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Fintech in Egypt, like the rest of the world, has been at an inflection point since the pandemic, with restrictive measures further galvanising efforts towards e-solutions.
Government initiatives aiming to turn the most populous Arab state into a cashless society have been incessant over the past five years.
A growing startup scene and an increasingly welcoming entrepreneurial environment have also lured the private sector into Egypt’s fintech drive.
However, large challenges remain.
Strong in finance, not in fintech
Egypt still lags far behind other emerging markets in fintech.
According to the 2021 global rankings of research firm Findexable, Egypt is in 12th place among 18 other countries in the Middle East and Africa, falling behind Kenya (3rd), South Africa (4th), Nigeria (5th), Rwanda (7th), Uganda (8th), Tunisia (10th), and Ghana (11th).
“Sometimes, when you’re underdeveloped in the traditional financial sector, you make bigger leaps in fintech, which is the case in many African countries, like Kenya,” says Sherif Samy, chairperson of the Egyptian FinTech Association, a cross-industry initiative that seeks to facilitate collaboration in the fintech ecosystem.
“Egypt is one of the oldest countries in the Middle East and Africa that had well-established financial services. We have banks and [a] post office [that targets smaller savers]; thousands of branches covering all of Egypt.”
Such a vast countrywide network has made Egypt’s need for state-of-the-art financial services less crucial than other emerging markets, Samy says. “That’s why maybe we are not as developed in the fintech area, usage-wise, compared to other nations in Asia and Africa in particular.”
The Findexable report, released late in June, also places Egypt 72nd in its global rankings, which includes 83 countries where, Findexable says, fintech advancement is measurable.
“If we fast-forward and look at the UK and Scandinavia, we will find even the ATM numbers are dropping; bank branches have been dropping for years … because people do not need as much cash,” Samy says, adding that in terms of fintech, these countries are 10 to 15 years ahead of Egypt.
Central bank most significant
Egypt has taken major steps to institute and promote fintech, led by the Central Bank of Egypt (CBE), says Samy, a former board member of the CBE.
After the 2016 Egyptian pound flotation and its tumultuous aftermath, the central bank was able to focus its attention and efforts more on financial inclusion and fintech, which Samy believes “go hand-in-hand”.
The CBE has altered requirements to open bank accounts in order to pave the way for wider groups of people to join the banking system, and also launched multiple initiatives and platforms to develop and generalise fintech.
“The heavier weight of financial services is banking, plus all other non-banking financial services that have to do with bank account[s]; e-insurance or e-trading or e-micro finance,” Samy tells The Africa Report.
“At the end of the day the money has to go in and out of a real bank account,” adds Samy, who is also the non-executive chairman of Commercial Bank of Egypt (CIB), the country’s largest private bank.
Ratified in September 2020, a new banking law dedicates a whole chapter for e-payment and fintech. Samy calls this the most significant legislative foundation for the Egyptian fintech landscape.
Meanwhile, another fintech draft law focusing on services affiliated to the non-banking Financial Regulatory Authority (FRA) is still being discussed by the parliament.
Samy, an ex-chair of the FRA, is wary of the kind of impact such a law would have. He believes the legislation regulating the authority’s services may need certain amendments, but not necessarily a new fintech bill.
“Time will tell if it’s really bringing something new,” says Samy. “In my opinion, there are issues that could be addressed in specific laws, [such as those pertaining to] insurance and capital market,” rather than enacting a new fintech law, he adds.
Other key steps
Samy also hailed as fundamental other strides towards making financial technology commonplace in Egypt.
- In 2017, a 16-member National Council for Payments, headed by President Abdel Fattah al-Sisi, was established. The council, of which Samy was a member, includes the central bank governor as well as a host of ministers and dignitaries. It aims to reduce transactions outside the banking system, spur people on to use e-payment solutions, achieve financial inclusion, and eliminate the vast grey economy, among other targets.
- Two years later, a law was introduced to ensure the fulfilment of certain payments via electronic means compulsory, including private companies’ taxes and fees of civil services.
“This [the law] was very important because it force[s] people to deal with it,” says Samy. “If it’s optional you [will] always have people not wanting to take the risk or learning something new, or feeling concerned about safety and so on.”
Considerable obstacles to spreading e-payment solutions in Egypt are still lingering and will take time to be tackled, Samy elaborates.
Revamping Egypt’s underpowered IT infrastructure is key to underpin the services’ consistency and reduce the currently common system outages, he points out. This year, the government has allocated LE5.5bn (around $350m) to enhance internet provision.
Another issue to be addressed is user friendliness. Apart from designing reliable apps with convenient usability, physical presence must be entirely eliminated from all transactions, which can be an uphill struggle since financial institutions in Egypt still rely on paperwork for Know Your Customer (KYC) standards, Samy says.
KYC standards are designed to protect financial institutions against fraud, corruption, money laundering and terrorist financing, and have been pivotal since the September 11 attacks.
“We’re relying on paper; you get the copy of your ID, and [the employee would need to] see the original,” or in other cases utility receipts must be submitted, Samy says, adding that cutting-edge alternatives using bio data and video-conferencing technology could replace paperwork.
Another way would be to have a unified database via an accredited entity, so that citizens wouldn’t need to go through the same paperwork process repeatedly. “Imagine you’re going to get a mortgage, then a month later you open a brokerage account;” the same documents will be required on both occasions, he explains.
What’s more, public fintech awareness is another challenge to face, even though a larger younger part of the population is more knowledgeable about technology, which gives Egypt an edge, adds Samy.
According to official data, a little over one third of the Egyptian 100-million population is below 15 years of age, whereas the largest segment is from 15 to 64 (almost 62%). The ageing population, from 65 onward, makes up just 4%.
How to make progress
He believes the volume of the remaining civil services and payments that have yet to be digitised is huge, and thus the government needs to prioritise this conversion.
Strategically, authorities ought to further target different large groups through relevant initiatives, such as pensioners and their beneficiaries, who, according to the social solidarity ministry, are estimated at approximately 10.5 million people.
As an example, he cites the farmer’s card system, which was activated last year to enable farmers to receive subsidies they are entitled to in a cashless manner, and also build a national database.
Other steps to promote fintech in Egypt include:
- Increasing the limits of fast-growing e-wallets;
- Linking e-wallets to national IDs instead of mobile numbers;
- Reducing the cost of e-payment solutions to encourage retailers to adopt them.
“We’re 60% there … all the right steps are there; it needs to be further pushed, further encouraged,” Samy says. “Gradually, people will convert.”
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