Brokerage companies on the Egyptian Exchange (EGX) have started to adopt digital transformation plans in stock trading with the aim of attracting new clients, increasing market shares and reducing costs. Various financial institutions have taken serious steps towards digital transformationduring the recent period, which in turn enhances financial inclusion in the country.
The EGX is considered one of the most prominent institutions that have taken strong steps in the process of digital transformation and technological development in recent years, by developing all auxiliary systems to enhance investments by relying on financial technology applications, which in turn prompted brokerage firms to embrace the digital transformation process.
In conjunction with the FRA’s launch of the executive laws entrusted with organizing and facilitating the digital transformation process for companies providing non-banking services, harnessing the capabilities of technology to support the government’s vision to achieve financial inclusion, and empowering different segments of society to benefit from non-banking financial services.
Brokerage companies are considered one of the most important sectors that may benefit from the new facilities, to launch electronic services to facilitate trading operations on the stock exchange, and to attract new investors by facilitating account opening operations, facilitating trading operations, and issuing remote buying and selling orders.
Mohamed Maher, head of the Egyptian Capital Market Association (ECMA) believes that the future will be bright for brokerage companies that rely on digital channels rather than paper-based operations.
Maher added that the digital transformation will contribute to reducing the cost of opening accounts, and receiving purchase and sale orders, and will contribute to increasing the profitability of brokerage firms, as well as support expansion nationwide without bearing the cost of establishing new branches.
He explained that brokerage firms on the Egyptian Exchange should move towards digital transformation, and establish and develop digital platforms to facilitate transactions for clients, within the framework of the current governing laws from the Financial Regulatory Authority.
Hassan Shoukry, Managing Director of HC Securities and Investment, believes that digital transformation and remote opening of trading accounts are one of the most important tools that could attract large numbers of new investors, contribute to increasing the customer base, and reduce the cost of attracting new customers to companies.
Shoukry added that the trading volumes depend on the attractiveness of the product offer and the availability of the necessary liquidity for the customer, and the trading volumes on the stock exchange will not be affected by the digital activation.
Ehab Rashad, Vice Chairperson and CEO of Mubasher Capital, said that the recent decisions will cause a radical change in the market during the next period. The step aims to help local companies keep pace with technological progress in neighbouring markets.
Rashad added that most of the foreign markets are managed by technology systems without human intervention. For example, in the American money markets, 70% of overall trading volume is generated through algorithmic trading.
He explained that with the activation of the executive decisions of the Financial Regulatory Authority (FRA) in this regard, and the facilitation of account opening operations, companies will be able to reach and attract a large number of customers, increase the volume of investments in the markets, and provide new channels for communication with customers.
He added that the decisions are the beginning of the digital transformation process, supported by the private sector and companies specialized in financial technology.
Ahmed Hamouda, co-founder and CEO of Thndr, said that financial technology is one of the most important tools that attract investment at the present time, due to the high cost of acquiring or attracting new clients, through traditional communication channels.
Hamouda explained that the decisions issued by the FRA regarding transactions and uses of financial technology are historic decisions for digital transformation, and announcing them at the present time will contribute to encouraging and supporting investment operations in financial technology, and keeping pace with foreign markets in attracting high investment volumes.
He further added that the issued decisions include all aspects of financial technology services, such as governance, preservation and confidentiality of customer data, which supports companies in gaining the trust of new customers who own investment portfolios, whether large or small.
Hamouda added that Thndr aims to increase the numbers and sizes of individual investors in the Egyptian Exchange, through technology services and facilitate follow-up and investment operations for all dealers, similar to foreign markets such as the American market, as 50% of American families invest in companies and the stock exchange, which contributes to an increase Investment volumes and individual wealth.
Thndr was able to achieve a trading value of EGP 13.5bn in the first half of 2023, an increase of 224% compared to EGP 4.1bn in 2022.
Mohamed Okasha, Managing Partner of the DisrupTech Ventures, which specializes in investing in financial technology companies, said that the decisions issued by the FRA and the Central Bank to support the digital transformation process were a long-awaited step for all financial technology companies.
He added that the Central Bank issued the requirements for establishing digital banks, coinciding with the FRA’s issuance of executive rules for digital services for non-banking financial activities.
It gave a positive impression to all companies operating in the two sectors, and paved the way for the launch of markets in financial services and technology.
Okasha said that digital transformation is one of the most important factors supporting investment and the economy during the next stage, expecting that licenses for the establishment of digital banks will be granted to three or four alliances as a minimum in the initial stage to activate the issued decisions.
He added that the non-banking financial services market will be the most beneficiary during the next phase of the decisions of the FRA, as the decisions aim to push and overcome obstacles in front of companies operating in the non-banking financial sector, and provide new financing and investment services to the consumer, as well as reaching new segments of customers in the Egyptian market.