The 5th Emerging Markets Payments Conference (EMPC) kicked off on 26 September in Sharm El-Sheikh, gathering key decision makers from banks and electronic payment companies across the Middle East and Africa to discuss opportunities and challenges of the industry. At the conference, the Daily News Egypt sat with Paul Edwards—Chairman of Emerging Markets Payments (EMP), a leading company in the electronic payment processing industry—and Mark Richards—a partner in Actis, which owns a major stake in EMP—to review the electronic payments market in Egypt.
Edwards said that Egypt is a very important market for EMP, adding that it is a very large market but at the same time it is very under-banked, as only 10% of the population have access to financial services. However, he added that the potential in Egypt is massive as “excellent” banks are here with increasingly big international names as well, such as QNB (Qatar National Bank) which recently entered the market. Edwards added that Egypt will witness in the next few years a major transformation in the market, which will start putting Egypt in a strong place in terms of electronic payments. “We, in EMP, are serving most of the banks and we are working very actively to increase the growth curve,” he added.
Edwards stated that the prepaid card sector is growing very quickly across the region, meanwhile, credit cards are growing more slowly but are topping the market. Mobile payments and mobile transactions have good growth potential added Edwards, as mobile phones are very well-penetrated in Egypt.
“Cell phones can be used to deliver secure, cost-effective and convenient services to people with cell phones in order to become a part of the financial inclusion; they would be able to send money to each other electronically for example and own an electronic wallet,” said Edwards, adding that his company is trying to send a message here in Egypt that using electronic devices to make financial transactions can be safe and secure.
Edwards explained: “We have found that once people have moved to the electronic wallet and started to make electronic financial transactions, they are more likely to move toward a more formal banking. It allows you to get the unbanked to the sector as they will realise that they need more services beyond just electronic wallets.”
When he was asked how he would rank Egypt in the electronic payments market, Edwards said that, in terms of reaching the unbanked, Egypt is not as advanced as other countries such as Kenya where 20 million people use mobile money and 25% of the country’s GDP goes through this system. “I think that when Egypt gets to that point, and the message became very clear of how people can come into this mobile money environment, the take-up in Egypt should be very strong,” he said.
When asked how long it will take Egypt to become advanced in the electronic payments market, Edwards said: “Kenya is a different world but it actually started without central banks, it has started as a private initiative, but if you have a strong framework from the central bank that provides incentives, that’s the first step, after that the players can understand what is required to participate in the mobile services sector.”
However, Edwards said that Egypt has a thriving communication sector. “Communication is not an issue so that’s a positive thing; you have sophisticated banks, you have a financial services processing centre like EMP,” he said.
Egypt is going to witness huge growth in all forms of electronic payments market in the next five years, Mark Richards asserted during the interview. “There is great strength in Egypt, you have got a very strong and organised banking system with a good regulator. Yet, if I compared it across the continent, it is still quite conservative and it hasn’t pushed electronic payments as an industry as much as other markets has. Egypt is still a cash-based society,” Richards explained.
Electronic payments are good for everybody and they make the economy more formal, making tax collection and tax revenue easier, Richards said, adding that all the ingredients to boost the market are here in Egypt.
With regard to the high illiteracy rate in Egypt and how it is going to affect the growth of the market, Richards said: “It is not an issue as the good thing about electronic payments is that they are intuitive and the young people always lead, moreover, it is a very simple process”.
Edwards commented that the 25 January 2011 Revolution has slightly promoted electronic transactions. “We have witnessed after the revolution a significant upturn in the usage of electronic payments methodologies,” he said, giving an example that, during the revolution, the adoption of Twitter as a means of communication was a phenomenon that showed that Egyptians embrace new technology, explaining that people will embrace electronic payments in a similar way, as it is not complicated.
Richards added that, in some cases, political instability encourages people to adopt new technology in payments as evidence has showed that electronic payments boomed during the civil war in Lebanon because people figured out that it is a lot safer not to carry cash in their pockets.
Regarding what the Egyptian government can do in order to promote the electronic payments market, Edwards said that the government needs a clear vision and a regulatory framework that market players can understand and that also protects that customer “as a lack of guarantees causes less enthusiasm to invest in the market”.
Edwards added that he believes that the Central Bank of Egypt has a clear vision to promote the technology and he is confident that they will offer a guarantee to support the market.
“Central banks worldwide have played an important role in boosting electronic payments, for example in Nigeria, the central bank has promoted moving toward a cashless society, and also in India, the government has supported several e-government initiatives which eventually resulted in increasing the number of e-cards to around 600m in five years. Also in China, the country has moved from a cash-based society to almost entirely electronic payment society in 10 years,” Richards added.
If the government leads by making its divisions and entities move to adopt electronic means, that would be a huge incentive to boost electronic payments sector in the country, Edwards stated.