Technology, population are crucial to digital payments growing without a ceiling

Fatma Salah
14 Min Read

The coronavirus pandemic has accelerated the growth of the digital payments market — especially in Egypt and emerging markets — doubling the size of the market locally, especially since Egypt has more promising opportunities in the sector and is still at the beginning of its journey.

Global reports expect that the volume of the digital payments sector’s revenues globally will reach about $460bn by 2030; meanwhile, its size in 2020 was estimated at $70bn.

Al-Borsa Newspaper held a roundtable seminar on digital payments as part of a series of business trends seminars to discuss the future of digital payments in Egypt after the boom that the sector witnessed over the past two years, especially after the issuance of regulations governing the work of the sector by the Central Bank of Egypt (CBE).

The seminar was attended by a number of prominent leaders in the sector and representatives of the Ministry of Finance, including Samar Adel — Head of the Electronic Payment and Collection Unit — and Dalia Fawzy, Director of the Unit and Head of the Meeza Committee in the Ministry.

The list of private companies’ representatives included Karim Eyada, Regional Director of PayTabs; Ahmed Abdel Hakim, Managing Director of Contact Financial Holding; and Ahmed Khalaf, Head of the Development Sector at Damen.

The seminar was also attended by Islam Gaber, Head of the Commercial Sector at Fawry; Mahmoud Khader, Head of Business Development and Strategic Partnerships at OPay; Abdullah Assal, Managing Director of Sahl; Abdel Rahman Ali, Founding Partner of Noqod Holding; and Tawfik Mahmoud, General Manager of Al-Arabiya Financial Services – Egypt.

The seminar was moderated by Mahmoud Al-Qassas — Managing Editor of Al-Borsa.

Al-Qassas said that the digital payments sector witnessed a great boom due to technological developments and the Egyptian government’s efforts, especially the role of the Ministry of Finance — along with the CBE — in driving the growth of the sector.

He directed a question to Fawzy about the development of the government’s plans to regulate digital payment activity.

She said that the process of digitising the distribution of state workers’ salaries began with a decision by the Minister of Finance in 2015 to adopt plastic cards instead of the traditional payroll slips from the state’s public treasury, and that was the first step towards digital transformation and financial inclusion.

Fawzy added that the ministry aimed to change the culture of citizens by adding a set of advantages to those cards that push them towards making purchases and carrying out all banking transactions through withdrawals, deposits, and transfers, as well as the possibility of online purchases, and many other services.

The ministry also allocated an additional advantage in cooperation with the CBE, which is the advance salary service, allowing employees with Meeza cards access to one third of their salaries in advance in purchases from stores and shops, stressing that the ministry’s goal was to change the culture for citizens by starting with state employees.

The conversation then moved to Adel, who in turn explained that the finance ministry started the digital transformation process when it established the Electronic Payment and Collection Unit in 2007, making all receipts available and exchanged electronically and linking them with government agencies, the National Investment Bank, post offices, and the CBE.

She added that the ministry began collecting proceeds through bank transfers, and the volume of electronic transactions at that time did not exceed EGP 1bn annually.

Adel also praised the state’s decision to cancel the accounts of 3,225 accounting units at the state level, each of which had 23 accounts. These accounts were replaced by the Unified Treasury Account, which includes about 15 accounts.

Furthermore, the ministry deployed about 15,000 points of sale (POS) in all parts of the country to deal with plastic cards and collect fees for the services provided to citizens in government transactions without any additional burdens.

She also revealed that the ministry is currently working on launching a billing platform for government agencies, and those agencies will submit all their claims on the platform so that they may be available to anyone that deals with the ministry. Adel added that the volume of electronic government transactions was more that EGP four trillion over the last three years.

Al-Qassas then moved on by asking Abdel Hakim about the contribution of the digital payments sector in advancing the wheel of other non-banking financial activities, especially the collection of premiums for consumer finance and insurance activities.

Abdel Hakim answered that the main goal of developing work in the sector is to strengthen the economy by providing means of payment that contribute to achieving the state’s strategy of financial inclusion, and with the state experiencing great challenges, the need to transform into a cashless society emerged, which prompted digital payments, creating great and powerful opportunities for the private sector.

He then enumerated the advantages of electronic payments in accelerating the capital cycle and increasing the rate of consumption for citizens, because reliance on cards for payment increases purchases over the use of cash.

For his part, Eyada said that the digital payments sector is very attractive in Egypt, which prompted PayTabs Global to establish a presence in Egypt through a partnership with EFG Hermes in December 2019.

He added that a number of international companies have already begun to look into the Egyptian market and introduce new digital products such as NFC technology payments, and the CBE will allow the introduction of new digital products in the payments market to keep pace with global developments in the sector.

Furthermore, Eyada stressed the necessity of using blockchain technology for the process of linking all sectors of the state with service providers and various payment channels, noting that the process of linking ministries, government agencies, and banks requires a strong technological infrastructure that needs more time. He added that the state is moving on the right path at a steady pace.

Moving on, Mahmoud said that the Egyptian market is an emerging and promising market in the digital transformation process, and the National Council for Payments has adopted a strong and ambitious plan for the digital transformation process in Egypt since its inception through new legislation.

He added that the CBE has greatly aided in the process of adjusting legislation that contributed to attracting foreign investments in the payments sector, which recently witnessed the exodus of some foreign investments from the Gulf to Egypt.

Additionally, Mahmoud said that the important part of the technological infrastructure is to link all government agencies to a unified system through blockchain technologies, coinciding with the need to motivate citizens to reduce their dependence on cash and use digital payments, especially that Egypt is a large market with a population of 100m.

Next, Al-Qassas asked Gaber about the possibility of building integrated e-commerce platforms to help emerging companies in the field.

In response, Gaber said that Fawry is working to transform into an integrated platform in the electronic payment system through new ideas and digital products to keep pace with the tremendous growth in global markets, meet customer needs, and focus on an easy customer experience in terms of ease and comfort for the customer in executing digital transactions.

He also explained that changing the behaviour from paying bills to electronic collection, leading to collection from mobile POSs, which greatly served the government system.

Gaber then referred to a protocol signed by Fawry with the Ministry of Electricity and Renewable Energy to collect bills through POSs instead of traditional collection, adding that the state played an important role in developing the culture of citizens towards digital payments.

For his part, Khalaf said that the movement of the digital payments sector is different from any other sector, especially in the competition, as it accommodates many competitors, allowing it to grow significantly.

He added that Damen owns the largest number of digital and technological solutions.

Khalaf also said that among the advantages that achieve the interest of competing companies in the market are the company’s technological infrastructure, the relationship of companies with the customer — whether the companies that collect their payments or the end user — the volume of investments that are pumped into development, and the creation of new digital solutions.

The moderator of the seminar, then asked Khader about the opportunities that the company saw in entering the Egyptian market.

He said that the market was nascent and had not yet reached the saturation stage, and it needed a higher technological quality. He also mentioned the directives of President Abdel Fattah Al-Sisi, the National Payments Council, and the CBE’s decisions that support digital transformation quickly.

Furthermore, Khader stated that the company pumped investments in foreign currencies in the Egyptian market in the context of heading towards a cashless society, explaining that collecting government agencies’ payments is simple compared to the size of the market; but at the same time, it should be noted that the market is still in the phase of reducing cash payment for electronic payment.

Al-Qassas then asked Assal about the future of payments without the use of NFC cards, whether through smart phone wallets or payment points.

Assal answered by saying that the future will witness a focus from service providers in using technology to achieve three elements — transparency, facilitation, and higher quality customer service in electronic payments and electronic collection processes.

He added that the company began its work by setting a main goal, which is to facilitate access of customers to the payment processes, especially in fixed payments such as monthly bills for services like electricity and gas.

Then came the desire from the electricity ministry’s companies to facilitate the process of charging prepaid metre cards through POSs by using electronic payment companies.

Then the matter developed into payment through smart phone applications without the slightest physical effort, and the state’s quest to reach this goal began. This experience was transferred due to its success in gas companies and water and sanitation services.

Finally, the moderator asked Ali about the government’s trend towards digital transformation in services and its impact on the existence of unified platforms and cards for some similar services.

He then explained that the impact of the spread of the pandemic was significant in the growth of electronic payments operations and contributed to expediting the process. This is in addition to the laws regulating the sector with the support of the CBE or the Financial Regulatory Authority.

Ali also mentioned that the company is currently working on a project that aims to provide electronic solutions for start-ups and small- and medium-sized companies in cooperation with the government and the CBE within the framework of exploiting the state’s support to increase electronic payments around the clock, seven days a week.

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