With the upcoming launch of its first digital bank, Egypt now has a massive opportunity to boost financial inclusion across the country, not to mention lay the groundwork for a thoroughly modern, customer-centric banking system. In early May, the Central Bank of Egypt (CBE) granted preliminary approval to Misr Digital Innovation (MDI), the investment subsidiary of Banque Misr, to launch “onebank”—the country’s first-ever digital native bank. With final approval expected to be issued imminently, the forthcoming launch of onebank marks a landmark moment in the evolution of Egyptian banking.
It was back in 2020 that the CBE got the ball rolling on digital banking when the newly issued Central Bank and Banking Sector Law No. 194 of 2020 addressed the concept of digital banks and the banking services they provide through digital channels or platforms that use modern technologies. By July 2023, the CBE released its rules for licensing, monitoring and supervising digital banks, which it described as the “continuation of the state’s efforts to support innovation and transformation to the digital economy”.
Such rules were introduced to both keep pace with developments in the global financial-technology (fintech) industry and meet the changing needs of banking customers in Egypt. For instance, the requirements for obtaining a digital-banking license encompass “submitting a detailed feasibility study that includes identifying the target segments and the products planned to be made available, as well as information technology plans, cybersecurity plans and strategies”. The licensing requirements for digital banks also require a 2-billion-pound minimum (approximately $31 million) of issued and paid-up capital “in the event that all banking activities are practiced”. And should the bank be engaged in the financing of larger companies, that capital threshold is doubled to 4 billion pounds. Furthermore, the bank’s principal shareholder must be classified as a financial institution with prior experience in similar ventures and must account for at least 30 percent of the total capital value.
Fast forward to May 2024, and the CBE announced its preliminary approval for MDI to launch onebank, having fulfilled the initial regulatory requirements for receiving a digital-banking license, including establishing the necessary degree of infrastructure, banking systems and security measures that can guarantee secure and reliable digital-banking services for Egyptian banking consumers. Completion of the second phase of licensing requirements is now pending, after which MDI can acquire the final operational license, and onebank can begin offering its digital-banking products and services to customers.
MDI was founded in 2020 for this very purpose: to establish Egypt’s first digital bank in accordance with the CBE’s directives and regulations, with a key objective of boosting financial inclusion across Egypt. According to the MDI website, onebank will promote financial inclusion by offering banking services and products smoothly through its digital channels, as well as providing a diverse range of banking solutions that will contribute to the development of financial services in Egypt. Such solutions will include “tailored products aligned with lifestyle” that will generate significant value for customers by identifying target demographics and products to be offered through the digital bank alongside information technology (IT) and cybersecurity strategies.
Indeed, addressing financial inclusion in the country is a long-overdue endeavour. According to its 2021 Global Findex Database, which focused on financial inclusion, digital payments and resilience during the COVID-19 pandemic, the World Bank reported that only 27 percent of Egypt’s adults owned a bank account. For comparison, that same metric was reported at 74 percent for Saudi Arabia, 44 percent for Morocco and 47 percent for Jordan. The report also noted that 72 percent of account owners in Egypt paid their utility bills in cash.
To address such shortcomings, the CBE launched its “Financial Inclusion Strategy (2022-2025)” in December 2022, a report that provided a scientific methodology for measuring financial inclusion in Egypt in terms of access, usage and quality of financial services. The report has been playing an important role in helping the CBE to continue setting formal targets and a vision “for formulating and designing a financial inclusion strategy, in addition to determining the implementation priorities”. Listed among the nine Strategic Objectives included in the report are “expanding the use of digital financial services” and “continuing to enable the Financial Technology and Digital Financial Infrastructure”.
It is hoped that a flourishing digital-banking sector will go a long way towards resolving Egypt’s underperformance in terms of financial inclusion. “The prevalence of digital banks in Egypt has become an imperative market demand,” MDI added. “Through onebank, all services and transactions will be online to cater to the evolving needs of the Egyptian consumer. onebank aims to provide such services that are in line with the state’s agenda for financial inclusion and digital transformation, representing a natural evolution in financial services.”
MDI also noted that onebank would most likely launch in the last quarter of 2024, with the Information and Decision Support Center (IDSC) of the Egyptian Cabinet confirming this timeline, following the completion of the second phase of the licensing process. It is also expected that onebank’s debut will well and truly open the floodgates for Egypt’s nascent digital-banking sector. Indeed, possibly a dozen more banks could launch their own digital-banking operations, with the National Bank of Egypt (NBE), Emirates NBD-Egypt, Orascom Financial Holding (OFH) and Ostoul Securities Brokerage & Bonds Trading all expressing firm interest.
What’s more, the activity being increasingly carried out by international players is helping to strengthen Egypt’s digital-banking ecosystem. For example, Mastercard and the National Bank of Egypt signed an agreement in early September to introduce artificial intelligence (AI)-powered “digital employees” to manage non-financial customer interactions and virtually provide a range of digital services. According to Mastercard, such a digital employee refers to a computer-generated representation of a person that can interact with users through digital interfaces and is typically created to replicate human appearance, behaviour and communication patterns, mainly by leveraging such advanced technologies as generative AI, computer graphics, natural language processing (NLP) and facial recognition.
“In a rapidly evolving world where consumer needs are constantly shifting, it is crucial for customers’ experiences to seamlessly transition from the physical realm to the digital realm,” Selin Bahadirli, Mastercard’s executive vice president of services, Eastern Europe, Middle East and Africa, said at the time of the partnership’s announcement. “Mastercard’s AI-powered digital employees are at the forefront of this transformation. We are delighted to announce our partnership with NBE, which brings forth immersive digital experiences and revolutionises customer interactions.”
Mastercard had already allied with the Egyptian unit of major Dubai government-owned Emirates NBD in a partnership that, in alignment with the CBE’s “Financial Inclusion Strategy”, aims to deliver innovative digital payment solutions to specific customer segments in Egypt—namely, the younger generation, travellers and tech-savvy consumers. “We are excited to embark on a new chapter in our partnership with Mastercard, reinforcing our commitment to fostering financial inclusion and pioneering the development of customer-centric solutions in Egypt,” said Mustafa Ramzi, head of retail banking and wealth management, Emirates NBD-Egypt, when the partnership was announced in February 2024. “This partnership equips us with advanced tools to enrich our customers’ banking experience, ensuring safe, secure, and seamless digital transactions.”
Egypt’s lofty digital-banking ambitions also come amidst a growing mood across the Western Asian region to advance digital financial services. In mid-September, for instance, the governor of the Central Bank of Iraq (CBI), Ali Mohsen Al-Alaq, disclosed that the central bank was reviewing more than 70 applications to create digital banks in Iraq. Such developments should advance the competitive environment within the region, potentially spurring further innovation and development within Egypt’s digital-banking sector.
This heightened activity should help create a positive feedback loop that will only accelerate Egypt’s digital-banking capabilities over the coming months. According to banking industry analyst Mohamed Abdel Aal, 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,” Abdel Aal observed in a July 20 piece for local news outlet Daily News Egypt. “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.”