Is fintech-powered full financial inclusion on the horizon in Egypt?

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A few centuries ago, there had once been an industrial revolution which enabled countries that adopted it to become what the world now calls the ‘developed world’. By the 20th century, it was hard if not impossible for the rest of the world, except oil-rich or particularly innovative countries, to catch up to developed countries due to their accumulation of wealth and resources over the decades, as well as their exploitation of the rest of the world by way of colonialism. But as the 21st century rolled in, the internet and technological innovation set the groundwork for a digital revolution, which for arguably the first time is giving developing countries a real chance to catch up by adopting cutting-edge innovations that fill in the gap more quickly than ever.

Egypt is one country that recognizes the potential of digital transformation in uplifting its economy and moving towards a cashless society is a cornerstone of its 2030 vision. But with an unbanked population being well above 50 percent, even two thirds in some estimates, this goal can’t be pursued by traditional means. Luckily, traditional isn’t the only way to go anymore.

With a vibrant fintech ecosystem offering a number of non-banking financial services in the country, there’s been a marked expansion in adoption of digital payments and transactions over the past few years – with the pandemic and social distancing pushing that trend faster than ever. Mastercard, a global financial institution, has recently released its Mastercard Payment Index 2022, which showcased a number of positive indicators for Egypt in its pursuit to become cashless.

The index, conducted by way of surveying, has concluded that 88 percent of Egyptians have used at least one emerging payment method in the past year, including 35 percent for mobile wallets, 27 percent for digital money transfer apps, and 24 percent using QR code to complete transactions. Cash transactions remain very prominent, but 15 percent of Egyptian consumers say they’re spending much less cash this year than ever before, as per the index. Could this be an indicator to a cashless evolution slowly setting in?

“Egypt and the wider MENA region are witnessing rapid rates of payment innovation and adoption of new solutions by end users. This is the result of major reforms taken by the government towards digital transformation and implementation of developed financial inclusion strategy,” says Adam Jones, General Country Manager, MENA Central at Mastercard. “The New Payment Index 2022 indicates that consumers in Egypt and across the region are more aware of new payment solutions, like digital cards, Buy Now Pay Later, Biometric Authentication Solutions, and, and are open to adopting these solutions in their daily lives.”

In Egypt and elsewhere, these technologies are nothing new. But moving away from cash has been hindered by a number of societal factors, top of which is the perception that digital transactions aren’t as secure as cash transactions. In Egypt, 39 percent of consumers say security of transactions is their utmost priority. With services like Fawry and Vodafone Cash becoming widely accessible and used, these security concerns seem to be quickly subsiding.

“Security has always been a persistent perception issue, and so we view it as an extremely good indicator that 61 percent of consumers in Egypt feel safe using apps to send money to individuals and companies via their phones, and about four out of ten have indicated their willingness to share their financial statements with apps to access means of payment that help them manage their financials. As a digital payment innovator, while transforming the ways people pay and making it more convenient, we’re keen on developing the highest levels of security that reassures consumers when using new payment methods,” adds Jones.

Buy Now Pay Later (BNPL) is by no way a new concept. It’s basically like having a credit card. However, obtaining a credit card is a process that has so much friction and procedures that only a few end up obtaining ones, even with customers that have debit bank accounts already. Owning a credit card is a major financial planning asset for those who have it, but the unbanked populations of Egypt have no simple way of obtaining one. The solution? Digital payment solutions that adopt BNPL. Though they still require a background check, these innovations give consumers easier, non-banking access to this feature, becoming a major asset to the unbanked and underbanked.

“BNPL is widely seen by Egyptian consumers as a good tool for budgeting and planning, with 81 percent saying they’re aware of the concept and 50 percent saying they’re comfortable using it,” explains Jones. “Many of the respondents say that BNPL has been particularly beneficial to them when it comes to planning future and big purchases, effectively increasing their purchasing power and making BNPL an effective budgeting and financial planning tool that is finally accessible to wider portions of the populations that need it most.”

The push for cashless and innovative payment solutions in Egypt is led by its younger populations, millennials and Gen Z, who constitutes at least 60 percent of the population. Tech-savvy and digital native, the younger generation represents the true potential of digital transformation in Egypt.

“Gen Z and millennials are less likely to make in-person payments. This is a tech-savvy generation and their usage of emerging digital payment solutions is accelerating at a faster pace than older users. They are actively seeking out new payment methods with 40 percent of Gen Z adopting contactless payment solutions, compared to 26 percent for older generations,” Commented Jones.

In its bid to push towards a cashless society, Egypt is attempting to catch up with the region and the world in its financial inclusion rates, an important prerequisite to achieving high growth rates. It’s success in the pursuit is yet to be seen, but it’s seeming that it’s well on the way to get there should it continue down the same path of adoption of fintech innovation on a mass scale.

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