The Resource Costs of Cash and Non-Cash Retail Payment Instruments in Ghana

The resource costs of use of cash, mobile money, checks, automatic clearing house (ACH) credits and debit cards as payment instruments in Ghana are estimated as indicators of cost-efficiency of the country's payment instruments. The extent of use of cash in payments in an economy is hypothesized to be directly proportional to the extent of informality of the economy and the self-employment rate and estimated by regression. Mobile money resource cost was estimated by analyzing financial statements of service providers for the cost of providing the service, and by counting out-of-pocket expenses paid by patrons. Costumer time spent making mobile money payment is valued by estimating the average time to make a successful payment. For checks and ACH credits, counterfactual scenarios for Ghana in 1993 are estimated by mimicking the well documented study of Wells (1996) for the US using 1993 data. Differences in use of checks in Ghana relative to the US are noted and incorporated. Also noted are the differences in human capital efficiencies of the two economies. With 1993 values, annual adjustments are made for the impact of inflation until 2023. Resource costs of debit card payments comprise costs borne by merchants/retailers, banks and infrastructure providers and customers. Merchant/retailer costs are extracted from Hayashi (2021); banks and infrastructure costs and consumer times are taken from Schmiedel et al. (2013) for the European Union and adjusted for Ghana using human capital efficiencies. Findings are reported mostly for the period 2019 to 2023. For 2023, the instrument with the lowest resource cost per transaction was mobile money (USD 0.36) followed by debit card at USD 0.94. Check payments consumed the most resources per transaction. Overall, cash payments consume more resources than others. For 2023, the total resource cost for payment instruments studied was 2.57% of gross domestic product made up as follows (cash 1.51%; mobile money 0.91%; checks, 0.03%; ACH, 0.02% and debit cards 0.10%). The resource cost of non-cash instruments is increasing on account of their increasing use. Mobile money service providers should increase the capacity of their networks. Use of mobile money and debit cards should be encouraged. Use of cash should be further discouraged. Ghana's resource cost estimate for instruments investigated is higher than for a sample of developed economies.