The Egyptian online payment sector remains heavily hampered by a wide gap between available solutions and the needs of 91 million Egyptians, the whopping majority of whom is still reluctant to set up bank accounts.

Addressing this environment, a number of startups is entering the market to tackle fintech and address the main concerns around it.

Minor e-services and banking awareness

For years, Egyptian companies have been paying salaries in cash, and people have been saving money outside banks.  Only 10 percent of Egyptians have bank accounts, according to Payfort’s State of Payments in the Arab World 2014 report.

Over the previous decade, the electronic payment market has been penetrated by two firms: state-owned e-Finance, which handles electronic payments from and to the government through banking channels, and private-sector Fawry, which was launched in 2008 to provide payment solutions through ATM machines, mobile wallets, and retail points.

Chief technology officer of Fawry, Mostafa Elnahhas, told Wamda that his company succeeded in spreading 65,000 collection points in 300 cities for banked customers in Egypt. However, the electronic payment is still small-sized due to the large amount of unbanked customers and the low credit card penetration.

Fast ecommerce improvement

“Egypt saw its largest improvements in the ecommerce sector, which increased by 16 percent over the last year and created a very positive sign that the Egyptian population is becoming more comfortable using ecommerce services during their daily lives,” Elnahhas added.

Khaled Eid, marketing manager at the local electronic payment solutions Bee, believes this sector is currently witnessing a boom, with lots of companies and startups entering the market.

“We welcome this change as it continuously pushes us to increase the level of performance and quality,” Eid told Wamda.

Market gap and potential opportunities

According to Ahmed Al Salahy, Payfort regional manager in Egypt and North Africa, two obstacles are behind the market gap: the innovative solutions needed and the unbanked community. Despite these two burdens, there is still a room for growth, he said.  “The electronic payment market in Egypt is witnessing growth due to the fast technology advancement and the strong increase in the number of smartphones penetration,” Al Salahy told Wamda.

The number of electronic payments carried out through credit or debit cards in Egypt has increased to reach two billion Egyptian pounds (US$ 111 million) in 2017 according to Al Salahy, compared to 500 million pounds (US$ 28 million) in the beginning of 2012. He believes this will strongly contribute to the growth of the electronic payment sector.

More flexible tools and regulations are needed to revamp the sector and the Egyptian culture needs to change, he added. People still rely on cash and need to become more bank-aware in order to be introduced to the electronic payment services and to learn how to use them properly.

Tech entrepreneurs to the rescue

These market conditions represent good opportunities to fintech entrepreneurs. Fawry’s Elnahhas said: “Entrepreneurs need to work closely with the mobile wallet service providers to bring innovative value added services to the product.”

He also urged entrepreneurs to come up with tech solutions to facilitate the process of transferring remittances. According to him, Egyptian expats’ international remittances increased by nearly 14 percent since the Egyptian pound’s floatation in November, which signals an opportunity for entrepreneurs to venture in this field.

Challenging regulations

Regulations are, however, crippling entrepreneurs. Mourad Alashry, CEO of PayMe, launched his startup in August 2016. It  allows companies and businesses to collect electronic payment without signing contracts with banks or paying extra fees.  The startup offers a simple payment tool for companies to allow them to set up an account and have customers send money through it.

However, shortly after its launch, the Central Bank of Egypt, the state regulator, suspended Payme’s operations as a payment firm as it wasn’t cooperating with a bank. The firm had to abide by this regulation until it followed the requirements and collaborated with state-owned bank the National Bank of Egypt, then resumed its business in January 2017.  

Alashry admitted that his startup is suffering from a complicated communication system, as they have no direct communication with the Central Bank of Egypt, but only with the NBE.

Bureaucracy, the absence of clear government regulations in the electronic payment sector, and the low percentage of debit and credit card users in Egypt are affecting the sector, said Al Salahy. “Only 20 percent of the total population use credit and debit cards, compared to 30 percent in other markets in the region,” he concluded.

Launching a regulatory council

The government is working to promote the financial inclusion of citizens and increase the involvement of the banking sector in business transactions and employees’ salary payment.

In February, President Abdel Fattah Al-Sisi issued a decree No. 89/2017 to establish the National Council for Payments, which will target financial inclusion and encourage online payments.

The Council was said to support using online gateways in transactions through ATM machines, internet or mobile phones. It would also organize and monitor the work of electronic payments in existing companies and preserve the rights of users in case of fraud.

Fawry’s Elnahhas believes the launch of the Council is a serious step towards reducing the use of banknotes outside the banking sector, supporting the use of electronic payment methods and supervising the frameworks that reduce the online payment-associated fraud.

Header picture through Pixabay.