Egypt is a great example of financial inclusion in the region and across the world, according to Stephen Kehoe, Visa Senior Vice President for Financial Inclusion. Kehoe told Daily News Egypt that efforts exerted by the government to electronify payments and services offered to citizens will certainly pay off in the near future.
Moreover, he said Visa wants to assist Egyptian society in moving towards financial inclusion. Visa has signed a memorandum of understanding (MoU) with the Federation of Egyptian Chambers of Commerce (FEDCOC) to encourage the acceptance of debit cards and other electronic payments by cash-intensive SME merchants in Egypt, in addition to announcing three milestone partnerships at this year’s Cairo ICT that will seek to increase the adoption and acceptance of electronic payments in the market.
He pointed out that medium and small merchants (MSMs) transact over $6.5tn per year and interact with more than 4.5 billion customers every day. In general, he said that Visa links together more than 2.4 billion accounts in more than 200 countries.
What was the reason behind your last visit to Egypt and how successful was it?
I always enjoy visiting Egypt and let me tell you that Egypt is a great example of financial inclusion in the region and across the world. The efforts exerted by the government to electronify payments and services offered to citizens will certainly pay off. We are now seeing government employees receiving their monthly salaries through digital payment options, there is a growing tendency to disburse subsidies through such options as part of a complete overhaul of the system, and there is the recent announcement of the formation of the National Council for Payments.
All of this constitutes very positive signs on the road towards greater financial inclusion. During my visit to Egypt, we announced three milestone partnerships at this year’s Cairo ICT that will seek to increase the adoption and acceptance of electronic payments in the market. In collaboration with two major government agencies and the biggest association of merchants, Visa aims to support and encourage the penetration of digital and mobile payments as well as raising financial literacy and payment awareness in the country. We signed a MoU with FEDCOC to encourage the acceptance of card and other electronic payments by cash-intensive SME merchants in Egypt.
Visa seeks to highlight the benefits of electronic payments and show its positive impact on business growth to entrepreneurs and business owners. We will cooperate with the federation to increase the awareness of small and medium merchants of the benefits of digital payments and we will join hands to spread the culture of digital payments in the market. Eyeing the inclusion of as many Egyptians as possible, we also signed a deal with Egypt Post to embark on an ambitious journey to equip six million Egyptians with payment tools in addition to three million pensioners.
The cooperation includes capacity building for post office employees and financial literacy for customers. Additionally, we signed a joint initiative with the Information Technology Industry Development Agency (ITIDA) that will focus on supporting financial technology startups and providing them the digital infrastructure and knowledge to drive financial inclusion via technology payment platforms.
How can all of this help SMEs and small and medium merchants?
We have recently issued a report titled “Small Merchants, Big Opportunity: The Forgotten Path to Financial Inclusion” and this report clearly says that the benefits of accepting digital payments are not readily apparent to most MSMs. While traditional benefits such as increased sales, improved security, and reduced cash-handling costs undoubtedly apply to merchants of all sizes, most MSMs in developing countries do not see these benefits as offsetting the investment required to begin accepting digital payments.
While individually these businesses are small, their influence within the global economy is significant: they transact over $6.5tn per year and interact with more than 4.5 billion customers every day. Because these merchants typically have thin margins, low-income customers, small transaction values, and operate in cash-based ecosystems, little has been done to integrate them into the cashless economy. A greater level of cashless acceptance among merchants—particularly the MSMs who are vital to the daily lives of unbanked populations—would provide low-income customers with more locations to use digital payment accounts and allow those accounts to serve as a gateway to greater financial inclusion. For the merchants, too, accepting digital payments is a key step toward increasing financial sophistication and exploring new avenues for growth.
As the cashless ecosystem grows in size, the benefits increase for both groups. MSMs provide a convenient place for customers to use their digital payment accounts and therefore a reason to keep money in the cashless ecosystem. But MSMs can also act as critical influencers of their customers and fellow merchants, as they are economic linchpins and, often, trusted members of their communities. Each of the 180 million MSMs across the developing world serve 25 customers every day, on average, producing up to 4.5 billion daily opportunities to interact with and educate financially underserved customers. The impact on MSMs themselves can also be significant: accepting digital payments enables merchants to establish a financial track record, thereby increasing their eligibility for more sophisticated financial services that they may need to sustain and grow their businesses.
What is Visa’s financial inclusion strategy for 2017 and how does the company plan to achieve this strategy?
Visa is powered by a vision to connect people everywhere to exchange value — transcending borders, languages and currencies. In that sense, from the very beginning, Visa has been about financial inclusion. Today — more than 55 years later — that vision is bearing fruit. Visa links together more than 2.4bn accounts in more than 200 countries and territories. Our network is capable of processing 56,000 transaction messages per second for people all over the world reliably, conveniently and securely. Now, our job is still about connecting people — and a key part of that is bringing more people into the financial system.
In Egypt, we are working with government and various partners to accelerate financial inclusion. Our recent cooperation with our partners on issuing payroll cards and with the Egyptian Banking Institute to increase the awareness of payroll cardholders are testament to that. We will continue to work with the government to identify areas where we can accelerate the conversion of cash payments to digital payments, as a first step towards providing unbanked consumers with a transaction account. We also plan to roll out mVISA very soon, which will accelerate the provision of mobile payment solutions.
How can Visa’s products and solutions play a role in achieving this strategy?
Visa has various solutions, from convenient, secure payment processing for merchants and banks to products which enable people to conduct transactions with more security. Our prepaid and debit products are highly flexible payment tools, which can be used to convert cash payments into digital form and to connect consumers and merchants to banks and vice versa. Further, while these products today come in the form of a plastic card, we plan to bring mobile solutions in 2017.
As the payments industry shifts from plastic to digital, we are supporting our clients to offer consumers a safe, simple and consistent purchasing experience, regardless of where they are and what device they are using. Visa Token Service enables financial institutions to issue tokens – essentially digital accounts that can be used for purchases online and with mobile devices. The new service can help prevent fraud by offering financial institutions, merchants and third-party payment providers, such as digital wallet providers, a secure way to enable mobile and online payments without sharing sensitive account information.
Does financial inclusion require banks to open branches in remote areas in order to reach more customers?
This is one route, but there are many others including greater use of the post office to provide basic services, and facilitating financial transactions for small merchants, convenient stores, and pharmacies. The use of mobile solutions will make it much easier in the future to extend services to different organisations, including non-banks.
We are also working with partners to reach as many as people as possible through the innovative products we are offering to our clients. As one of the world’s largest payments technology company, Visa has an essential role to play in reaching these people and providing services they want, can afford and will use. Our mission to provide financial access to everyone everywhere will only become a reality when we are serving people at the bottom of the economic pyramid, as well as the top. However, we cannot do it alone. We need partners. We can use our network to enable people all over the world to exchange value, but it will take new kinds of partnerships to enable that network to reach consumers who have been excluded due to the challenges of remoteness and infrastructure connectivity.
Therefore, our job is to work with merchants, banks, central banks, legislators, NGOs, mobile operators, micro-finance institutions, and others to develop and bring useful products and services to people, along with the education on how to use them effectively and responsibly.
What are the successful examples in such markets?
In India, we work with different micro-finance institutions to digitise their payment and repayment services to millions of customers. In Colombia, we enable coffee growers to receive agriculture subsidies and crop payments onto a prepaid card which accelerates the speed of payments and gives them a payment product they can use in stores. In Nigeria, we have enabled banks to develop low-cost bank accounts for market sellers where access is enabled via mobile phones. In Mexico, we have provided new technology solutions to enable merchants to receive and make payments to consumers who don’t have access to a bank.
