Only recently have we started talking about personal banking and begun hearing and using words such as “easy” and “quick”. Although, till now, the general conversation doesn’t stray too far away from “I was there for hours” and “look at all these papers I had to sign”. As soon as we walk into the branch is where the problems begin, and that is also where today’s core issue lies. By law, any bank – or financial institution, for that matter – cannot serve any potential customer before putting them through a process called “know your customer” or KYC for short. KYC involves collecting certain information about a prospective customer, and while different sectors & services may have different requirements, the basic requirements are usually the same. KYC serves to identify the customer through an official document such as a National ID or Passport and puts certain information on file such as a current address, occupation, etc. KYC protects the bank from serving fraudsters, money-launderers, and funders of terrorism. KYC is the reason why we have to go to the branch in-person. KYC is the first layer of interaction between customer and service provider and is the key to bringing “Digital Egypt” (“مصر الرقمية”) to fruition.
“Digital Egypt” has been picking up pace in recent years, with mandates to create a cashless Egypt leading to the creation of financial technology such as Mobile Wallets. An app that sits on your phone can offer many traditional banking services such as bill payments, peer-to-peer transfers, deposits and withdrawals – meaning you no longer need to go to a branch to do such things. And yet, activating the wallet needs KYC and that still needs to happen at a branch. In other words, to stop going to a branch you have to go to a branch. While mobile wallets have been a great success, already surpassing 10 million users in less than 10 years in a notoriously underbanked and banking-resistant country, there is still a long way to go before seeing true financial inclusion.
To overcome this barrier, certain regulations have been created since the turn of the century. The e-signature law released more than 15 years ago that, as described by the Information Technology Industry Development Agency (ITIDA), “means that a buyer does not need to physically sign a document when entering into a transaction online.” However, just taking a quick look around shows that adoption hasn’t been “easy” or “quick”. More recently, the Central Bank launched the first Regulatory Sandbox, as a way to test out new technology in a controlled manner. The first track of this program? eKYC. Clearly, there is a will, and an active push to pave the way for truly digital financial services. Although we’d love to think that down the line fully digital banks, without a single physical branch, will be an app download away – Egypt will likely carve its own not-so-straightforward path before the Chimes and the Revoluts become the norm.
The US & Europe have seen the power in financial markets gradually shifting towards plucky young startups who are slowly overtaking the traditional banking players. While Egypt has seen a marked growth in ambitious young fintech startups, it will likely see financial innovations either being led by or at least getting regulatory support from traditional banks. Abroad, PayPal & Venmo became the platforms of choice when it came to peer-to-peer transfers, which until recently the local equivalent of those companies were the mobile wallets that were required to be issued by banks & MNOs (in partnership with banks).
We’ve recently seen the first independent wallet, but there’s still a long way to go before a non-bank becomes the face of this market. Quite similarly, while the aforementioned neobanks, Chime & Revolut, are in the company of the world’s largest neobank – the aptly named NuBank – here in Egypt, the only potential neobanks (or fully-digital banks) are being built by traditional banks. While that may change in the long-term, and a truly not-previously-a-bank challenger bank might emerge, the players of the near future will likely be wearing suits, a clean shave, and work 9-to-5.
While FinTechs & RegTechs will complement and sometimes compete with banks, such as using eKYC to support upcoming digital banks or emerging consumer finance industries to fight banking credit, the future of personal banking in Egypt will likely remain just that – a banking-led future.