Report on Criteria for Evaluating Alternative Distribution Channels for Bank Products and Services

To: Deputy Managing Director – Operations
From: Head of Business Development
Date: July 31, 2025
Subject: Evaluation Criteria for Alternative Distribution Channels

Executive Summary
In the Ghanaian banking sector, distribution channels are pivotal to marketing strategy, especially amid post-Domestic Debt Exchange Programmed (DDEP) recovery and the rise of digital banking under the Payment Systems and Services Act, 2019 (Act 987). Channels such as branches, ATMs, mobile apps, agent banking, and fintech partnerships must be evaluated for efficiency, compliance, and value addition. This report outlines five key criteria for assessing alternative channels, drawing from practical examples like GCB Bank’s digital expansion and Ecobank Ghana’s agent networks, aligned with Bank of Ghana (BoG) directives on outsourcing and cyber security (e.g., Cyber and Information Security Directive 2020). These criteria ensure channels support resilience, profitability, and ethical practices while complying with BoG’s sustainable banking principles.

1. Cost-Effectiveness 
Evaluate the overall cost of implementing and maintaining the channel relative to the revenue it generates, including setup costs, operational expenses, and scalability. This involves calculating return on investment (ROI) and comparing fixed versus variable costs, ensuring alignment with BoG’s Capital Requirements Directive for efficient resource allocation.
For instance, Stanbic Bank Ghana shifted to mobile banking post-2019 cleanup, reducing branch-related costs by 30% while increasing transaction volumes, as digital channels have lower marginal costs than physical branches. In evaluation, prioritize channels with low customer acquisition costs, especially for mass-market products like savings accounts, to enhance profitability in a high-interest-rate environment post-DDEP.

2. Customer Reach and Accessibility 
Assess how well the channel expands market coverage and accessibility, particularly in underserved areas, considering geographic, demographic, and technological factors. This criterion ensures inclusivity, complying with BoG’s directives on financial inclusion and anti-discrimination under Act 930.
Access Bank Ghana’s use of agent banking in rural regions, for example, increased customer base by 20% in 2023 by leveraging local merchants, making services available without branches. Evaluate channels like apps or partnerships with telecoms (e.g., MTN MoMo) for urban youth, while ensuring accessibility for older demographics to avoid exclusion, thus supporting targeted precision in distribution.

3. Security and Regulatory Compliance 
Examine the channel’s robustness against risks such as fraud, data breaches, and operational disruptions, ensuring adherence to BoG regulations like the Liquidity Risk Management Guidelines and Cyber and Information Security Directive 2020. This includes evaluating encryption, authentication protocols, and audit trails.
Post the 2017-2019 bank collapses (e.g., UT Bank due to governance issues), Ecobank Ghana adopted secure fintech channels with biometric verification, reducing fraud incidents by 40%. Channels must be vetted for Basel III-aligned operational risks, prioritizing those with strong compliance to maintain trust and avoid BoG penalties, especially in digital distributions vulnerable to cyber threats.

4. Channel Integration and Flexibility 
Determine how seamlessly the channel integrates with existing systems (e.g., core banking software) and its adaptability to changing market needs, such as shifts toward omnichannel experiences influenced by deregulation and new technology. This criterion focuses on interoperability and scalability for future innovations.
GCB Bank’s integration of online platforms with physical branches allows seamless switches, enhancing customer satisfaction amid post-DDEP diversification. Evaluate flexibility by testing for quick adaptations, like adding features during economic volatility, ensuring value addition to both customers (convenience) and suppliers (data flow), as per evolving distribution systems.

5. Performance Metrics and Value Addition 
Measure the channel’s effectiveness through KPIs like transaction speed, customer satisfaction scores, conversion rates, and value added (e.g., cross-selling opportunities). This involves analyzing how the channel enhances targeting precision and overall marketing strategy.
In practice, Absa Bank Ghana (formerly Barclays) evaluates ATM networks versus apps using Net Promoter Scores, where digital channels added value by enabling personalized offers, boosting upsell by 15% in 2024. Prioritize channels that provide data for analytics, aligning with BoG’s sustainable principles, to ensure cost-effective, customer-centric distribution that drives long-term profitability.

Conclusion
These five criteria—cost-effectiveness, customer reach, security/compliance, integration/flexibility, and performance/value addition—provide a comprehensive framework for evaluating alternative channels, ensuring they align with our bank’s strategic goals and regulatory requirements. I recommend piloting evaluations on proposed channels like expanded fintech partnerships, with a follow-up review in three months. Please advise on next steps.