A payment system is the entire matrix of institutional infrastructure arrangements and processes in a country for initiating and transferring monetary claims in the form of commercial and central bank liabilities. The concept covers the following:
- Payment instruments used to initiate and direct funds transfer
- Network arrangements for transacting and clearing payment instruments
- Institutional players in the system
- Market conventions and regulations
- Legal and regulatory framework
The stakeholders of Ghana’s payment system are the central bank; the commercial banks, service providers and users of the system. The central bank occupies an important and unique position in the payment system. It is an overseer, operator and a participant of the payment system. The commercial banks participate in the system by making and receiving payments on their own behalf or their customers’. The service providers are the printers of payment instruments and telecommunication companies who provide the infrastructural arrangements for the payment system. Notwithstanding the unique role of each stakeholder, all of them are users of the payment system, including the banking public.
Ghana’s payment system had improved a lot since 1997 when the MICR cheques were introduced, and continues to evolve to meet the developmental needs of the country. The current trend in Ghana’s payment systems development is being driven by economic, financial, public policy factors as well as a growing local ICT industry and global trends in payment systems development. Consequently, over-reliance on cash as a means of payment is gradually giving way to a range of cashless and safe payment instruments. The cheque is the major inter-bank retail payment instrument which constitutes about 95% of the total retail payments both in terms of volume and value. The remaining 5% is contributed by the inter-bank credit transfer. High value funds transfer is made with the Ghana Inter-bank Settlement (GIS) system, which is a real time gross settlement system. At the retail level banks offer ATM and other debit card services. Telephone and internet banking services are available but in their use is not widespread.
THE LEGAL ENVIRONMENT
Ghana’s payment system is supported by various laws in line with the core principles for systematically important payment systems. The laws cover payment instruments, institutions, clearing and settlement systems, and include the following:
(a) Bank of Ghana Act, 2002 Act 612. The Act makes the BOG the authority responsible for payment and settlement systems in Ghana. This is stated among the functions of BOG as indicated below:
- the promotion, regulation and supervision of payment and settlement systems; and
- the facilitation of the clearing of cheques and other credit instruments for banking institutions.
(b) The Payment Systems Act, 2003, Act 668 is a sound legislation framework which further empowers the BOG to oversee and manage the payment systems as contained in the provisions below:
- to establish, operate, promote and supervise payment, funds transfer, clearing and settlement systems subject to such rules as it may publish; and
- to designate any other payment, funds transfer, clearing and settlement systems operating in the country, which the Bank considers to be in the public interest to supervise.
The Act also provides for the following:
- principles of transparency as applicable to payment systems;
- minimum obligations of participating financial institutions;
- principles required to achieve irrevocability and finality of payment;
- admissibility of electronic evidence in the law courts;
- dispute resolution; and
- other miscellaneous provisions covering disputes, offences, penalties and interpretations.
c) The Bills of Exchange Act, 1961, Act 55 (an adaptation of the English Bills of Exchange Act 1882) specifies how cheques are drawn accepted and paid. The clearing of cheques is further subject to the Rules to Govern Clearing House Operations. A draft bill known as the Bills and Cheques Bill now before Parliament, is expected to replace the Bills of Exchange Act when passed. The draft bill provides for electronic presentment of cheques and amends various sections of the Bills of Exchange Act to bring it in line with current business trends and practices. Other bills due for legislative consideration are the Anti-Money Laundering, Foreign Exchange and the Credit Reference Agency bills. These bills, when passed, will no doubt affect banking business including payments.
Besides the laws, there are rules and regulations governing payments. The Rules Governing the Operations of Clearinghouse provide an operational framework within which clearing and settlement is handled efficiently. The document covers among others; payment instruments standards, preparation of instruments for clearing, membership of clearinghouse and conduct of members, clearinghouse procedures and the management of clearinghouse.
Ghana Inter-bank Settlement (GIS) System’s Terms and Conditions also provide the contractual basis for the operation of the large value funds transfer system.
