Transfers ready but full-fledged mobile banking to take longer in Egypt

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CAIRO: Egypt’s mobile phone subscriptions topped 74 million in April, an increase of 27 percent from the previous year.

The country’s banked population, however, is not nearly as large, coming in at around 10 percent.

Such a discrepancy in numbers suggests that a marriage of the two sectors would be a match made in heaven. Mobile banking is not only expected to come in handy for Egyptians, but will also open doors for new partnerships once all the kinks are ironed out.

Minister of Communications and Information Technology Magued Osman said last month that the Central Bank of Egypt has finally approved money transfers — the first step towards mobile banking — allowing users across Egypt to transfer or deposit a maximum of LE 3,000 by mobile phone.

But analysts and industry insiders say it could be some time before Egypt sees full-fledged mobile banking services.

“We approved the service already since March 2010, now it is up to the service providers and banks,” said the head of payment systems at the CBE.

“It is a matter of preparation on their part and getting the proper licensing from other government organizations, this might be the difficult part,” he told Daily News Egypt.

The three mobile operators — Mobinil, Vodafone and Etisalat — along with the banks they are partnering with will have to apply for licensing through the National Telecommunication Regulatory Authority (NTRA), which will have the final say.

According to Ahmed Adel, telecom analyst for the Middle East and North Africa (MENA) at Naeem Holding, the service will be introduced to Egypt in three phases.

“The first phase is for users who share the same mobile network provider, the second will be making it possible for users to send to all three networks, and the third will be opening up the money transfer to international users,” he said.

According to Adel, the convenience of mobile cash transfers could be an easy way for those living abroad to send money to friends or family in Egypt.

But, while it is a big step for the country, it is not meant to be a short-term profiteering strategy.

“Its not about the money transfer, its about mobile banking. We believe that the money transfer license is just the first step of introducing full mobile services which can be seen in the market over the next year or two,” Adel added.

For Egypt’s three telecom provider, he said, it would be used as a way of creating better ties with customers.

“More than 90-95 percent of the telecom providers’ revenue is coming from voice services. The profit coming from such services will not be that significant financially on the short term,” he said. “Any operator in the market right now is just trying to target just their own subscribers, you have to protect and maintain your subscriber base by offering new services.”

Service partners

Mobinil and Vodafone have already partnered with local banks. Mobinil is currently with BNP Paribas, while Vodafone is partnering with the Housing Development Bank.

“We’ve received approval from the NTRA, but it is pending the stability of the current situation in the country,” Khaled Hegazy, director of public relations at Vodafone Egypt, told DNE.

Hegazy, however, is confident that the service will help Egypt’s market significantly once it is up and running in a clear framework.

“It will be a big boost for the Egyptian economy. It has been very successful in several markets like Kenya, Qatar and South Africa,” he said. “It will show affects immediately, but after two or three years it will have a much stronger impact on the economy.”

The money transfer works by depositing money in the user’s mobile account. Then, when a customer wants to withdraw the money that was deposited or transferred, they show the transaction’s code or receipt to any participating outlet and receive cash in return.

Currently, bankers and analysts alike are waiting for telecom operators to make the next move and announce the complete details of the service.

Mohamed Abdel Rahim Ismail, senior manager of Enterprise Information Management at Etisalat Egypt, said his company has been discussing the idea internally and they see it as a promising step for anticipated business opportunities.

“We still haven’t adopted it, but I can say that while it can have some risks, it will have a lot of potential as well,” he said. “The process itself definitely needs different parties, and we are still studying this, there will be partnerships with banks.

According to head banker at Al-Ahly Bank, the bank has yet to implement it, but idea is still under study.

“There is more than one complication,” he said. “Some countries used mobile banking and it became popular, but a glitch that popped up made them discontinue using it.”

He pointed out that because Egypt’s three different carriers might have different plans and offers, it will take Al-Ahly Bank some time to work out how they will go about providing the service.

“Every telecom operator has a different plan,” he said. “As a bank, our plan could be different, so the issue now is trying to figure out these small technicalities before we can say the service is up and running.”

He expects that within a year or two, each company will have more solutions and models available and that the service could actually start resonating in Egypt’s emerging market.

“The idea itself has a lot of value in this aspect, especially when everyone has a mobile these days,” he added. “It can work in Egypt as it only works in emerging markets because of the low-income standard that is set.”

For other banks, waiting on the sidelines in the beginning seems to make more sense before jumping on board with the new service.

Sherif Khalil, head of investor relations at Commercial International bank (CIB), added that when the idea starts picking up in Egypt, the bank would then consider offering the service.

“It’s going to take a lot of time to take place,” he said. “When it does happen we will see if economically make sense.”

Mike Millar, head researcher at Naeem Holding, also said it will take some time before Egypt sees a full-fledged mobile banking system in place for several reasons.

“It will start off with fairly basic services like money transfer, and then perhaps payment services, it will take some time for it to evolve into more sophisticated banking services,” he said.

Security and comfort will also be a deciding factor for Egyptian users.

“If you look back when it became possible to make payments on the internet, people were cautious, this will be the same case now,” he said.

Millar also pointed out that adding other features to the service might be opportune in Egypt.

“Mobile lending could be appropriate in microfinance,” he added. “But the mobile companies would have to be careful with the liability with the banks and they would have to secure their ties.”


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