The Covid-19 pandemic has been one of the most disruptive events worldwide and Africa Generally and Egypt especially are no stranger to its ripple effect. It has caused a multitude of changes in people’s lives; transforming how they learn, work, exercise, travel, as well as how ‒ and what ‒ they purchase.
Consumer behaviour is changing fast and these new patterns are becoming the new normal. Specifically, digital adoption in Egypt has been accelerated by COVID-19 in a way that was unexpected, online shopping and entertainment are strongly impacted as a result, and Digital Banking has been drastically affected by that new normal.
Before going through the changed faces of the Egyptian behaviour during the pandemic, it is must first to define the Digital, What defines Digital Transformation? What defines Digital Banking? What defines Digital champions?
Digital Transformation is the outcome of IT-enabled change that is aligned with business objectives and driven by a well-planned strategy.
Digital Banking is the digitisation of all the traditional banking services that were historically only available to customers when physically inside of a bank branch.
Digital Champion offers a wide range of functionalities relevant for customers and a compelling User Experience.
The disruption in the financial business even before the pandemic has affected the banks in Africa and Egypt, as banks are facing multiple changes as they are losing access to customers, as people switch to non-banking Channels (Fintech Companies). In addition, banking products and services are being unbundled, as customers choose better experiences from a single service provider. Banks worldwide and Africa and Egypt are struggling to differentiate themselves, as customers can compare banking products online with higher transparency. Finally, banks are losing brand awareness and becoming invisible, as customers can access financial services without knowing the brand (Open Banking).
Based on the massive disruption of the financial services, and the changes that face banks in Egypt, banks are requested in order to be Digital Champions they need to focus on the below key elements of the digital transformation:
- Customer Experience: banks need to focus on the customer and his preference not to sell the products, Customers are looking for seamless customer journey of on boarding and minimal clicks to get the service done. 72% of Egyptians surveyed said they had become more digital in the last 6 months, compared to 57% of their global peers, perhaps a reflection of them catching up with their international counterparts who have already migrated to a more digital lifestyle in recent years. Mobile shopping is also growing in popularity with 49% of consumers indicating that they shopped using their phones weekly or daily ‒ a trend consistent with other Middle East markets
- Process Reengineering: banks shouldn’t claim that they are digitally enabled or define themselves as digital champions because they are providing mobile and internet banking channels while they are capitalising on these obsolete processes. Banks need to recognise that they are racing with the FinTech companies, which are paces ahead because of the innovative and flexible processes they are considering.
- Business Model & Integration: banks need to be more resilient and flexible, in case if they cannot compete with the disruptors they should align and integrate with them. Integrating with payment aggregators, API & web services’ providers, and other FinTech companies will support the banks’ plan to boost the digital transformation. Also banks need to focus on the business model they need to propose as they have been offering the same kind of products and services for the same segments for decades, it is the time to offer a unique business model taking into consideration the uprising trend of the tech-savvy customers and the demanding young generation.
Banks in Africa & Egypt in their quest of building a full digital transformation plan need to get rid of the common Digital Transformation myths. “Adopting technology for the sake of it” is one of the great myths, as most bankers believe that they need to update all the bank systems to get the state of the art of the technology to be able to define themselves as a Digital Champion. Nevertheless, the real importance of digital to business is not in the emergence of new technology, the importance is the shift in customer behaviour, thus the banks’ top management and CIO need to recognise that IT Innovation is aligned with the business goals.
Minor adjustment for the existing processes, and considering Short-term tactics or one time fix are one of the myths which are hindering the implementation of the digital transformation, The digital disruption indicates the need for a fresh customer service strategy. As banks need to consider new innovative business models aligned with a holistic digital banking strategy. The new business model should focus on three main pillars:
- Upgrade the core banking system to be ready for the upcoming digital changes.
- Changing both bank internal and external culture to believe in the change: use the data comprehensively and focus on the customer by providing seamless on boarding and integrated services and products.
- Digitise the bank’s operations internally to convoy the bank culture. SMES, Mortgage, treasury, Finance, and other bank sectors should automate their operation processes by reengineering the processes and leverage the related technology.
The government and Central bank of Egypt have been making big strides towards digitalization. In 2021 and 2022, they raised public investment allocations for the information and communication technology (ICT) sector by an unprecedented 300%, according to budget plan data, to push digital transformation forward. A national Instant Payment Network (IPN) has also been recently launched to cover necessary needs of the real-time transfer and payments.
CBE spent EGP 8 billion pounds during the pandemic to encourage and boost the digital transactions, CBE granted 11 banks the licence of the QR code to facilitate the payment, also 5 banks asked for native comprehensive digital bank licence.
The mobile wallet subscribers jumped during the pandemic to be 25 million with 27% growth rate compared to 2020, the number of the transactions over the mobile wallets reached 227 million transactions with the value of 233 billion pound during 2021.
Customer behaviour during the pandemic paved the way for the banks to accelerate their plans of the digital transformation, as the banking system in Egypt during the fiscal year of 2021-2022 managed 1 billion digital banking transactions with the value of EGP 2.8 trillion pound, with the growth rate of 49%.
In addition, the digital banking transfer during the fiscal year of 2021-2022 reached EGP 1.4 trillion pounds, compared to EGP 825 billion pounds during 2019, with a growth rate of 70%. In addition, the number of POS increased as a direct result of CBE’s initiative to reach 700 Thousand compared to 200 thousand POS, with a growth rate of 250%.
Various statistics showed an increase in percentages of digital transformation and an increase in internet use ranging between 50-70% compared to pre-pandemic levels. There is also a growing consumption of digital content by citizens, with the onset of the pandemic, internet usage rates in Egypt increased by 100%, while peak hours increased from three to 16-18 hours.
The Government is working with the UN’s International Telecommunication Union, the World Bank, and the Bank for International Settlements’ Committee on Payments and Market Infrastructures to further its Financial Inclusion Global Initiative. Launched in 2019, the three-year program aims to accelerate digital financial inclusion in developing nations. As part of the plan, Egypt targets an increase in the number of active mobile payment accounts in the country from roughly 20m in 2019 to 40m in 2021. At the business level, in January 2021 the Egyptian Financial Regulatory Authority launched the Digital Financial Inclusion 2021 initiative to boost the rate of non-cash payments in the economy, especially among smaller enterprises.
While technology has long been at the heart of efforts to transition away from cash and improve financial inclusion, the uptake of electronic payments was catalysed by the pandemic. Leveraging technology to improve access to the formal economy and reduce red tape will encourage healthy competition and boost Egypt’s attractiveness to foreign and local investors alike. doubtless, the leap of the digital banking transaction led by the pandemic of Covid-19, and as a result of the significant efforts by CBE and the government to turn Egypt into a cashless community, and more yet to be considered and already planned to flourish the future of Egyptian banking system.
