(Photo courtesy of Visa)
Mobile phones are crucial to Visa’s Egypt strategy and their use in making payments is a pillar of Visa’s holistic financial strategy, according to Tariq El-Husseini, North and West Africa Visa General Manager.
El-Husseini said that the financial usage of mobile phones in Egypt has so far been limited to transferring funds from one person to another, rather than for purchases or trade.
Using mobile phones to make payments requires an infrastructure that is not currently present in Egypt, as consumers need to be convinced of the credibility of this new tool, El-Husseini said.
El-Husseini added e-commerce is currently characterised by mobile phone payments as a result of steady growth in Internet usage among Egyptians over the past three years.
He also said that mobile payment rates are modest even in the most advanced societies and developed markets. The field has greater opportunity for growth in Egypt due to its relatively young society that is more receptive to this type of technology than others, with 15% of mobile phone users in Egypt using smart phones.
According to El-Husseini, there is a disparity between the number of credit cards and the number of mobile phone users in Egypt. There are 12 million credit cards in Egypt, but approximately 33 million mobile phone customers do not use any method of electronic payment. An opportunity exists to convince these people to use their smart phones for electronic payment processes.
He said that a smart phone customer will be better prepared to complete a transaction with his mobile phone if he already has a payment account.
El-Husseini also said that credit cards can be compared by two methods. The first is by choosing the best card, which is done by evaluating the product provided by the bank in terms of grace periods and interest. The second method measures cards in terms of payment development. This measurement takes into account how many people abandon cash and use cards for their transactions.
El-Husseini said that the size of the electronic payment market is modest when compared to its importance and volume. Rising personal spending, which already amounts to 20% of spending on personal needs, and inflation, are important factors in an increase.
He added that as long as cards account for a positive share of consumption, consumers’ preferences for them will rise, and this is what needs to be measured. The wide scope of the payment market must be taken into consideration, as well as how much spending has taken place through cash versus electronic means. This will measure the growth rate for this type of payment.
El-Husseini said that the electronic payment industry involved “plastic payments” at the end of the nineties, and after technology was introduced, this became known as electronic payment. It has now become known as digital money, in which mobile phones, e-commerce, and so on are involved. As a result, many payment methods and choices have become available to customers whether this take place through a mobile phone or a card. If we are able to provide more options, the proportion of electronic payments may increase from 2.8% in Egypt to 4% or 7% or more.
El-Husseini revealed that online payments or ’e-commerce’ has risen to 48% in the Middle East, with Egypt currently not too far below from this rate at 38%. This figure represents a large increase and means, in addition to the fact that the system is safe, it is easy for consumers. The process will require large investments from banks so that customers have access to online payments.
El-Husseini said that the spread of online payment services requires that important industry actors sell their services via modern payment means, including the government and large companies. In this way, changes will be enabled in the industry, affecting payment of taxes, customs, and bills, amongst others. This is happening now, but in a limited way, and very soon the situation will change. The volume of payment via electronic devices will steadily increase, and then the proportion of electronic payments to cash will begin to increase rapidly.
He added that diversifying payment choices for consumers contributes to the comprehensive philosophy that Visa is interested in. Any consumer that has a fixed or variable income and needs to purchase a service or good is able to use digital payments like any other consumer.
This is not yet available in Egypt but is among the most important things that Visa is to make available. Visa is also working to spread a culture and awareness of electronic payments and uses through various means, like soccer, as we are sponsors of FIFA for example.
El-Husseini added that the second component that the company focuses on is increasing sales points. This is particularly in places where those making purchases can use cards to increase the number of e-payment transactions.
He pointed out that banks have begun to orient themselves toward small projects, as this is a very broad category boasting large growth rates.
El-Husseini said that Visa must focus on these areas as part of the company’s holistic financial philosophy. He pointed out that the other cards will remain important as well, and all varieties of cards merit focus.
He revealed that prepaid cards grow by 25% each year, and considered this rate insufficient but having the potential to double. The cards can be used to pay salaries by using the employee’s card number to increasing his balance by the value of his salary. Then, the employee can withdraw his money using an ATM or shop using the card.
He said that the basic infrastructure for electronic payments in Egypt is unsatisfactory for investors in the field as is the case for a number of other larger markets.
He emphasised that investing in payment infrastructure is a long-term strategy for achieving profit, and investors have a choice to pump 50% of their investments into this field, ATMs, or more lucrative endeavours.
He said that banks have begun to offer products specific to each sector in order to encourage the spread of electronic payment services for small and medium-sized venture. For example, a unified package of special services for analysis and radiology labs is available. Supermarkets will be provided with delivery staff at electronic sales points in order to allow consumers to use cards to pay from home, especially as 40% of supermarket sales take place through home delivery.
El-Husseini revealed that other services are being provided to make electronic payment available for things like electricity and telephone bills or paying tickets through the Internet.
He said that eh government is currently negotiating to allow bills for some state electricity companies to be paid via the internet soon.
He estimated that electricity companies will collect millions during the first year of this service’s launch and hundreds of millions over three years.
El-Husseini also anticipated that implementing this service will easily lead to a jump to 7% for electronic payments as a proportion of the total.
