The Central Bank of Egypt (CBE) has approved Misr Digital Innovation (MDI), the investment arm of Banque Misr, to launch Egypt’s first digital native bank, One Bank. This landmark decision marks a significant step forward in the digitalization of Egypt’s banking sector.
Egypt’s banking system has evolved through several key phases, starting with traditional, paper-based operations and cash transactions. It then progressed to adopting Internet technologies and cloud computing for online banking services. The emergence of fully digital banks has been driven by advanced technologies such as artificial intelligence, encryption, and big data analytics. Granting a license for a digital bank is a pivotal step towards integrating these modern technologies into Egypt’s banking sector, aiming to enhance financial services for customers and foster innovation and competitiveness within the industry.
The launch of Egypt’s first digital bank this year is a historic event, meriting recognition among the CBE’s achievements. The new bank, a subsidiary of the state-owned Banque Misr, will offer banking services digitally, allowing customers to meet their banking needs remotely through electronic platforms, including the Internet and smart mobile devices.
Digital banks provide numerous benefits for both banks and their customers. They enable individuals to access their bank accounts and conduct transactions anytime and anywhere, thanks to their 24/7 online availability. The smart banking services offered by digital banks have transformed the culture and methods of banking transactions. Instead of visiting a bank and interacting with real employees, customers now engage with touchscreens and approve transactions via electronic signatures.
Digital banks typically operate at lower costs than traditional banks, as they do not require high-cost infrastructures or expensive physical locations. This cost efficiency allows digital banks to offer better returns or lower fees for their services and products, ultimately enhancing profitability margins for shareholders and strengthening the banks’ competitive positions.
Moreover, digital banks excel in executing transactions instantly and more swiftly than traditional banks. They serve as hubs for innovation and technological development in banking services and products. By employing advanced encryption techniques to protect customer data and secure online financial transactions, digital banks provide a high level of security and banking protection.
In light of these global technological advancements and their impact on the future of the banking industry, the CBE, based on Banking Law No. 192 of 2020, has issued regulations for licensing, registering, and supervising digital banks. These regulations represent a significant step towards ensuring that the Egyptian banking industry keeps pace with the latest global developments.
The licensing requirements for digital banks in Egypt mandate a minimum issued and paid-up capital of EGP 2bn for engaging in all banking activities, except for financing large corporations. This requirement can be extended to include large corporate financing if the capital is increased to EGP 4bn. Additionally, the largest shareholder must be a financial institution with a proven track record in similar activities, holding at least 30% of the total capital. To obtain a license, applicants must also submit a detailed feasibility study outlining the target segments, planned products, IT strategies, and cybersecurity plans.
Digital banks in Egypt are subject to the same regulatory and supervisory rules as other banks operating in the country, including anti-money laundering and counter-terrorism financing laws, along with other specific requirements aligned with their nature of operations.
The demand for digital banks in Egypt is expected to grow as technology continues to advance and the use of the internet and smartphones increases. This demand will come from existing traditional banks looking to expand their service offerings and new local entities and branches of foreign digital banks.
Digital banks represent the future of banking, leading the way in financial inclusion and modern banking services for all generations, not just the younger ones. As we move towards a virtual world dominated by artificial intelligence, digital banks will become increasingly essential.
Mohamed Abdel Aal – Banking Expert
