body corporate regulated under the Banks and Specialised Deposit-Taking Institutions Act, 2916 (Act 930) need not apply for a licence to engage in a payment service business but rather authorisation from the Bank of Ghana.
Application by Foreigners
As per Section 8(4) of Act 987, applicants must ensure that they have at least 30% equity participation of a Ghanaian in the FinTech company before they would be able to obtain any of the prescribed licences.
Registration with Other Bodies
FinTech companies must be registered with the Data Protection Commission to ensure the protection of consumer data. FinTech companies must also comply with the Anti – Money Laundering Act, 2008 (Act 749) and register with the Financial Intelligence Centre.
Purposeful effort will be required from regulators to shape the future of FinTech and push it in a productive direction in Ghana. It is hopeful that with the introduction of the FinTech and Innovation Office of the Bank of Ghana, there would be regular updates to the licensing requirements of FinTech companies that would ensure adequate compliance with international best practice and also encourage more entrepreneurs to set up FinTech companies in Ghana.
Kwabena Oppong-Kyekyeku is an Associate at CQ Legal and Consulting and has keen interest in Banking and Finance law, Corporate and Commercial law, Capital Markets and Taxation.
Lauretta Maame Esi Otoo is an Intern with CQ Legal and Consulting and has a keen interest in Banking and Finance, specifically FinTech as well as Corporate and Commercial Law, CyberSpace & Technology Law and Taxation.