Interview: Central Bank of Egypt is clearing a path for a wave of fintech investment: Paymob CEO

Several regulations have been put in place to ease access to banking services and reduce reliance on cash

Islam Shawky CEO of financial solutions provider Paymob.

Islam Shawky CEO of financial solutions provider Paymob.

Paymob / Handout via Zawya

As Egypt’s regulators continue to embrace new financial technologies, the sector is poised to witness the emergence of more fintech startups and attract more investments, according to Islam Shawky CEO of financial solutions provider Paymob.

“I believe it is very important for Egypt to have a regulator with this insight and progression,” Shawky told Zawya. “This will open a lot of doors and will definitely lead to new startups, new ideas and, most importantly, more funding.”

In recent years, the Central Bank of Egypt (CBE) has aggressively embarked on a campaign of financial inclusion. Several regulations have been put in place to ease access to banking services and reduce reliance on cash. Most of these policies have been aimed at attracting direct investments in this nascent sector.

In the last month alone, the CBE approved regulations governing the services of Instant Payment Network (IPN), a step seen by many as a milestone on the path towards a digital economy.

“This is revolutionary,” said Shawky. “[The central bank] has built a new infrastructure that will enable real-time settlement of digital transactions.”

The new regulation reduces the gap between cash and electronic payments, he said. “We see ourselves competing with cash. Cash settles instantly; however, digital transactions settle in T+1 or T +2.” Instant payment settlements, he explained, puts fintech on par with cash.

Pioneering Tap-on-Phone Services

In 2015, Paymob was established as an infrastructure technology enabler that provides a set of financial technology solutions. The company’s products include mobile wallet technologies and smart point-of-sale (POS) devices. In 2020, the company’s founders said that their infrastructure processed more than 85 percent of Egypt’s mobile wallet transactions. Today, Paymob has more than 12 million users and 60,000 merchants. It has partnerships with more than ten banks, including the country’s largest.

Last month, Paymob received a boost when the CBE authorized the launch of its tap-on-phone digital acceptance service, on which the fintech had been working with Mastercard for almost 18 months. The service, the first of its kind in Egypt, is expected to replace conventional bulky POS devices.

“With tap-on-phone, you can unlock a huge number of merchants and service providers,” said Shawky. “They will not need to deploy something at their end. They just have to download an application on their phones [to get the equivalent of] a POS on their phones.”

Egypt’s latest demographics make it ripe for fintech services such as tap-on-phone. According to the latest government figures, the monthly mobile phone penetration rate reached 97.8 percent in September, and the number of mobile internet subscriptions stood at 62.8 million in a country with a population of nearly 102 million. However, nearly 68 percent of the adult population remain unbanked.

Shawky says that Egypt has more than 4 million SMEs that are either unbanked or financially underserved. While high costs meant that runners, gig economy workers, etc. cannot use POS machines, he expects Paymob’s tap-on-phone application, which bypasses the need for additional hardware entirely, to bring aboard hundreds of thousands of Egyptian merchants, regardless of their business size.

Last month, Paymob piloted its tap-on-phone application at Cairo ICT, a telecommunications and information technology trade fair and forum. The full launch is set for early next year.

Shawky believes that the tap-on-phone service, combined with the CBE’s recent decision to introduce instant settlement for digital transactions, will have “a huge impact” on his business and on financial inclusion at large. “Both things will redefine our business and take us to another order of magnitude.”

Regional Expansion

So far, Paymob has offices only in Egypt; however, its technologies have already been deployed through local partners in Kenya, Pakistan and Palestine.

In April, the company announced that it had closed a Series A round totalling $ 18.5 million, led by Global Ventures. A15 and FMO, the Dutch entrepreneurial development bank, also participated in the deal. Its two objectives, Shawky said, were  to grow Paymob’s presence in Egypt, which has been achieved this year, and to start hiring an international expansion team and work with regulators in GCC. In fact, after securing the necessary approvals, Paymob expects to go live in Saudi Arabia by the end of H1 2022. 

Since the pandemic hit, Paymob’s merchant base increased by 70 times as more Egyptians switched from cash to digital payments. But Shawky believes the near future holds still more opportunities.

“The last decade we were trying to print cards, create wallets, giving people means to be financially included,” he said. “That was the enablement phase. I think this decade, starting from 2020, we are moving into the activation phase, where all these cards and the people who got financially included in the previous phase are becoming active in using financial services.”

“This is the phase that will be very exciting,” he added. “I believe we will see a lot of players emerging from Egypt.”

(Reporting by Noha El Hennawy; editing by Seban Scaria)


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