New central bank regulations will allow customers to make digital bank transfers for the first time

The Central Bank of Egypt released on Monday new regulations for instant payment networks, a service that will allow bank account holders to make almost instant transfers and purchases between personal or business accounts around the clock using only the customer’s mobile phone number or unique payment identity.

Transactions will be capped initially at LE50,000 per transaction, LE60,000 per day, and LE200,000 per month.

The new service is the latest addition to the policy push toward banking inclusivity and digital transformation stipulated in the new law regulating the central bank and the banking sector, which was passed last year to pave the way for more digital services and a broader bank client base.

While banks must still apply for licenses and alter their infrastructure to comply with the new instant payment networks, the decision has the potential to push a greater proportion of the population to use the banking sector. Estimates suggest that only 33 percent of Egyptians have bank accounts at present, and of these, only 36 percent of clients use bank accounts for payment transactions and only two percent for banking services, while almost half remain inactive.

Until now, cash withdrawals at ATMs were the only instant interbank transfer service available, where clients from one bank could instantly withdraw cash from their accounts at a different bank.

Customers who wished to make digital transfers between accounts, however, would have to wait for at least three hours for the transaction to complete its journey through a clearing and settlement operator — a service provided exclusively by the Egyptian Banks Company — and would be unable to complete the transfer outside working hours. 

Outside of banks, clients wishing to make instant transfers were only able to use digital wallets offered by mobile operators such as Vodafone Cash. Since these companies have full access to clients' data and oversee the entire payment ecosystem from start to finish, they were able to settle transactions to other users on the same network instantly without the need for an intermediary to step in, block the sum on the sender's account, check the receiver's account, debit the sender’s money and credit the receiver's account.

The new regulations issued by the central bank set the ground rules for liability during each part of the transaction cycle for instant payments, which will still be overseen by the Egyptian Banks Company, and provide for the use of instant payment networks, which serve as a private database linking clients’ data with financial service providers. 

Payment service providers gain conditional access to clients’ data through the networks, thus enabling them to debit or credit users’ accounts almost instantly, instead of waiting for a clearing and settlement operator to process the transaction, which has traditionally consumed both time and resources and incurs an additional service cost for users.

Banking expert Mohamed Abdel Aal has noted that next to the speed and ease of completing transactions with the new payments infrastructure, clients will also no longer have to pay fees for the manual settlement of each transaction. 

The service will take some time to set up, however. The network will be launched in the current quarter, which ends on December 31, according to the central bank, which suggested banks will need around six months to apply and gain license approval, adjust their systems and restructure their databases and security requirements to tally with those of the instant payment networks. The central bank expects that banks could officially launch the transfer services on internet banking and mobile banking applications within a year.