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After Recapitalization, what next? …customer mindshare becomes the new battleground for Ghanaian banks.



Until a few years ago, Ghanaian banks enjoyed comfortable incumbency in the market, with modest expectations from customers in terms of their banking experience and loyalty based on a relationship-banking model. Ghana’s banking industry was inundated by an overwhelming number of 36 banks until the recapitalization exercise that has pruned the numbers to 23 banking institutions now operating in the country.

Before the exercise, most banks reaped the benefits of their extensive physical scale, significant brand recognition, and large stockpiles of capital to invest in growth initiatives. Considering the distrust of customers as a result of the turmoil in the industry, banks now have to struggle to compete for customers.

Also the idea of banks succeeding on their own on customer fronts, has started to shift under the pressure of changing customer preferences as a result of new entrants, in the form of Fintechs and other nonbank firms, who are also pushing the boundaries of customer experience. Currently, customers increasingly expect interactions with their banks to be as sophisticated and personalized as their experiences with other services. Thus, banks need to think beyond customer experience to a broader measure of what is called “customer mindshare.”

Customer mindshare is an aggregate of four components that includes customer experience but also takes a bank’s physical footprint, digital sophistication, and marketing presence into account. Along with a bank’s products and services, these factors are what will differentiate banks from the customer perspective going forward. In bank-to-bank comparisons, customer mindshare will be an effective predictor of a bank’s ability to acquire new customers and expand share of wallet with existing customers.


The new customer expectations

The aftermath of the banking crisis has resulted to customers expressing new demands and expectations from their banks. Three in particular stand out:

  • More—and better—digital functionality from financial-service providers. The traditional method of customers’ queueing to transact in the bank must make way for easy banking through the use digitally developed Apps. Research shows that the percentage of banking customers that prefer transacting through branches and the old, familiar forms of payment is declining precipitously and so newer models must be designed.
  • Significantly better levels of banking experience. Accustomed now to the high service levels of digital-first lifestyle merchants such as Amazon, Netflix, and Spotify, customers fully expect the same sophistication in service from their financial providers. While this has been true for some time, there are increasingly new providers (for example, fintechs) ready to step into the breach.
  • Beyond digital. A majority of customers clearly do want digital options—to varying degrees. Just as important, they will want a bank’s multiple channels to work together seamlessly. Furthermore, even in a digital age, research shows that a significant percentage of customers continue to value face-to-face interaction for more complex needs. As an example, for transactions such as opening new accounts, customers overwhelmingly will still prefer the personal attention of branch service.

The challenge for many banks will be that their current distribution models are not equipped to meet these changing expectations. Some banks serve multiple markets with diverse customers and regulations, and accordingly have evolved into highly complex organizations with matrices of management, departments, products, distribution channels, and IT systems. This complexity challenges their ability to deliver high-quality and seamless service across traditional and digital channels.

New customer needs, therefore, call for a new retail-banking distribution model. Many banks are aware of this imperative. With reformed regulation and capital requirement set in place, bankers must turn their focus to long-term institutional growth and sustainability, redesigning their distribution footprints and adopting new digital technologies. These are important steps, but we believe that building a new distribution model requires a new way of measuring success.


The new competitive ground: From share of wallet, to share of mind

Customer mindshare can be said to be a combination of products, services, functions, and access that creates an environment that encourages greater engagement between a bank and its customers. It is an aggregate metric that includes four factors:

  • physical footprint: a bank’s branches, ATMs, and other physical points of presence
  • digital maturity: the extent and sophistication of a bank’s web and mobile capabilities
  • share of voice: the level of a bank’s representation in advertising and marketing in the market
  • customer experience: a bank’s ability to fulfill customers’ expectations of service, within and across all channels

These four components, in aggregate, and in relative measures of weighting by market, provide a metric that correlates with a bank’s ability to acquire new customers and win share.


Physical footprint

Historically, banks have relied heavily on their branch networks to grow their share of deposits in any particular market. Branches are indeed still an important part of the distribution equation, but their impact is more nuanced.

Branch and deposit share are strongly correlated across four defined market sizes and growth levels, but the relationship is not as tightly aligned as it once was. Some banks fail to achieve the share that might be expected given their branch footprint, while others overperform—indicating that sheer scale does not determine the effectiveness of a branch strategy.


Digital maturity

Research shows, not surprisingly, that a bank’s “digital maturity” is a reliable indicator of its ability to gain digital current account volume through digital channels. Digitally mature banks recognize that the impact of digitization is not always directly measurable; they invest in digitizing features that increase adoption and engagement—such as mobile—even if the deposits are not necessarily being made through that channel. In other words, digital maturity bestows a kind of “halo effect” that draws deposits to the bank across all its channels, digital and nondigital.


Share of voice

Share of voice, or the reach and presence of advertising and marketing, carries great importance in increasing deposits. This is particularly true online, where the level of digital advertising and marketing is highly correlated with deposit share. Conversely, outdoor advertising, print, and mass media are losing impact. Share of voice is particularly important for banks entering new markets. The size of the branch network is only a part of the equation. It must be complemented by digital advertising and marketing.


Customer experience

Research shows that superior customer experience raises the likelihood that a customer will increase deposit balances and open new accounts and products at a bank. Highly satisfied customers are 2 to 3 times more likely than less-satisfied customers to express the intent to increase deposits at a bank, and 2.5 to 5 times more likely to open a new account or sign up for a new product.

Banks that deliver on customer experience and receive the highest marks for deposit-related customer satisfaction grow deposits faster than lower-rated competitors.


How can banks win?

Analyses underscore the fact that the size of a bank’s branch footprint is no longer the overwhelming factor in deposit share it once was. Other components of customer mindshare—digital maturity, share of voice, and customer experience—are growing in importance. Accordingly, strategic reviews should be informed by customer-mindshare variables. Moreover, the industry has reached an inflection point where quick experimentation, agile delivery, and fast-paced evolution are becoming the norm for product development, and these banks should embrace these methods for testing and carrying out their strategies.

How banks should proceed depends on their current capabilities and the mix of markets in which they compete (small versus large, low growth versus high growth).


Implications for some banks

Given the extent of their overperformance in terms of branch effectiveness, especially in the market, some banks can consider reducing their branch presence where it makes sense to do so. They can then reinvest the cost savings to raise their customer-experience levels (where they tend to trail other banks) and develop truly sophisticated omnichannel experiences. Banks should also continue to build on their high share of voice, increasing their emphasis on digital channels and going even further with respect to personalization and targeting of marketing messaging. As customer expectations continue to rise, winning on digital sophistication and customer experience will be key for banks.


In all, retail banking in the Ghana is undergoing significant change, as the relevance of traditional branches becomes less clear cut and as customer preferences evolve. In this environment, the comparative performance of individual banks is becoming more pronounced. While the current moment presents challenges, it also represents an opportunity for forward-looking banks to build value and increase their customer mindshare.

In the next five years, the most creative and opportunistic banks will strengthen their relationships—or mindshare—with customers, and they will establish the next set of best practices for the industry.


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Reducing the regulatory gaps and challenges in the Ghanaian financial system through the adoption of the twin peak model



To date, Ghana’s financial regulatory approach has been closer to the traditional approach in China and Mexico where the regulatory authorities have been established alongside institutional or sector- based lines and separate regulatory authorities established to regulate and supervise the banking sector; insurance sector; securities sector and pension sector.

The current regulatory structure can be described as a sectoral regulation which maintains separate regulatory agencies across segregated institutional lines of financial services such as banking, securities, insurance and pension. The existing regulatory arrangements for financial services involve four regulators exercising jurisdiction over different sectors of the financial industry. It is fragmented with each regulatory agency being responsible for a particular segment.

The Ministry of Finance and Economic Planning is the apex body regulatory structure that has the overall regulatory oversight over all financial intermediaries in Ghana. This Sector Ministry has the overall responsibilities to develop, implement and supervise the financial governance structure in Ghana. The Sector Ministry is assigned the responsibility for also providing the policy framework for the financial sector while the actual regulation of the sector within the policy framework is assigned to the Bank of Ghana, Securities and Exchange Commission, National Insurance Commission and the National Pension Regulatory Authority.

The existing regulatory arrangement for financial services involve four regulators exercising jurisdiction over different sectors of the financial industry. It is fragmented with each regulatory agency being responsible for a particular segment. In many areas of financial sector operations, reasonably good laws and regulations exist. However, the difficulty has been the capacity of regulatory agencies to enforce the existing rules.

According to FINSSP 11, (2012), the search for growth and economies of scale and scope have led to a breakdown of barriers in the financial sector. Universalization of banking, for example, is reflected in the fact that banks are offering a variety of non-banking services alongside their traditional banking services.

Such services include insurance, stock brokerage, investment management, investment banking and financial advisory services. Similarly, insurance companies are offering investment related and retirement products. Ghana’s regulatory structure has not caught up with this convergence.

Fragmentation of regulation has resulted in the following anomalies: (i) Insurance companies offering investment management services and retirement plans but are not subject to the regulatory oversight of the SEC and NPRA which have regulatory responsibilities for investment advisory services and pension plans. (ii) Accountants, lawyers and banks are exempted from licensing as investment advisers while management consultants who offer the same services are not, (iii) Banks are dealers in the government securities market but are not subject to regulatory oversight by the SEC, thus leaving investors in the government securities market with less protection than what is envisaged in the Security Industry Law (FINSSP 11, 2012).

The regulatory response to this has been a trend in a number of jurisdictions towards the move to the twin peaks model of financial regulation. This allows a prudential regulator to supervise the range of activities more efficiently by taking a holistic view of the financial services market and market conduct regulator to ensure that customers and investor are well protected.

In the current regulatory framework, there are a number of regulatory authorities with responsibility for the financial sector regulation, each with substantially different powers and functions. This regulatory landscape, while largely ineffective is also fragmented and that has led to gaps in regulatory application in some instances and allowed for regulatory arbitrages in others.

The first challenge relates to the coordination mechanisms between Ghana’s key financial regulators. Although legal reforms have been made to address challenges identified through various collapses, there continues to be a preference for informal bilateral and multilateral coordination mechanisms over formal, statute-based mechanisms. Where coordination has been identified as a problem, regulators have responded by enhancing regulatory memoranda of understanding and establishing informal information-sharing measures to make sure that each regulator is aware of the role of other regulators in the system

Second, the current silo approach model of financial regulation has been a recipe for regulatory arbitrage. A potential danger with the multiplicity of agencies as experienced in the Ghanaian financial system is that overall effectiveness was impaired as financial institutions engaged in various forms of regulatory and supervisory arbitrages.

This problem has been put by Abrams and Taylor in the following way: regulatory arbitrage “can involve the placement of a particular financial service or product in that part of given financial conglomerates where the supervisory costs are lowest, or supervisory oversight is least intrusive. It has also led financial firms to design new financial institutions or redesign existing ones strictly to minimize or avoid supervisory oversight.

This has induced “competition in laxity” as different agencies compete to avoid a migration of financial institutions to the competing agencies. Mensgold saga is a case of regulatory arbitrage not regulatory failure as being paraded by some researchers and academia. There were series of institutional failures such as Economic Crime Agency, Financial Intelligence Center, Registrar General Department, Securities and Exchange Commission, Bank of Ghana, BNI and Ghana Police Service. The lack of a strong regulatory response, along with under-developed formal financial and regulatory institutions, has allowed Ponzi schemes such as Mensgold, Savanna Brokerage and Global Coin Community Help etc.

Third, the growing internationalization and regionalization of the Ghanaian financial system over the last two decades had provided the financial markets with cross border contagion issues, cross border supervisory and consolidated problems, pricing efficiency and risk dispersion and also encouraged product innovation and complexities.

Even though the Bank of Ghana since 2014 had reviewed its cross- border supervision and consolidated supervision, but other regulators such as National Insurance Commission and Securities and Exchange Commission are yet to undertake consolidated supervision despite the presence of foreign subsidiaries of insurance companies and the growing importance of financial conglomerates in Ghana.

The increasing internationalization and regionalization of the Ghanaian financial markets had also accentuated the international dimension to regulation which in turn has implications for the institutional structure of multiple agencies both at the national and international levels.

Fourth, the current fragmented approach is discredited for inefficiency, complexity, confusion and cost ineffectiveness to the regulated and government. The hallmark of fragmented regulatory regime is their inability to anticipate how to address future financial distress or crisis or adapt to market innovation and development. Additionally, it is argued that they are susceptible to capture by the regulated. Conceivably, because none of the regulators has capacity to “look at the financial market as a whole” no governmental agency commands all the necessary information to monitor systemic financial risk. The cardinal question is whether the foregoing challenges are sufficiently weighty to constitute the impetus for shift in regulatory paradigm.

Fifth, the emergence of financial conglomerates and universal banking licensing concept in 2003 had challenged the traditional demarcation between multiple regulatory agencies and had made the business of regulation more complex.

In particular, the issue arises as to whether a structure based on specialist agencies supervising different parts of the business of a financial conglomerate might lose oversight of the financial institution as a whole. According to IMF country assessment report (2011) on Ghana’s financial stability, it opined that the exact scope of financial conglomerates in the financial sector was not fully known.

However, the IMF noted that nine universal banks which accounted for about 55% of the total banking assets, had subsidiaries in securities firms as well as insurance companies. Since the banks were not supervised on a consolidated basis and there were also no mapping of shareholders and common directors.

Sixth, regulatory overlap remained another challenge in the Ghanaian financial services sector. The overlap between the regulatory objectives of financial regulators in Ghana appears to be more critical issue in a practical sense. Regulatory overlap refers to the situation where products or services, transactions and other activities undertaken in the financial services sector are subject to the regulation of two or more regulators, giving rise to potential conflict and difficulties in compliance.

Seventh, regulatory coordination has also been a major challenge for the multiple regulators in Ghana. There are no informal bilateral arrangements between each of the four regulators as well as no formal Council of Financial Regulators to facilitate coordination amongst the four Ghanaian regulators. There is a challenge of providing the effective coordination mechanisms required of a multi-agency system. It is broadly recognized that regulatory frameworks that divide authority between multiple agencies require strong coordination mechanisms to ensure that issues needing regulatory oversight do not fall through the gaps.

Therefore, the main arguments against the silo- based model included the fragmentation of regulatory arrangements, competition between regulators and confusion for the regulated population as a result of different objectives, staff, styles and information technology systems between regulators, with flow on-effects on the wider population and hence therefore a call for regulatory paradigm shift to the twin peaks model.

The twin peaks model of regulation in Ghana will seek to create a stable and more inclusive financial sector which is needed to support increased economic growth and development in Ghana.  At a macroeconomic level, a stable and well- developed financial sector will support real economic activity through the efficient channeling of savings into productive forms of investment, contributing to the country’s objectives on job creation and a more inclusive economy.

For individuals and firms, access to affordable and reliable financial products and services enables people to engage in economic transactions on a daily basis, to save for retirement and other long- term goals, to insure against varied risks and avoid an over reliance on debt and exploitative or reckless lending practices in Ghana.

Access to appropriate financial products and services in Ghana is necessary for economic growth and well -being is to be genuinely inclusive.

The rationale underpinning the adoption of the Twin Peaks model of financial regulation in Ghana can be seen in South Africa and other countries such as Australia and UK. The rationale for Twin Peaks Model reflects four primary considerations.

First, market developments in the post financial sector reform period in Ghana, increased financial conglomerates and the blurring of the boundaries between financial products and services. Second, the availability of economies of scope and the importance of allocating scare regulatory resources efficiently and effectively.

Third, the benefits of setting a twin peaks model would improve coordination and cooperation among regulators and fourth, the clarity of making both prudential regulator and market conduct regulator accountable for its performance against statutory objectives for the twin peaks regulatory model. Twin peaks model will be a comprehensive and complete system for regulating the Ghanaian financial sector.

It aims to ensure better outcomes for financial customers and the wider economy, by ensuring that customers are treated fairly, that their funds are protected against risk of institutions failing, and by reducing risk of using public funds to protect the economy from systemic failures. A twin peaks system also represents a decisive shift from the existing fragmented regulatory approach, minimizing regulatory arbitrages and overlaps or forum shopping. It will also focus on implementing a more streamlined system of licensing, supervision, enforcement, customers complain, and customer advice as well as education across the Ghanaian financial system.

The twin peaks model of financial regulation is a regulatory model which creates two regulators for the financial services sector: A prudential regulator regulating the solvency and liquidity of the financial service sectors and a market conduct regulator who regulates how financial services institutions (i.e. Banks, insurance, capital market and pension funds) conduct their business, design and how to price their products and treat their customers.

Twin Peaks Model: (i) reduces the risk of regulatory overlaps and duplication that can arise with multiple regulators and conversely, the risk of gaps in the regulatory coverage and enforcement, (ii) strengthen  the accountability of regulator (accountability does not diffuse across multiple regulators) and reduces the potential for blame shifting, (iii) increase economies of scale and scope in market supervision, potentially contributing to better use of resources, regulatory effectiveness and reduces administrative costs.

This is particularly important for small country and financial market such as Ghana, (iv) allow development and implementation of a unified and consistent approach to market conduct regulation, supervision and enforcement across the entire Ghanaian financial system reducing regulatory arbitrage, (v) allow better monitoring of issues affecting the entire financial system, as well as rapid policy responses, (vi) facilitates the regulation and supervision of financial conglomerates, where financial firms are operating in more than one segment of the financial market, and (vii) eliminates potential conflicts that can arise from different regulatory objectives between multiple regulators.

Here is a new paradigm for thinking about the way jurisdiction like Ghana can create and organize regulatory agencies.

The twin peaks model of financial regulation helps

  1. To strengthen Ghana’s approach to market conduct regulation which is non-existent in the financial services sector in Ghana thereby improve confidence and create a sustainable financial services sector.
  2. To create a more resilient, stable financial system that will help prevent distresses and crises from developing and more easily resolve those distresses and crises that occur, at a lower cost to customers, consumers and tax payers.
  3. To expand access to the financial services sector through financial inclusion and
  4. To combat financial crimes and money laundering activities in Ghana   


Four key motivations for a twin peaks model of financial regulation:

  1. The need for regulator to deal with market abuses such as insider dealings and ensure adequate investors and consumer protection in the Ghanaian financial services sector.
  2. The need for legislation when financial services institutions experiences capital, liquidity or solvency pressures
  3. Under the twin peaks model of regulation there will be consistent regulatory standards for all financial services institutions
  4. Cooperation and coordination between regulators will minimize the regulatory gaps and arbitrages


Prudential Regulation Authority (PRA)

The prudential regulator’s strategic objective will be to maintain and enhance the safety and soundness of the regulated financial institutions. This will include macro and micro prudential regulation and supervision.

The prudential regulator will be responsible for assessing and addressing system risk across the financial services sectors and for the prudential regulation of banks, insurances, pension funds and capital markets. The new regulatory architecture will ensure that macro-prudential regulation of the Ghanaian financial system is coordinated effectively with the prudential regulation of individual financial firms, and that a new, more judgement focused approach to regulation of firm is adopted so that business models can be challenged, risks identified and actions taken to preserve financial stability.


Financial Sector Conduct Authority (FSCA)

The market conduct regulations strategic objective will be to protect consumers, and customers of financial services institutions and promote confidence in the Ghanaian financial service sectors. The regulation of business conduct within the entire financial system, including the conduct of firms towards their retail customers and the conduct of participants in the wholesale financial markets will be carried out by a dedicated single body with focused and clear statutory objectives and regulatory functions.

The Government through the Ministry of Finance and Economic Planning will therefore create dedicated consumer protection and market authority with primary responsibility to promote confidence in the financial services and markets. This objective will have two important components. First, the protection of consumer through a strong consumer regulator, and second, through promoting confidence in the integrity and efficiency of the Ghana’s financial markets.


The mandate for Financial Sector Conduct Authority will: –

  1. Promote the fairly treatment of financial services customers
  2. Protect and enhance the efficiency and integrity of Ghanaian financial markets, and
  1. Contribute to the financial sector’s policy objective of financial stability, financial inclusion and combating financial crimes and money lending.
  2. Perform the duties impartially and professionally will be funded through government subvention and levy- based system on the regulated financial firms.
  3. Provide financial customers and potential financial customers with financial education programs and otherwise promoting financial literacy and financial capability.


In summary, the move in Ghana towards a “twin peaks model” of financial regulation will be significant reform that will promote financial stability and strengthen Ghana’s ability to manage and mitigate the effects of financial crises. The most compelling argument for the twin peaks model is to enhance the effective management of systemic risks and consumer protection.

For instance, if entities are conglomerates covering banking, insurance, securities and pension then it may be difficult for a particular regulator for a particular sub-sector to draw a view of the overall risks facing the entity. A unified regulator under the twin peaks model, on the other hand would be able to understand and monitor risks across the sub-sectors and develop policies to address the risks facing the entire conglomerates.

The experiences of UK, South Africa and Kenya will provide some insights into the challenges that this model presents, particularly in the areas of coordination and the various ways in which these challenges might be overcome. One of the key lessons suggested by the South Africa experience will be legislative and regulatory framework which will be necessary- but of itself insufficient -element in terms of achieving the desired outcome, of equal importance will be the “culture of coordination” under which the main will be regulatory performance rather than regulatory structure.

There are two main features which stands out as being critical to the effective operation of the Twin Peaks model of financial regulation in Ghana. The first is clarity in terms of responsibilities and objectives of each regulator, which requires a clear demarcation between the roles of regulators and the minimization of regulatory overlaps and arbitrages.

The second, which is closely related to the first, is a framework of coordination that encourages both regulators to share information proactively and cooperatively in the performance of their supervisory and enforcement functions.


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