Egypt’s remittance market is undergoing a seismic shift as the Central Bank of Egypt (CBE) rolls out measures to integrate international money transfers with the country’s National Instant Payments System, “InstaPay.” With remittances surging to $20.8 billion in the first nine months of 2024 — up 42.6% from the previous year — the stakes have never been higher for a nation grappling with foreign currency shortages and persistent economic challenges.
In an ambitious bid to modernize its financial ecosystem, the CBE has announced it has granted licenses to Egyptian banks, enabling instant receipt of remittances from abroad. Funds can now be transferred directly to customer accounts 24/7, leveraging the InstaPay platform introduced in 2022.
The initiative promises to reduce reliance on cash, streamline digital transactions, and enhance the efficiency of remittance inflows. “It’s a significant step forward,” noted Ihab Nasr, the CBE’s Assistant Deputy Governor for Payment Systems and Services. “But it’s also a delicate balancing act — between progress and maintaining control over a critical financial pipeline.”
The InstaPay system already boasts over 11.5 million registered users, with transaction values expected to surpass EGP 2.7 trillion by the end of 2024. However, critics argue that while this system benefits banks, it leaves little room for local fintech players to innovate or compete.
The Expatriate Dollar Lifeline
Egypt’s economy has long depended on its diaspora, which has ballooned to 14 million individuals — up from 2.7 million a decade ago. Their remittances are a lifeline, helping to shore up foreign currency reserves. September 2024 alone saw $2.7 billion in transfers, more than doubling the $1.3 billion recorded in the same month of 2023.
These inflows have been critical in an economy strained by inflation, debt, and the lingering aftershocks of global economic disruptions. Yet, efforts to coax more dollars from abroad, such as a government initiative exempting expatriates from car customs duties, have delivered mixed results. The car import scheme, for instance, raised just $450 million of its $2.5 billion target.
Traditional Giants Hold Sway
For now, international players like Western Union, MoneyGram, and Ria Money Transfer continue to dominate the remittance market. Western Union, with its hefty fees but dependable service, remains the go-to choice for many Egyptian expatriates. Other players, such as MoneyGram and Wise, have carved out niches offering speed and convenience.
Saudi Arabia, home to Egypt’s largest expatriate community, exemplifies this trend. Services like Bank Al Jazira’s FAWRI Money Transfer thrive by catering to expatriates with tailored remittance solutions. Yet, the collapse of smaller players like the UK-based Small World has exposed the vulnerabilities of this dependence on foreign operators.
The CBE’s decision to incorporate remittances into InstaPay aims to challenge this status quo. While banks will serve as conduits for these transactions, the pricing of transfer fees remains at their discretion, raising concerns over affordability for end users.
Despite being one of the fastest-growing sectors, Egypt’s fintech landscape remains stymied in the remittance space. Payments and remittances account for 36% of the sector, according to the CBE’s 2023 FinTech Landscape Report. Yet, systemic barriers, including restrictive currency policies and regulatory uncertainty, have stifled growth.
A temporary ban on Egyptian pound debit card use abroad in late 2023 — though eventually reversed — highlighted the precarious environment local fintechs operate in. Additionally, limits on foreign currency withdrawals and spending continue to strain liquidity for businesses and individuals alike.
These measures, while intended to stabilize foreign reserves, have inadvertently clipped the wings of fintech startups. “We’re watching a potential golden goose being locked in a cage,” one industry insider remarked wryly.
What Lies Ahead?
The InstaPay integration signals progress but raises uncomfortable questions about the exclusion of local fintechs. By prioritizing traditional banks as the gatekeepers of remittance flows, Egypt risks missing out on the innovation and efficiency that fintechs could bring to the table.
Policymakers face a choice: continue down a path that centralizes control or embrace reforms that empower local innovators. Addressing currency restrictions, incentivizing bank-fintech partnerships, and fostering a competitive landscape are essential steps to unlock the full potential of Egypt’s remittance economy.
For now, the foreign remittance dollar flows on — swiftly, securely, and firmly in the hands of Egypt’s banking behemoths. Whether fintechs can carve out their share in this growing pie remains a story waiting to unfold.