Egypt's Fintech is evolving into an open finance ecosystem

open banking in egypt

What should you consider when we talk about the biggest impact on financial inclusion in Egypt? As well as in other markets, consumers in Egypt want freedom to handle their finances.

It means there is a genuine need for better banking solutions, such as instant access to money and fully digitized payments. How can the country provide it? Open Banking is the answer.

The FinTech sector is booming in Egypt. Today, Cairo is one of the hottest hubs where to invest.

Even in the banking system. Financial inclusion is on the developmental agenda in Egypt, that’s why the FinTech startups here are becoming one of the key driving forces to achieve this kind of adoption.

With its already vibrant entrepreneurship ecosystem, Egypt-based regulators have been making moves to encourage the development of its FinTech sector.

The first step is to increase its Open Banking system with the aim to improve financial inclusion.

CBE InstaPay app

In October 2021, The Central Bank of Egypt’s (CBE) Board of Directors adopted a new set of Open Banking regulations governing the instant payments network’s (IPN) services in Egypt.

“This is part of the country’s National Payments Council’s policy to assist the digital economy’s transition and provide new services that would make financial transactions easier for citizens”, said the CBE in a statement. As underlined by experts, the new regulation will allow customers to send money instantly using their smartphone’s number or a real-time payment address. Moreover, they will also be allowed to check whenever they need all of their bank accounts and make transfers to any bank using a single application, allowing for the provision of new financial services that will help to reinvigorate the national economy and reduce reliance on cash.

“The IPN regulations adopted by the CBE represent an important step on the path to providing the appropriate infrastructure for payment services and systems nationwide. It will allow approved mobile phone applications to provide payment services and instant transfers, in a way that supports the improvement of the financial services provided, and contributes to creating new competitive opportunities that will attract new customers to the banking sector and provide banking services in an advanced manner, while ensuring the complete safety of all transactions,” Amany Shams Eldin, First Sub-Governor Banking Operations, said. 

After 6 months from the approval of new rules, CBE launched InstaPay app, the national system for instant payments. The platform, developed by The Egyptian Banks Company, the hi-tech arm of CBE, "allowing financial transactions to be conducted electronically and instantly, facilitating e-financial transactions for citizens in a safe, effective and instantaneous manner launching Egypt among leading countries in MENA area in the fields of e-banking financial services", Ramy Aboul Naga, Deputy Governor of the Central Bank, said.

An $85 million FinTech MEA Fund

According to data, Egypt’s supportive regulation, together with the impact of Covid-19, saw cashless payments in the country grow by more than 230% last year. Now FinTechs, banks and state-owned platforms all want a piece of the action.

That’s why on March this year, Egypt’s largest national banks, Banque Misr, National Bank of Egypt, and Banque du Caire - together to Global Ventures, a leading MEA-focused venture capital firm – announced the launch of Nclude by Global Ventures, following approval by the Central Bank of Egypt (CBE).

As stated by the media, this bold and unprecedented step was an implementation of the country’s strategic vision to support young innovators who “will build the Egyptian Economy of the future”.

In fact, Nclude by Global Ventures will focus on accelerating FinTech innovation with the purpose of boosting  financial inclusion The Fund is also set to attract further investment from prominent regional and international investors.

MDI: Egypt’s first fully digital bank

However, traditional banks in Egypt are not waiting, and they are ready to be the game changer in the Egyptian Open Banking sector.

A new banking challenger, Misr Digital Innovation (MDI), came out the stage for the launch of the country’s first fully digital bank. “Our goal is transforming the banking experience to one that is more engaging and more in touch with our customers’ daily lifestyle”, wrote Sherif Elbehery, MDI Managing director and CEO.

The new digital bank, which project was officially launched  in 2020 by Banque Misr, aims to provide banking solutions, access to the digital economy and drive financial inclusion within the Egyptian community. 

In March 2021 Banque Misr has chosen Atos to support its digital bank infrastructure and MDI has been working towards developing its digital products, having signed a memorandum of understanding (MoU) with Dell in November last year.

The MoU will enable both companies to “explore ways in which MDI can improve its technology capabilities to improve customer experience”. 

As part of Banque Misr’s efforts to support Egypt’s digital transformation goals, the MoU is aligned with the ‘Smart Economy’ objective – part of Egypt’s Vision 2030, which aspires to build a knowledge-based digital economy, media reporter. Moreover, last Autumn, MDI also signed a seven-year strategic partnership with Mastercard to support the digital bank with the issuance of debit, credit and prepaid cards. Mastercard will also offer MDI assistance with marketing and product development. 

The next generation of banking in Egypt is an open-finance ecosystem

At the first stage of Egypt’s Open Banking path, digital payments were such an important milestone, allowing simple and direct account-to-account transfers. However, as we had the opportunity to see, not only FinTech, but also regulators and the local bank system are ready to embrace digitalization. MDI was the first attempt to revive the Egyptian traditional bank system.

The sector will grow in upcoming years. According to Akram Abdou, Founder of Egypt-based Underlie Startup, “the next generation of banking in Egypt is an open-finance ecosystem”.

Egypt has almost 39 banks nationwide, and it presents an opportunity for fast-tracking the implementation of Open API standards.

That’s why Akram Abdou feels optimistic about the willingness of FIs to implement such standards to get them potential revenue streams. Product comparison and lending & credit risk are also critical aspects of Open Banking, where financial data offers the required insights to make an informed decision and therefore minimize risk. 

So, what’s next? Egypt is bridging the digital divide with APIs. It’s obvious by now that customers are at the center of the whole banking experience, and offering them a seamless digital journey has now become the core of modern banking because they are the primary drivers of open banking as a concept.

Open Banking and Open Finance have the potential to revolutionize how people in Egypt interact with banks and other financial services providers. It also allows new entrants into the market, opening up new opportunities for startups, FinTech, and tech companies in Egypt that are looking for ways in which they can disrupt traditional finance models.