Egypt publishes digital payments, lending and savings rules for mobile wallets

Last week, the Central Bank of Egypt (CBE) approved the third edition of the rules for payment services using mobile wallets.

This included its approval of the rules for lending and providing digital savings services through the mobile wallet.

The EPC has clarified the procedures for obtaining a license to provide a payment service via mobile phones.

He explained that banks wishing to provide payment services using mobile phones to their customers must submit an application to obtain the approval of the CBE. This includes banks that got a license after the rules were published and want to add new services. The approval would guarantee the completion of several documents in order to be authorized to provide these services.

These documents include a list of the services that the bank wishes to provide or add, and a statement indicating any case of partial or total non-compliance with the rules laid down by the EPC.

In addition, banks should provide a penetration test report on the actual operating environment prior to the launch of the service, provided it was performed within three months of the date the request was sent.

The presentation of this report may be postponed until the initial approval of the EPC is obtained. In this case, the bank should not start the service before sending the report to the CBE and obtaining the permit.

The CBE stressed that banks which had previously obtained a license to provide payment services using mobile phones before the publication of the rules must reconcile their situation with the rules. This should take place within a grace period not exceeding six months from the date of their issuance.

The bank’s inability to reconcile its situation for the specified period may result in the termination of the previously granted license.

These banks must also inform the CBE and the users of the system, in a publicized manner, of any modification of the tariffs of this service.

Banks must also submit monthly reports to the CBE indicating: the number of electronic money units issued; the number of system users who have balances; the number of users of the system who have no balance; the number of service providers; and the volume of daily transactions of various types; and any other data requested by the EPC.

The CBE also revealed the detailed controls and terms of the digital lending and savings service through mobile phone accounts. These will be introduced by banks active in the Egyptian market in the coming period, in cooperation with I-Score and mobile payment service providers.

The CBE explained that mobile loans are a short-term credit facility, up to one year, in the form of electronic money that customers submit.

They are granted by banks in instant electronic form via the mobile payment service, without the need to visit the bank’s branches or one of its service providers.

The EPC rules set a maximum limit for mobile loans of around EGP 5,000 for individuals, EGP 15,000 for category (A) businesses and EGP 10,000 for category (B) businesses. They also grant the Governor of the EPC the right to modify these limits.

Category (A) includes companies and micro-establishments which have documents or a registered office, or whose activities are verified by any other means. They should have a mobile phone account with the bank or one of its service providers, according to procedures issued by the Egyptian Anti-Money Laundering and Financing of Terrorism Unit in March 2020 and its amendments.

Category (B) includes enterprises and micro-establishments or individuals exercising a profession without any of the aforementioned points. These are listed under the name “economic activity” according to the explanatory memorandum which will be published subsequently by the EPC.

These are entities that have opened a mobile phone account with the bank or one of its service providers in accordance with the procedures for the mobile phone payment service issued by the Egyptian Anti-Money Laundering Unit. money and terrorist financing.

The CBE stressed that the rules on maximum loan brackets, relative to total income, will not apply to digital lending products through mobile phone wallets.

The CBE enables banks to use alternative credit scoring data through digital scoring models. This is particularly the case with customers who do not have a credit history, that is, they have not obtained a loan or a credit card.

Customers will be able to benefit from this provided a strategy is developed to deal with the expected risks and losses, as well as the expected rate of the loan. In addition, procedures and standards should be developed to test and evaluate the model and modify it periodically.

The CBE also stressed the importance of providing mobile loans in fixed installments with fixed dates, with the amount and yield being specified in advance. The authorized limit must be equal to the amount used, and they could be reduced for the value of the paid installments.

The bank should also inquire about customers of approved credit classification societies, in particular the total amount of existing digital facilities for that customer that have been granted through the payment service using a mobile phone.

In accordance with the regulations and instructions issued by the CBE, the maximum daily limit for withdrawals, transfers and possible deductions from the mobile phone account has been increased to EGP 30,000 for individuals and category (B) businesses and to EGP 40,000 for category (A)) companies.

The instructions also include the maximum monthly limit for withdrawals, transfers and deductions from the private mobile phone account. These should not exceed 100,000 EGP for individuals and category (B) companies and 200,000 EGP for category (A) companies.

The bank should also set appropriate maximum limits for customer mobile phone account balances in light of its assessment of money laundering and terrorist financing risks. This also includes all other risks related to the service and users of the system. The Governor of the EPC has the right to modify these maximum limits.

In the meantime, the EPC has exempted users of the system who had undergone identity verification procedures from the aforementioned limitations. These fall under the rules for identifying customers in banks issued by the Egyptian Anti-Money Laundering and Terrorist Financing Unit in March 2020 and their modifications.

The bank must assess the risks associated with the service and the users’ system, and set a maximum limit for the balance, value and number of daily and monthly transactions made on the mobile phone account.

The CBE has indicated that the bank must apply intensive measures towards the users of the system and ensure that electronic money is not concentrated in the accounts of a limited number of customers.

This is accompanied by a particular emphasis on suspicious cases of money laundering or terrorist financing.

The EPC also requires banks to obtain a written declaration from parties authorized to sign on behalf of businesses that transfers to these accounts involve commercial or contractual relationships. The statements should also be accompanied by an indication of the nature of this relationship.

Banks must inform their customers of any high-risk financial transactions on their accounts, unless requested otherwise. This can be done by automated means, such as texting or emails.

The EPC allows users of the system to receive transfers from abroad in foreign currency and add them to the Egyptian pound mobile phone account.

This service is reserved for individuals, with particular attention being paid to the regular monitoring of incoming transfers to ensure that there is no suspicion related to money laundering or the financing of terrorism.

The CBE also stressed that the bank should take the appropriate steps to ensure that the transfer belongs to the same user of the system and that the value has been added in Egyptian pounds to their mobile phone account.

Values ​​of incoming transfers from abroad should not be added to the phone account before these transfers are reviewed if insufficient information provided regarding the transfer is provided.

The bank should also ensure that none of the parties to the transfer, whether sender or receiver, are on local or international blacklists.

Banking expert Mohamed Abdel-Aal said Egypt was taking swift action to implement the National Payments Council’s strategy aimed at financial inclusion, digital transformation and creating a society less dependent on money. cash.

Banking expert Mohamed Abdel-Aal

He said the availability of mobile banking services can help achieve this, as they provide a simple “e-wallet” or “smart wallet” application, which provides wallet owners with separate banking services.

They include withdrawals, deposits, payments and transfers. He also said that the importance of this service is increasing as there are over 100 million mobile users in Egypt while the number of internet users exceeds 43 million.

He added that the CBE’s announcement of the third edition of the rules for mobile wallet payment services is a bold move that supports the spread of this service and increases demand for it.

The latest version provided two new banking services. The first is the digital lending and savings service where customers receive on-the-spot financing without going back to traditional methods. The second is to allow full transfers between client accounts and electronic wallets over the phone.

He stressed that this separate step will have multiple positive effects, as it is expected to bring about a cultural shift in the arts of credit analysis in financing small and micro enterprises.

Client behavioral assessment methods are used to determine their financial solvency. They understand tracking their electricity consumption rate and how often they pay their bills.

He added that this step would also result in the payment of transactions in wallets over the phone, in terms of number, value and quality.

Abdel-Aal noted that the figures available indicate that mobile wallet accounts exceeded 20 million in Egypt in 2020, while the total annual transactions made through phone wallets were worth 100 billion EGP.

“On the other hand, this paradigm shift will help attract an increasing number of young people and low-income citizens to the banking system,” he said.

This enables them to benefit from various banking services and gives them more means to earn a living, as well as reducing the unemployment rate, increasing incomes and reducing poverty rates, he added.

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