In an interview with Daily News Egypt, Visa general manager for North and West Africa, Tarek Elhousseiny, discussed the opportunities and challenges of increasing the presence of electronic payment options in Egypt.
What is your outlook for the Egyptian economy?
We are seeing progress by the Egyptian government in its work to speed up financial inclusion, which will in turn positively impact the economy by increasing the transparency of the financial system and the efficiency of services provided to citizens.
In particular, the government is making significant headway in key areas, such as the increase in electronic methods of government disbursements like payroll, pension, food, and bread subsidies. Visa is currently working with the government to facilitate the implementation of these projects. Once they are activated and become operational, the payment landscape in Egypt will change for the better, as more people will benefit from the formal banking sector, and the acceptance of electronic payments will expand as more merchants come on board.
In March 2016, Visa released a study conducted with Moody’s Analytics that analysed the impact of electronic payments on economic growth across 70 countries between 2011 and 2015. The study found that the increased use of electronic payment methods, including credit, debit, and prepaid cards, added $296bn to the gross domestic product (GDP), while raising household consumption of goods and services by an average of 0.18% per year. Furthermore, Moody’s economists estimated that 2.6 million new jobs were created on average annually over the five-year period, as a result of increased use of electronic payments. The 70 countries in the study make up almost 95% of the global GDP. In Egypt, increased electronic payment usage added $10m to the country’s GDP from 2011 to 2015, and created the equivalent of an average of 2,300 jobs in Egypt per year in the same period.
What are the current strengths of the Egyptian economy?
From a payments standpoint, the financial system in Egypt is solid and there is a clear government impetus towards increasing the level of financial inclusion. Additionally, we believe there is a lot that the payment industry can do to support the small and medium-sized enterprise (SME) sector in Egypt, which plays an essential role in stimulating the economy, generating jobs, and increasing exports. This is why Visa is cooperating with stakeholders like e-finance, cloudBuy, and the Ministry of Communications and Information Technology to assist the sector by creating a comprehensive online marketplace on which the government can procure goods and services from Egyptian SMEs. The e-marketplace will also enable SMEs to benefit from service providers like mobile network operators, banks, and the Egypt Post, to name just a few. It will further provide an opportunity for SMEs to increase their exports, develop their businesses, and hire more people by linking with other e-marketplaces, which in turn will help the country generate foreign exchange reserves.
We are also working with SMEs to help them streamline their expenses by issuing payment cards for business expenses. This is an easy way for SMEs to separate company and personal expenses, manage business and travel spending, and simplify bookkeeping. Managing outgoings on a card allows the companies to have greater control over their business spending—they can track expenses by category, issue cards to key employees, set spending limits, and better manage their company’s cash flow. Transitioning from business cheques to business payment cards fuels growth, not only by providing faster, more cost-effective ways to pay, but also by allowing for purchasing flexibility through online purchasing and business travel bookings. Both automated payments and leveraging of the internet as a tool for business makes it easier to do business.
Access to funds whenever and wherever an SME needs them gives businesses more flexibility to scale, increase revenue, and improve cost efficiency. Other benefits that offer cost savings with business cards include offers for business travel and accommodation, as well as for business support services and products.
What is required to push the Egyptian economy forward and enable growth?
As the Moody’s study commissioned by Visa demonstrated, building a culture of electronic payments across society has a very direct impact on the wider economy. Electronic payments, for instance, require more stringent identification documentation, making it difficult for ghost recipients to remain undetected, which improves traceability and increases transparency in the financial system. Moving to electronic payments can also lead to significant cost savings over the long term, particularly in relation to large-scale government-to-public payments, such as social transfers. Additionally, electronic payments are often the first entry point into the formal financial system for individuals and a step towards providing accounts, either traditional bank accounts or e-wallets, to people unaffiliated with a bank.
What activities or projects can assist with the growth of the Egyptian economy?
We believe that projects aimed at driving financial inclusion can help the Egyptian economy grow. Financial inclusion brings many benefits, the most significant of which is the potential to transform a person’s life by enabling them to save, send, receive, and borrow money securely, conveniently, and reliably, which is essential to breaking the cycle of poverty.
Financial inclusion frees people from having to safeguard large amounts of cash, which is inherently susceptible to loss or theft. Furthermore, making payments via a text message on a mobile phone saves people the time and money they would have spent travelling long distances to pay bills or receive funds from others. Electronic payment products that provide access to credit make it possible for people to invest in a farm or small business, or pay in advance for vital services. Being financially included increases the likelihood of someone being able to access education, health services, and even employment. It enables more money to be taken out from under mattresses and moved into the formal economy, creating opportunities to deploy capital more efficiently and drive economic growth.
Currently, we are working with our clients and the Egyptian Banking Institute to increase awareness among government employees about the benefits of electronic payments.
What did Visa do to expand access in countries similar to Egypt and in emerging markets?
Visa has been working in the area of financial inclusion for many years. In fact, it is part of our core business: enabling everyone, everywhere to have access to a basic transaction account that connects him or her to a bank. There are many ways in which we enable financial inclusion at the base of the economic pyramid, including making government disbursements more effective, providing financial literacy to consumers, extending acceptance locations to remote areas, and using market research to help banks develop products that are most appropriate for low-income consumers.
We recently launched mVisa with our partners in India, and early results show that thousands of merchants have adopted the solution. Over the next few months, more and more merchants are likely to enrol in the programme. We intend to launch mVisa in Egypt soon, which will help increase the acceptance footprint in the country, and enable more people to use and benefit from electronic payment solutions.
How can innovations in the payment industry help drive financial inclusion?
As the payments industry shifts from plastic to digital, Visa is supporting our clients to offer their customers a safe, simple, and consistent purchasing experience, regardless of where they are and what device they are using. Visa announced the creation of Visa Digital Solutions, a comprehensive suite of offerings that can enable payments across a broad range of internet-connected devices and wearable products. It also includes a new service that can help reduce fraud in mobile and online payments.
Through Visa Digital Solutions, Visa is enabling existing clients and new partners to create new, innovative commerce experiences that utilise Visa’s secure, global payment platforms and capabilities.
Understandably, the future of retail hinges greatly on the various possibilities that mobile transactions present, which to a large extent are defined not by what retailers want to sell, but by how and what consumers want to buy. The mobile channel is leading the purchase environment convergence or omni-channel retail, which include in-store payments, traditional online payments, online and in-store pickup, and mobile point-of-sale delivery models. In addition to that, the mobile channel is also making it possible to create new purchasing experiences through contextual offers, location-based content, and “tap-n-pay” experiences that are available in the consumer’s hand.
The latest innovation driving this trend is token-based technology, which enhances the digital payment experience—online, at the point-of-sale, or in-app—by adding an extra layer of security to every transaction. Visa Token Service can enable interoperable near-field communication (NFC) mobile payment solutions that work on Visa’s worldwide PayWave platform. Solutions such as Apple Pay, Samsung Pay, and Android Pay are powered by Visa Token Service. Visa’s Digital Enablement Program streamlines the process for merchants and financial institutions to adopt new digital and mobile payment solutions powered by Visa Token Service.
Visa is inviting the entire industry to join in the pursuit of new commerce and payment models. Visa is doing that by opening the edges of its network—providing a growing ecosystem of clients, partners, and developers with fast and secure access to VisaNet through Visa’s Developer Platform. Visa’s open approach to payments is already accelerating the development of innovative applications and services.