Egypt. Revolution. A two word combination that the international media has become familiar with since the surging of the Arab Spring in 2011. But, a new revolution in Egypt is forming on the horizon. The introduction of the Automated Clearing House (ACH-EG) in 2010 enabled inter-bank clearing transactions among participating financial institutions. Mobile payments then entered the ecosystem in 2013. With the infrastructure for banking interoperability already in place, mobile payment interoperability will soon be layered onto the ACH-EG via the mobile payment gateway solution devised by MasterCard. This development promises to lead to a transformation in payments.
While mobile interoperability has yet to culminate, Mr. Ahmed Faragallah- Head of Payments at the Central Bank of Egypt- estimated that the system could be active by mid-2016. But the real question is, how would interoperability translate? How, in practical terms, will it alter and innovate the current ecosystem?
The Egyptian Ecosystem
The current reality in the digital and mobile payments space in Egypt is one of specialization and fragmentation.
Person to person mobile transfers typically fall within the sphere of National Bank of Egypt, Commercial International Bank, or in collaboration with one of the three mobile network operators. National Bank of Egypt, in partnership with Fawry, offers a mobile wallet product termed Phone Cash. Commercial International Bank, again in partnership with Fawry, launched a similar product coined Smart Wallet.
Due to the nature of the regulation in Egypt, mobile network operators are required to contract with a bank, which is ultimately responsible for compliance with AML/CFT controls and is liable to ensure that the electronic money units allocated to mobile wallets are represented by a cash sum deposit equivalent to the same value. Therefore, while Etisalat, Vodafone, and Mobinil each advertise their own individual mobile wallet and transfer service (Flous, Vodafone Cash, and Mobicash respectively), the back-end of operations consequently rely on the banks. The mobile network operators are involved in branding, marketing, and ‘Know-Your-Customer’ data collection, but the capacity to scale offerings is inherently linked to, and thereby limited by, banking infrastructure. As of the start of 2016, the three mobile network operators performed identical services: P2P transfer within their network, phone bill payment and mobile top-up.
Bulk payments, as typified by salary disbursements, are not currently as palatable to the private sector. Government initiatives have been a propelling force in the development of bulk payment solutions. Both MasterCard and Visa have coordinated with the national government to incorporate payroll debit cards as one method to distribute salaries. There is one vendor, though, that is soliciting private companies in hopes of diversifying payroll payment methodologies in Egypt. dopay exploits a variety of tools to manage payroll - from its pre-paid dopay card to direct bank transfers and, eventually, mobile wallet allocations.
Person to business retail or bill payments, whether digital or mobile, are facilitated instead by technology providers. Fawry has more than 50,000 service points, which customers can visit to execute multiple bill payments for errands varying from tickets, utilities, education to charity or subscriptions. The service points consist of kiosks, pharmacies, groceries, post offices, and 6,500 ATMs from 14 different banks. Mobile wallet purchases processed by Fawry for person to business or person to government transactions, however, are bound to IoS, Blackberry, Android and Java phone access. Bee Payments, another technology provider and competitor, organizes itself around an agent model, analogous to that of Fawry. Where it differentiates itself is the Bee Card, a pre-paid card that allows unbanked constituents to dabble in the wonders of online shopping at registered electronic sites.
While mobile interoperability will not instantaneously melt away the niches addressed above, it will certainly help lower some barricades. According to Mr. Mohamed Kamel Bayoumi, the Managing Director and Board Member at Egyptian Banks Company (which governs the EG-ACH under the supervision of the Central Bank of Egypt), mobile interoperability will fundamentally expand the transfer payments field. As of now, only the Phone Cash wallet is equipped with a function that authorizes transfer to any mobile operator wallet, due to its integration within the banking infrastructure. However, after the completion of the mobile payment gateway, Mr. Bayoumi confirmed that digital money would migrate freely between mobile wallets and bank accounts irrespective of which financial institution or mobile network operator an account originated from. This advancement has the potential to revitalize international P2P transfer initiatives. Currently, Etisalat and the National Bank of Egypt are in negotiations with the Central Bank of Egypt to activate international mobile remittances.
The unencumbered and free movement of payments, in turn, should incentivize software solutions to digitize bulk payments. dopay is already ahead of the curve on the design and implementation of bulk payment processes. Mr. Frans van Eersel, Managing Director and Founder of dopay, elaborated on their formative approach: “We are currently working on a full integration with the ACH. We expect this to be ready by mid-2016. Once the integration is completed, enterprises cannot only pay salaries (or other payments) into dopay accounts, but also into any Egyptian bank account as well as any mobile wallet or prepaid card that is connected to the ACH.” While dopay may be specializing its bulk payment offerings, there is still plenty of fertile ground upon which the mobile network operators and banks can tread.
As to how the mobile payment gateway, and resulting interoperability, would impact person to retail purchases, one only needs to consult the proposals of MasterCard. Evolving from the pre-paid card scheme, MasterCard, with the blessing of the Egyptian government, intends to digitize the national ID. Michael Miebach, president of MasterCard Middle East and Africa, clarified that “there will be work done to leverage the existing mobile gateway of the country and coupling that with the national ID to create an environment where every single Egyptian is authenticated to a mobile payment account that would facilitate payment.” This functionality would be available to both smart and feature phones, which would readily broaden the person to business payments sphere and loosen the grip of technology providers like Fawry and Bee Payments.
An Impending Upending?
While interoperability will reshuffle the pseudo-monopolies of Egypt’s payment industry, it stands that it will benefit most and harm few. Any loss of business by a bank, mobile network operator, technology provider, or payment processer, seems to be eclipsed by fresh opportunity. Interoperability will ease the use of digital payment services for customers, thereby encouraging new entrants, which should more than compensate for a few turned subscribers. As Mr. Bayoumi commented, “the market is crowded, everyone is now bringing their own solution, and has their own initiatives. But the competition will not be that tough. We have a very large market, and what is utilized of that is very little.” Indeed, he continued, “I believe 2016 will be a revolution in payments for Egypt.”
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Image courtesy of Ahmad Hammoud