Tarek Mahfouz, director of Visa in Egypt, said that financial inclusion needs a strategic vision to be achieved and government support for its implementation.
In an interview with Daily News Egypt, Mahfouz pointed out that the Egyptian government is striving to spread financial inclusion and is taking concrete steps to achieve this. He added that mobile phones are an effective way to spread electronic payments and activate financial inclusion, provided that adequate infrastructure and legislation are available.
He stressed that education and awareness-raising related to payroll cards are considered the pillar of the success of Egypt in its electronic payroll programme for government employees.
He pointed out that the technological infrastructure is one of the most important factors for the spread of financial inclusion because it enables financial institutions to absorb large sectors within the banking system and also allows citizens to deal with banking institutions using various technological means that are adapted to serve them.
Mahfouz said that the banking sector is one of the main players in the efforts to push forward financial inclusion in Egypt, but there are other parties that should support it, pointing out that Visa is currently working on the formation of committees in cooperation with major companies in the field of consumer goods and the production and distribution of medicine to expand the scope of electronic payments acceptance.
What role does Visa play to help Egypt achieve financial inclusion?
I would like to point out that financial inclusion means that all citizens and segments of society enjoy financial services with dignity and transparency, next to the availability of multiple options for financial services provided to consumers.
Financial inclusion needs a strategic vision to be achieved and government support to implement it, which we are currently seeing from the Egyptian government, which is hurrying to spread financial inclusion and is taking concrete steps to achieve this.
These include the payment of government employees’ salaries and suppliers’ entitlements through electronic payment cards.
As for the role played by Visa to help Egypt achieve financial inclusion, there is a great effort executed by the company in this regard. The most recent activity in this context was the organisation of a workshop with the Egyptian Banking Institute and Banque Misr for the representatives of government agencies who are mandated to distribute payroll cards to state employees.
The main objective of the workshop was to inform the commissioners of the basic messages of government payroll cards, including that the government payroll card can be used to pay for purchases and services, and that they are completely safe and provide convenience and smooth financial transactions.
Such activities by Visa contribute to the efforts towards financial inclusion. Awareness and the dissemination of digital payment culture are the most important mechanisms for spreading financial inclusion.
How do you see the role that electronic payment cards can play in achieving financial inclusion?
The world is moving towards paying salaries through cards, in order to save costs of managing cash and issuing checks.
In the United States, there were about 3.7 million employees who receive their salaries by cards, compared to 11.8 million employees who receive their salaries by checks. In 2015, the number of payroll cards reached 7.4 million, compared to 6.7 million employees paid by checks. It is expected that the number of payroll cards will reach 21.2 million cards in 2019, versus 2.2 million employees who will be paid by checks.
I see education and raising awareness related to salary cards as the core of the success of Egypt in the programme to pay the salaries of government employees by cards.
Looking at the United States, which is one of the most advanced countries in the spread of payment cards, we find that 8% of salary cardholders withdraw all their salaries from ATMs, while 59% of them withdraw only part of the salary from ATMs, while also using the card for some purchases.
Thirty-three percent of US payroll cardholders use the card only to conduct all their daily financial transactions.
Visa depends on its close partnership with the government and financial institutions. We also rely on these partnerships to implement the government payroll services.
The programme is implemented by ministries and government agencies, which requires close cooperation of all parties, including Visa, the Egyptian Banking Institute, and government agencies, as well as financial institutions issuing payroll cards, in order to ensure coordination and harmony in the process of drafting the messages received by the cardholder.
What are the main challenges for Egypt in the path for achieving tangible progress in financial inclusion?
The most important challenge is to raise awareness and digitise government payments and the government’s revenue. We are working with the Egyptian government to achieve this quickly.
The strong technological infrastructure in the Egyptian market must be exploited to spread financial inclusion.
Mobile phones are an effective means of spreading electronic payments and activating financial inclusion, provided that adequate infrastructure and legislation are available.
With the proliferation of the internet, coupled with the proliferation of smart mobile phones, we see that Egypt has a growing opportunity to achieve significant revenues from electronic commerce, which Visa has studied extensively. We provided a full study about it to the Egyptian Ministry of Communications for them to take advantage of.
The technological infrastructure is one of the most important factors for the spread of financial inclusion, because it enables financial institutions to absorb large sectors within the banking system and also allows citizens to deal with banking institutions using various technological means adapted to serve them.
A survey commissioned by Visa recently found that 53% of Egyptians are permanent internet shoppers, with one in every ten Egyptian citizens using e-commerce sites almost daily, compared to 47% who shop online every 2 – 3 weeks. This means there is a great opportunity to further expand the sector over the coming years.
Youth accounts for the largest proportion of Egyptians who shop online. Sixty-three percent of young people between the ages of 18 and 25 use the internet to shop at least once a week, and they spend the most. About 31% of the youth that shop online spend EGP 5,000 or more per month. The average monthly expenditure for all age groups is EGP 3,758.
I want to point out that when South Korea returned to using electronic payments in the process of collecting taxes, it succeeded in raising the tax revenue by about $30bn in four years.
In South Africa, the government used Visa cards to provide social support to its beneficiaries, including 7 million children receiving government benefits. In Moscow, 3 million Russians receive their pensions through Visa cards.
One of the main reasons for the lack of financial inclusion is the limited scope of acceptance of electronic payments, which is something we are currently tackling with the government through innovative solutions, such as mVisa, which operates on internet-linked smart phones. This expands the scope of accepting electronic payments at different merchants.
QNB Al-Ahli recently announced the launch of the service, which is a breakthrough in the field of digital payments.
The mVisa service targets the majority of merchants for its ease of operation and spread. It is an ideal tool to expand payment acceptability. Anyone who carries a mobile phone can use it to buy products and services, thus saving time, effort, and cost associated with transportation. The service can also be used to pay utility bills.
This service is used by placing an mVisa code for each merchant. The cardholder can then take a snapshot of the code through the mobile camera or enter the code manually to conduct transactions.
Because of its widespread nature and low costs, acceptance of mVisa payments is increasing. This service also lowers, or even eliminates, the risk of fraud, because the consumer is the one who enters the amount to be paid on his mobile phone without having to use the card or pass it to the point of sale. The merchant receives a message on his phone confirming the receipt of the amount from the consumer.
Moreover, the mVisa service is easy to use for all merchants everywhere, especially in remote areas. The service can become a vital financial inclusion tool in Egypt.
How do you see the role of the banking sector in achieving financial inclusion in Egypt?
The banking sector is one of the main players in the efforts to push for financial inclusion, but other parties also play a major role in achieving this, including the government agencies concerned with technological infrastructure, such as the Ministry of Communications and Information Technology, which is making great efforts in this regard.
We are cooperating with the Federation of Egyptian Chambers of Commerce in this field. We started with the General Computer and Software Division to prepare a pilot project for the settlement of electronic payments in the retail and pharmacy sectors.
We are also working on forming committees in cooperation with leading companies in the field of consumer goods, as well as pharmaceutical production and distribution companies, in order to reach the best ways to expand the acceptance of electronic payments to ensure the payment and consolidation of financial inclusion efforts, achieve financial transparency, and save time and effort associated with cash transactions, as well as reduce the risk of cash circulation suffered by companies and traders alike.