Why the decline of Mobile Money (MoMo) transactions in June 2024

Mobile Money (MoMo) has transformed Ghana's financial services, changing the way people conduct transactions and manage their money. 

Its simplicity, accessibility, and widespread acceptance have made it an essential part of the country's financial ecology. 

However, current data from the Bank of Ghana show a dramatic fall in MoMo transactions in June 2024. 

This contraction raises questions about the underlying causes of user behaviour and market dynamics. This article explores the economic and regulatory issues that have contributed to the drop, with a focus on the impact on small and medium-sized businesses (SMEs).

Inflation and Lower Disposable Income

The Ghanaian economy has been dealing with growing inflation, which has eroded the purchasing power of both individuals and businesses. 

For many Ghanaians, little disposable cash means prioritizing basic expenses over recreational purchases. 

As a result, fewer consumers are expected to conduct MoMo transactions for non-essential objectives, adding to the total drop. SMEs, which rely significantly on MoMo for transactions, have also felt the impact. 

Higher operational costs and less customer spending have resulted in fewer transaction volumes. Businesses that formerly used MoMo for payments and consumer interactions must now find more cost-effective alternatives.

Economic Uncertainty

Economic uncertainty has a big effect on financial behaviour. Individuals and organizations may become more cautious in their spending and financial activity when currency values fluctuate, market conditions remain unpredictable, and there is a risk of economic upheaval. 

In June 2024, economic instability in Ghana most likely resulted in a decrease in MoMo usage as consumers and businesses choose to save money and cut transaction fees linked with MoMo services.

Electronic Transactions Levy (E-Levy)

The E-Levy, designed to increase government revenue, levies a tax on electronic transactions, including MoMo. 

The E-Levy, which was meant to capitalise on the rising digital economy, has had unexpected repercussions. 

The added financial burden on transactions has prevented many customers from using MoMo services. 

For SMEs, which frequently operate on thin margins, the E-Levy raises operational costs, making MoMo less appealing for business transactions. 

The E-Levy's influence became more obvious in June 2024, as firms and consumers looked for ways to avoid the additional expenses. 

This has resulted in a significant decrease in MoMo transactions, emphasising the need for a reassessment of the E-Levy's structure and rate.

Regulatory Compliance and Costs

Compliance with regulatory obligations can be a major burden on SMEs. Businesses may be hesitant to fully utilise MoMo services due to the financial and administrative difficulties connected with regulatory compliance. 

In June 2024, heightened monitoring and implementation of compliance requirements may have led to the fall in MoMo transactions. 

SMEs, already under economic strain, may have found it difficult to meet these regulatory standards, leading to a shift away from MoMo services.

Impact on SMEs

SMEs rely on MoMo for effective cash flow management. The drop in MoMo transactions disturbs this flow, making it more difficult for firms to manage their funds effectively. Payment delays can cause operational inefficiencies and expense increases. 

MoMo services have made it more convenient for SMEs to serve their consumers. Customers may have difficulty making payments when MoMo transactions fall, potentially resulting to lost revenues and decreasing customer satisfaction. 

With fewer MoMo transactions, SMEs may be forced to return to traditional cash-based transactions, which provide their own set of issues, including increased security concerns and handling expenses. 

The added weight of the E-Levy exacerbates these operational expenditures. MoMo has allowed SMEs to broaden their market reach beyond geographic boundaries. The decline in MoMo transactions constrains this reach, limiting business growth. 

Conclusion

The reduction in MoMo transactions in June 2024 demonstrates how economic and regulatory variables influence user behaviour and market dynamics. 

To fully realise the potential of mobile money services, Ghana must solve these problems through focused reforms and supportive policies. 

Ghana can reverse the fall in MoMo transactions, boost SMEs, and foster economic growth by reducing financial costs on consumers and businesses, increasing financial literacy, and providing a favourable regulatory environment. 

As the government navigates these issues, a balanced approach that considers the demands of all stakeholders will be critical to ensure the long-term success of mobile money services in Ghana.

Source : Lead News Online

The writer is a Lecturer/SME Industry Coach, Coordinator (MBA Impact Entrepreneurship and Innovation), University of Professional Studies Accra
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