According to World Bank data, in 2021 just 22% of the Egyptian population over the age of 15 owned a debit or credit card, and only 2% of the population had used a mobile phone or the internet to make a transaction.
But things are changing, and they’re changing fast. As Dr. Tamer El-Hussainy, CEO of Cairo-based ePayment service provider Damen, told PYMNTS in a recent interview, “The electronic payment market is growing by around 25% to 50% year over year.”
El-Hussainy partly credits the government for encouraging the digitization of payments in the country in the last few years, using strategies such as mandating ePayment for official payments and building the necessary infrastructure for electronic money to become normalized at the point of sale (POS).
For example, he pointed to the central bank-led Meeza electronic payment scheme as one of the “milestones that happened during the past five years.”
Damen has also played a key role in supporting the digitization of Egypt’s burgeoning ePayments ecosystem, he added. The company helps a network of merchants process electronic and cash transactions and increasingly provides financial services directly to consumers, too.
With companies like Damen increasingly offering real-time domestic and cross-border transactions from a mobile app, Egyptians from all walks of life can benefit from a more seamless digital experience compared to branch banking and the cash economy.
On the consumer-facing side, the firm announced last month that it had partnered with San Marino-based banking-as-a-service (BaaS) FinTech BKN301 to help digitize its product infrastructure and launch a mobile wallet app.
El-Hussainy anticipates that as ePayments gain traction in the next five to seven years, Damen will see its business strategy shift to focus more on consumer products like the mobile wallet and less on supporting its merchant network.
But the principal use of mobile wallets as a tool for transferring money, and less for POS transactions, can be an inhibiting factor to digital payment growth in the country, he pointed out. However, that culture is gradually changing, and Damen is facilitating educational campaigns to encourage greater adoption of electronic payments for a wider range of use cases.
And although government initiatives and private sector-led education schemes will help foster financial inclusion and the widespread use of digital payment methods in Egypt, in the end, El-Hussainy is of the view that it boils down to “customer experience.”
When it comes to collaboration with the banking sector, El-Hussainy does not see payment aggregators like Damen as competing with financial institutions. Instead, he said that banks have embraced them because “they don’t have the muscles that payment aggregators have on the ground.”
Basically, while banks are instrumental in facilitating digital transformation at the top of the chain, they work in partnership with companies like Damen to roll out ePayments to small and medium-sized businesses.
“[Banks] sometimes support us with POS systems and other times the central bank buys the POS systems and distributes it to the aggregators to disseminate and make them available for everyone. So they’re [actually] happy [with our service],” he told PYMNTS.
What Next for Egypt’s Digital Economy?
Despite the acceleration of digital payments in the last two years, the process of transforming Egypt’s payments landscape is still ongoing and has its own fair share of challenges. El-Hussainy pointed to ongoing difficulties around sourcing hardware components from China as one major hurdle that is slowing down Damen’s growth.
He remains optimistic, however, about the future of Egypt’s digital economy.
In a promising indicator of the country’s progress, Ehab Nasr, a representative of the Central Bank of Egypt, recently revealed that the Eid al-Adha period witnessed a boom in the value of electronic transactions.
And for the first time, the value of electronic transactions during the holiday week — about 15 billion Egyptian pounds ($780 million) — approached the value of cash withdrawals through ATMs, roughly 20 billion Egyptian pounds ($1.04 billion).
That, and the 161% year-over-year surge in the value of mobile wallet transactions in the first half of 2022, are strong indications that electronic payments are here to stay.
Finally, thanks to the government’s Egypt Manufactures Electronics initiative, Damen and other Egyptian companies may not be so reliant on imported hardware in the future.
The scheme, which includes investment incentives and tax and customs exemptions on production components and raw materials, has already prompted two large multinationals, Nokia and Vivo, to open phone manufacturing facilities in the country.
So as the local economy grows and digitizes, payment systems will inevitably evolve, but it will take a collective effort from local FinTechs, foreign businesses and the government to drive long-lasting change.
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