As a governance expert with experience in fintech integrations at Ecobank Ghana, where I oversaw digital wallet launches under the Payment Systems and Services Act, 2019 (Act 987), Transaction Cost (TC) Theory (by Coase and Williamson) posits that firms exist to minimize costs of market transactions like search, bargaining, and enforcement, favoring internalization for efficiency. In banking, approving MoneyTalks (a digital product, e.g., mobile app for payments) involves weighing TC reductions (e.g., lower branch costs) against new risks like cyber threats, per BoG’s Cyber Security Directive 2020. Post-DDEP, digital shifts aid recovery by cutting operational costs, but boards must apply TC critically to avoid failures like early fintech flops in Nigeria.

Critically examining application:

• Assess Market vs. Internal Transaction Costs (5 Marks): Evaluate if internal development of MoneyTalks reduces search/bargaining costs compared to outsourcing. Critically, internalization minimizes opportunism, but high setup costs (e.g., GH¢10M for app development) must be justified under shareholder value maximization.
• Analyze Asset Specificity and Uncertainty (5 Marks): Digital assets like proprietary algorithms are specific, increasing TC if outsourced (hold-up risks). Board should approve if internalization lowers uncertainty, referencing BoG approvals for in-house fintech to comply with data protection.
• Consider Frequency and Governance Structures (5 Marks): High transaction frequency (daily customer uses) favors internalization. Establish oversight via sub-committees for monitoring, aligning with EWRM to mitigate cyber risks.
• Evaluate Bounded Rationality and Opportunism (5 Marks): Acknowledge limited information; use due diligence and pilots to reduce. Critically, this prevents over-optimism, as in global cases like WorldCom’s tech overinvestments.
• Integrate with Overall Governance and Metrics (5 Marks): Approve based on net TC reduction (e.g., 20% cost savings projected), with KPIs for ROI. Example: GCB Bank’s MoMo integration post-2019 reduced branch TCs by 30%, boosting profitability.

By applying TC Theory thus, the board ensures efficient, compliant approval, enhancing competitiveness.