On leveraging technology to strengthen financial inclusion
How is the rise of financial technology (fintech) changing the role of banks in financial services and in what ways will this impact the regulatory climate?
TAREK FAYED: The banking sector has an instrumental role to play in the next phase of digital financial services and fintech. Institutions in Europe and the US have been particularly adroit in folding fintech into their operations over the last 5-10 years, and these global trends highlight the importance of investing in the field for Egypt. The government and the banking sector are both working to encourage the development of fintech in Egypt, in particular due to its potential to boost financial inclusion.
The increasing role of technology in banking is changing the sector dramatically. Banks no longer face competition solely from other financial institutions but now also from products and services offered by telecoms operators, digital services companies and fintech firms. The level of competition in these new areas clearly shows the demand from consumers for advanced and innovative products and services, which means banks must adapt. One way that banks can do this is through cooperation with digitally focused companies to create innovative solutions.
Robust, yet fair regulation is necessary in banking to enable the sector to thrive. As banking and technology become increasingly intertwined, one of the challenges for central banks worldwide will be to maintain a regulatory framework that is both flexible and encouraging of innovation and a level-yet-competitive playing field.
What role will technology play in increasing the penetration and formalisation of banks?
FAYED: Digital technology will allow banks to reach individuals who may otherwise not have access to a bank and as such digital financial services will be key in increasing financial inclusion. By offering banking services on digital platforms – whether online or on mobile applications – banks can tap into a broader consumer base, one that in Egypt’s case has a mobile penetration rate of over 100%.
The starting point for boosting digital banking must be payments. Egypt has already digitalised the salary payments of government workers and a number of banks, including Banque du Caire, have rolled out Meeza debit cards for a wide range of clients including pensioners, civil servants and subsidy recipients. These are strong steps towards a cashless economy and better financial inclusion rates. As familiarity with digital payments increases, people will be more likely to have an active bank account. Expanded digital payments and the introduction of new methods of acceptance such as QR codes will boost payments through mobile wallets. However, Egypt still has room to expand its physical branches and continued investment is needed in the short to medium term.
In what ways are banks looking to adapt and attract talent in a fast-moving environment?
FAYED: The financial industry is dynamic and in order to survive banks must constantly innovate. Egypt has developed a strong talent pool in financial services and technology, and the banking sector should focus on attracting technical and digital talent. We will not be successful with the standard recruiting model. Instead, there needs to be a cultural shift within banks and recruiting needs to reflect the new kind of talent needed.
To that end, the CBE established the Innovative Financial Technology Applications Lab and regulatory sandbox to encourage the development of new digital financial tools. The creation of this and similar labs may be an effective way to attract not only technology talent to banking, but also investment. Egypt will only be successful in fintech once a supportive ecosystem that can create and draw talent organically has been established.