Sherif Samy is a financial advisor and founding Chairperson of the Egyptian FinTech Association.
He is currently serving as Chairperson of the Commercial International Bank – Egypt (CIB), having previously served as Chairperson of Egypt’s Financial Regulatory Authority (FRA).
He has also previously served on the Boards of the Central Bank of Egypt (CBE) and Banque Du Caire.
Samy sat down with Daily News Egypt to provide greater insight on how the novel coronavirus (COVID-19) pandemic has affected Egypt’s banking sector. He also outlined what the bank’s plans are in the post-pandemic era.
How have the banking sector’s plans and approaches changed after the COVID-19 pandemic? Have the opportunities and challenges been affected by the health crisis? What are your expectations for the banking sector in the coming period?
Obviously COVID-19 and the precautionary measures taken to fight the pandemic impacted banks, not only in Egypt but across the world.
The first challenge was to balance the wellbeing and safety of bank staff and clients with the need to remain operational and providing services. Creative solutions were adopted for work-from-home for those whose jobs allowed it, including introducing alternating shifts for branch staff, and supplying them with ample quantities of masks, protective shields, and detergents.
This was in addition to obviously accelerating the rollout of digital financial services. The latter was supported by an upgrade to the technology infrastructure and telecom capacity, to address the sudden surge in the use of such technology-enabled services. Additionally, measures were taken to ensure that ATMs are constantly provided with cash to cater for the growing usage during the pandemic.
The Central Bank of Egypt (CBE), as the regulator, adopted important measures to ensure the banking sector weathers the storm as they say. A key initiative was to direct the banks to waive fees associated with payments, local transfers and cards services.
This helped encourage more usage of cashless transactions and attracted a new category of individuals and small businesses that were previously more comfortable with cash transactions via the branches. The CBE also mandated the banks to allow borrowers, both corporate and retail, to delays payments of their credit facilities for up to six months.
This addressed the pressing needs of those whose businesses or income were disrupted due to the pandemic and the associated lockdowns.
It should be stressed that for the past few years, the progressive banks realised the future mandates reinventing the way banking services and products are provided for the benefit of becoming digital. Hence, COVID-19 did not change the course but accelerated it. I believe the banking sector and society made a two to three-year leap in just a few months. This is expected to continue.
On the other hand, we should remember we are not yet out of the pandemic. While vaccines and other measures tell us we are hopefully nearer to the light at the end of the tunnel, there are several sectors in the Egyptian economy still suffering, namely, those related to travel, tourism, exports, entertainment, and obviously exports.
Banks as lenders to businesses and individuals in such sectors are sharing part of the risk, and trying to be accommodating while observing the necessary risk management and asset protection measures. Hence, one cannot deny revenues were affected and additional provisions were taken in this respect during the year 2020, and this will probably extend to the first half (H1) of 2021.
In your view, what is the best investment sector for banks now? How can banks benefit from acquisitions, especially fintech companies?
In many markets, banks have seen growing competition from FinTech players, offering digital financial solutions that are friendlier, faster, and in many cases lower cost than traditional banks.
Egypt will not be immune from such a trend as we witness the gradual emergence of new ventures in the field. While we already have established players in the payments industry, more recent ones in the areas of lending, savings, insurance have gone into operation. Over the coming few years we will be able to assess their true impact in Egypt.
While Egypt and other emerging markets have not reached the level of being to a large extent a cashless society, the trend is definitely starting. Locally the government is supporting it, especially after the issuance of a law regulating cash payments and not accepting cash for government-related dues above a certain sum.
I would also highlight that the new banking law issued in September 2020 includes for the first time a whole chapter addressing payment service providers and financial technology. This reflects the CBE’s keen interest in developing the sector and protecting the customers of such digital financial services.
Banks in numerous regions of the world have more than one strategy with regards to FinTech. Some are adopting a “build it in house” approach, others are selectively identifying firms to acquire for a faster time to market.
Some less aggressive banks are comfortable with cooperating with independent FinTech players. One should also note that the big threat in the field will come from “Big Techs” which are large social media platforms and e-commerce companies wanting to leverage their millions of users to provide such a “captive” client base financial services as well.
Some good examples would be Alibaba, Amazon, and what Facebook and WhatsApp are working on in terms of digital banking initiatives.
Let us also note that in such a discussion we should not ignore Egypt Post, as it a large organisation with nearly 4,000 branches all over the country, and boasting over 20 million clients with savings exceeding EGP 200bn.
So it is a force to recognise and a key contributor to financial inclusion. Hence it would also have to face the winds of change facing the financial services industry, modernise its technology infrastructure, and offer more digital channels and payment solutions.
How does CIB cope with the continuous change in customer requirements? What contribution can your bank provide to the sector during the coming period?
CIB Egypt has recognised the trend a few years ago, hence its ongoing heavy investment in technology, robotics, and data analytics. This allows it to be competitive in terms of digital offerings, in addition to the ability to better target clients with customised products and adequately assess their risk profile through analytics.
In the past year, the number of digital banking transactions performed through the bank’s Mobile Banking service has more than doubled reaching EGP 53bn. Among digital products, we have “Zaki the Bot”, an artificial intelligence chatbot, available on CIB’s website and official Facebook page. It allows CIB customers to easily navigate the bank’s products and services in both Arabic and English.
I would stress that the bank’s direction is not only on the digital front, as it remains committed to better serve SMEs which is a national priority. CIB Egypt is taking additional steps on the sustainable finance front, recognising its role to support green finance, and to minimise the environmental impact of its own operation.
Do you think banks’ entry into non-banking financial services, such as financial leasing, factoring, and microfinance, will represent a turning point for the sector?
I have been Egypt’s chief regulator of non-banking financial services, and have been involved with several of them at a later stage. I believe that leasing, factoring, mortgage, microfinance and consumer lending, when provided via companies, could better and more efficiently reach small- and medium-sized enterprises (SMEs) and a large bracket of the society we are targeting for financial inclusion.
So my professional opinion is that by having such subsidiaries, banks in Egypt will increase their reach and have the right dedicated teams and agility to better address the needs of such a customer base.
What will the bank’s role be in a cashless society?
Let us not get too excited! While we will see a gradual shift in Egypt to payments systems for years to come, cash will remain king. Hence Egyptian banks, while innovating and expanding their digital offerings, will continue to maintain ATMs and a significant branch network.
However, onboarding new clients and growing their customer base may be faster and less dependent on physical premises compared to the previous decades.