By Mohammed Ayyad
The National Bank of Egypt (NBE), the largest government bank in Egypt, is planning to reduce cash transactions in the market and replace them with credit cards in order to meet the needs of citizens of diverse age groups and consumer cultures. In an interview with Daily News Egypt, Hegazy said his bank is looking to add pre-pay cards for non-bank customers and make bill payment services available on “Mobile Banking,” which is currently limited to money transfers only.
How do you view the credit card market in Egypt? Have we reached rates which can service our population, currently estimated at 85m?
The credit card market in Egypt is promising because of the market’s size, which exceeds 85 million. The market, whether debit or credit, is currently only tapping into 12 m consumers. What’s more, [many Egyptians tend to] only use their cards in withdrawing their salaries, and not for paying for bills.
Market share for cards in Egypt is divided between 9m debit and withdrawal cards and only 3 m credit cards for paying bills. These rates are still very weak, compared to the 40 million credit cards used in Turkey. NBE’s market shares make up more than 2.5m of the country’s 9 m debit and withdrawal cards, and half a million of the country’s 3m credit cards.
What are the bank’s plans to expand the customer base in the market for cards?
At the bank we are fighting to turn Egypt into a “cashless” society, and to attract new segments of the population to replace cash with cards in their financial transactions. In Egypt we have a rapidly growing demand for cards as a substitute for cash, particularly in the younger age groups that make online purchases with “cashU”cards. The cards are charged in advance and are particularly popular among youth to buy games online.
But we are going to work during the coming period to eliminate the requirement that customers have a bank account to get a card, to facilitate their transactions and provide pre-paid cards, charged at branches currently being set up across various governorates to provide an infrastructure so individuals can buy make purchases as they like, whether online or in mega-malls, without needing to have a bank account.
We are going to launch prepaid cards in mid-July 2014, and we are looking to issue 200,000 cards after the technological infrastructure is developed. Our broader plan is to bring prepaid cards to 2 m customers, particularly youth, for making online purchases or paying for university expenses.
Prepaid cards will allow individuals to receive remittances transferred from Egyptians abroad, withdrawing the money from electronic machines, which will decrease the difficulty of Egyptians working abroad to transfer remittances. So prepaid cards will not be for purchases only, but will allow for receiving foreign remittances.
Is the bank thinking of providing unconventional competitive products in specific sectors, like for reserving airline tickets?
Prepaid cards will already allow customers without bank accounts to charge their cards and reserve airline tickets online, as well as make payments for electricity bills or any other bills. We are working quickly to complete the infrastructure needed to implement these services with the ultimate goal being to make Egypt’s consumption less reliant on cash.
We will allow parents to provide their children with prepaid cards for their expenses, which will make it easier for parents to monitor their children’s purchases via text messages sent to the owner of the charge cards after each payment is made.
What about the “Mobile Banking” service for mobile money transfers?
It is well known that mobile banking now is for transferring money through mobile phones, known as “phone cash” in cooperation with Fawry. But in the coming period we will allow customers to pay bills for purchases through the phone without any need for cards or points of sale, which will facilitate financial transactions for citizens without cards.
Mobile bill pay service will be coming very soon. We are preparing the infrastructure for it now, in coordination with several large malls and telecom companies.
As for “phone cash,” which is limited to fast and easy transfer of funds across governorates, it currently has 34,000 subscribers from NBE bank customers, and we are looking to increase this to 62,000 customers during the coming period. But I would like to mention, for example, if a student is in one governorate and her mother is in another, and she doesn’t have the money to pay university fees, she can call her mother to transfer the required money through her mobile phone, and the money can be retrieved through a Fawry branch. The fees can therefore be paid without the need to travel and waste time.
But the number of active subscribers of “Phone Cash” is estimated to be 26,000, or 77% of the total– but the numbers are continuously growing, and are expected to exceed the increase in proportion of customers during the coming period (ch), especially as the service falls under the umbrella of modern services that need more time to define and gain popularity and acceptance for various market demographics.
We added the service in the middle of last year in cooperation with MasterCard and Egyptian Banks Company, to be the first bank in the Middle East offering this independent of any mobile network, enabling mobile phones to make deposits and withdrawals, transfer funds from their mobile accounts to the accounts of phones on any mobile network, whether Vodafone, Mobinil, or Etisalat.
The service also helps to enable customers, through the Fawry service, to pay bills for their landline and mobile phone by charging their phone’s credit, and also allows for payments for things such as making donations or reserving airline tickets. Customers who use the service once will continue to interact with it given the possibility of transferring funds, or paying bills for services.
We have 90 million mobile users in Egypt, so how can the number of custoemers using mobile banking, particularly fast cash, doesn’t exceed 34 thousand. We have huge numbers and its upon us to work on extending the service.
But do you not view the mobile phone payment services as competing with prepaid card services offered by the bank?
Yes, absolutely. But at NBE we strive to provide all services to citizens looking to pay bills on their purchases through prepaid cards, so the customer will find points of sale available, and those who prefer paying bill through their phone directly without resorting to cards will find they can do that as well.
The most important thing is that the bank seeks to attract new segments outside the banking system, therefore we offered cards that don’t require those using them to have a bank account. We have approximately 10 million people interacting with the banking system in a population exceeding 85 million, so the market is expanding to attract more to the banking system.
Has lawlessness affected rates of new card users because of closures of banks during certain periods?
The state of lawlessness that followed the January 2011 Revolution, and which lasted three years, strengthened the idea of resorting to credit cards to facilitate their transactions without resorting to banks which had closed their doors in the face of the public for days, fearing armed robberies brought on by the turmoil being experienced in the country.
I would like to point out we are getting requests from youth in the governorates looking to get prepaid cards to pay for their purchases of games online. The market is evolving rapidly and its demands are increasing, and we seek to meet its needs. The era of cash will inevitably come to an end in favor of non-cash means for everything.
How do you view the government’s move to cancel the “discount and added” tax and replace it with a value added tax imposed on banking services?
Canceling the “discount and added” tax is inevitable and will increase liquidity on the market for traders and raising the volume of transactions, but in terms of the value added tax on banking services, the timing is not appropriate, but I’m not objecting to it. Let’s wait until we raise the number of those using the banking system first.
How do you view the demands of stock market investors to impose taxes on savings schemes in banks, similar to market taxes on capital gains?
First, I believe that the Egyptian capital market and stock exchange indices will accommodate the new tax, estimated at 10% of capital gains and cash dividends due at the end of each year. I’m not against imposing taxes on savings schemes in banks, provided that any possible negative repercussions are taken into consideration. For instance, will this reduce the cash liquidity in banks which contributes to financing the budget deficit and provides funds for investment that accelerates financial growth and increases employment rates?
However, I think the government’s decision to raise the exemption limit on cash dividends to EGP 15,000 has both provided protection for small investors whose portfolio does not exceed EGP 300,000 and has reduced inequality between savings schemes in the stock market as well as banks.
What is happening with consultations between the bank and government organisations and bodies to pay government employees their salaries via electronic means?
We now have approximately 450,000 debit cards used to pay government salaries and based on our consultations across various government agencies, we are looking to increase this number by 200,000 new cards so that government employees can access their salaries electronically.
This is an initial step to attract new customers to the banking system, which could eventually lead them to expand their dealings through credit cards.
What are other actions being taken to develop and modernize bank infrastructure?
NBE is the oldest commercial bank in Egypt. It manages activity through its branches, affiliated institutions, and representative offices in various parts of the world, such as China, the United States, Germany, Britain, the United Arab Emirates, Sudan, Ethiopia and South Africa.
NBE has 1700 ATM machines and it aims to have 2,500 machines by the end of the next fiscal year.
Our bank has contracted with A-Flex, an Indian company, to supply us with an integrated business system for course banking. Using this new system as opposed to the old system we had been using for 25 years will help us account for the significant increase in the number of our customers and the pace of technological development.
We’ve completed the first phase in installing this new electronic system in preparation for the transfer of personal loans into the system.
What about contactless smart cards that are on the market now – is the bank preparing to provide these to customers?
At the moment, we are working to provide “Bye Pass” contactless cards to our senior clients, which allows for the payment of bills and use in airline reservations without the need to process discounts through points earned through the customer’s account. They will be processed through the bank directly, which reduces wasted time.
What can you say regarding the number of branches of your bank and the current target to meet the needs of the citizens?
We seek to reach a total of 381 branches over the next three years as compared to the 331 branches we have at the moment, through the launch of 50 new branches within our bank expansion plan.
The focus is to establish new electronic branches that take up little space. They will be able to carry out all the actions of an ordinary bank and will provide good service to our customer population, which grows on a daily basis, in order to avoid overcrowding and congestion within the banks.
As I stated earlier, NBE has 1700 ATM machines and it aims to have 2,500 machines by the end of the next fiscal year.