Fintech Ascending: Why Egypt’s Banks Should Embrace Change

Aymen Daoud Regional Head, North & West Africa at Backbase tells us about the growing Fintech scene in Egypt, underlying its importance in the nation’s banking sector

You can call it a miracle on the Nile. In less than a decade, Egypt has experienced an astonishing digital transformation of its financial sector. In 2014 there were a grand total of two fintech start-ups in the whole of Egypt, while in 2021 that figure reached 112. Investor interest has also been piqued, with venture capital putting only $1 million across three deals in the sector in 2017, but almost $160 million over 32 deals last year, with money pouring in both from within Egypt and from abroad.

This status was further consolidated in 2020 when e-payment company Fawry became Egypt’s first tech unicorn, showing just how high the standard can be set. This remarkable growth made Egypt stand out in the region, with only established powerhouses like Nigeria and South Africa having a bigger fintech market in Africa.

Constructive Competition

As Egypt’s fintech ecosystem grows, its traditional banking sector is faced with both challenges and opportunities. On the one hand, banks are clearly feeling the pressure: Less than 30% of Egyptians have a bank account, but in just a few years the percentage of fintech users in Egypt reached almost 10%. Furthermore, the ease of use and flexibility of fintech raised user expectations across the board.

On the other hand, banks should be delighted to have so much attention drawn to their sector. Fintechs made personal finance hot and everyone in the industry stands to benefit from that. A sustained reduction in the number of unbanked Egyptians will expand the banking market, creating new vectors of growth for fintech and banks alike.

The advantages brought by fintech to the banking table were not lost on Egypt’s highest institutions. The Central Bank quickly recognized the potential, launching a number of initiatives meant to facilitate the sector’s expansion. Perhaps the most important of these is the 2019 Fintech and Innovation Strategy, which lays out a roadmap meant to better identify, cultivate, fund, regulate and govern the burgeoning talent on the fintech scene.

And while legislative progress could be faster, there are reasons to feel optimistic. A new banking law which was ratified back in 2020 and will allow the launch of digital banks for the first time finally came into effect in May of this year, with several of Egypt’s largest banks already applying for digital licences.

Fintechs made personal finance hot and everyone in the industry stands to benefit from that

Aymen Daoud Regional Head - North & West Africa at Backbase

Continued Integration

Commercial banks as well have taken notice and become more involved in the field of digital finance. Earlier this year Banque Misr, National Bank of Egypt and Banque du Caire, three of the country’s top national banks, partnered with Global Ventures, a leading firm in the realm of venture capital, to launch a new venture called “Nclude”. With $100 million in starting money, Nclude is aimed at accelerating fintech development and investing in young innovators.

Egyptian banks must now continue this process of integration between fintech and traditional banking. When it comes to fintech in Egypt, the forces of disruption are not a one-way street. Through initiatives like Nclude, banks are already joining the fray and betting on the future of fintech, avoiding the familiar pitfalls of industry protectionism.

Banks need to leverage this opportunity ever further. The fintech train is moving full steam ahead in Egypt and the surest way to maintain its momentum is to have both fintech and banks busy shovelling coal in the boiler room. The destination is worth it for everybody.