The Central Bank of Egypt (CBE) has announced the approval of new regulations and customer due diligence procedures for mobile payments by the Egyptian Money Laundering and Terrorist Financing Combating Unit. These regulations will enhance financial inclusion, support economic growth and create new business opportunities for Egyptian banks, according to the Credit Outlook report published on Monday by Moody’s Investor Service.
According to the report the new regulation for mobile payment services is credit positive for Egyptian banks because it is part of the authorities’ efforts to increase customers’ access to the financial sector and move towards a less cash dependent economy.
The new regulation will allow banks to employ agents spread across the country in order to establish relationships with customers and verify their identities. Furthermore the agents will offer banking services for the people who were previously unbanked, which will include low-income individuals, the youth, and residents of remote areas.
Additionally, micro enterprises and merchants will be able to pay or receive funds via their mobile accounts and customers will be able to receive remittances to their mobile accounts. customers will also be able to make payments to customers of other mobile payment schemes and transfer funds between their mobile account and other accounts held at the same bank. The banks will have six months to upgrade their information systems and software applications to communicate and exchange data with other digital payment platforms.
The report stated that mobile banking has significant growth opportunities in Egypt, since the mobile phone penetration in the country exceeds 100%. There are currently more mobile connections in Egypt than people. Since the launch of the first mobile payments services in Egypt three years ago, subscribers of mobile payments has reached 6.2 million as in October 2016.
Egypt’s current financial inclusion is low with an estimated 14% of Egyptian adults having bank accounts. Mobile banking is expected to enhance deposit growth as banks’ penetration of the bankable population deepens. Moreover banks will be able to sell to new and existing customers products such as payroll, transfers and bill payments, which will boost their non-interest income and overall fee revenue, the report said.
As the market develops and the population becomes more accustomed to financial services, banks can introduce new loan products that will support credit growth and net interest income. Longer-term, mobile banking will improve the efficiency of banks because it will reduce the number of new branches that Egyptian banks need in order to penetrate the market.