Without a doubt, life for many of us has changed beyond recognition compared to just one year ago, as the novel coronavirus (COVID-19) pandemic has changed that way we undertake daily tasks forever. One major change in the past year has been to turn what we historically did face-to-face into an online activity: and that is using video conferencing for meetings; shopping online; restaurant delivery; day-to-day digital banking; and the list goes on. Several experts believe that these changes are here to stay, indicating that if the COVID-19 pandemic were to end overnight, many of these new habits would continue as they have become permanent. This is especially relevant when it comes to the banking and financial services sector, as the pandemic pushed the sector to accelerate its digital transformation. According to research by RFi Group, 71% of consumers globally are now, in the midst of the pandemic, using digital-banking channels weekly, while daily use increased 6% during the same period. In a world where physical presence has become a burden, the need for a flexible and user friendly access to banking services has become mandatory. Accordingly, many banking services will be carried out remotely, and the response time to applications will be significantly reduced. The digitisation journey did not start with the pandemic, but it did cause an inevitable acceleration towards this, as well as the transition to remote work. Many corporates, and organisations—including banks— have rediscovered the inefficiency and the high cost of their structures. As the world moves past the pandemic, new business models, corporate strategies, and principles of the internal organisation will be revised. According to banking executives, the transition towards digital was inevitable for routine activities, such as checking balances, making payments and transfers, paying bills, even completing credit-card applications. Many of these activities are habits, and once habits are embedded, they are unlikely to change. Post-COVID-19, even more people will bank this way, ensuring that routine activities will stay digital. In an OpEd, Kevin Martin, COO of Wealth and Personal Banking at HSBC, said that "customers will still go to branches and turn to people for important life moments". He added, "Even as the pandemic fades, people will still have a psychological need for human interaction at important life moments. People need to feel reassured when it comes to life events, such as sending a child overseas for education, managing generational wealth transfers, establishing a wealth plan, coping with bereavement or buying a home." Thus, Martin concluded that post-COVID-19, touching base with bank branches will continue to make up a significant proportion of this type of activity. What remains to be seen is how far people will be willing to use video platforms as part of this interaction, which may, in turn, depend on factors such as how long social distancing persists. People will value the convenience of a nearby branch compared with a scheduled video call for different reasons, but the ubiquitous use of Zoom Video Communications is likely to accelerate the frequency of virtual "face to face". Another expected change is the rise in FinTech partnership with traditional financial institutions. According to a report by Deloitte, an important outcome of COVID-19 for Fintechs may well be the continued acceleration of partnerships with financial institutions. This can offer the benefits of capital, distribution access, and compliance infrastructure, but often lack highly sought-after digital solutions. The COVID-19 era has made physical cash payments less practical, opening the door to an increase in digital payments and e-wallets. Although cash use was predicted to decline in any case, the pandemic accelerated such decline, due to concerns that handing over money can cause human-to-human transmission of the virus. According to a Mastercard survey looking at the implications of the coronavirus pandemic, 82% of respondents worldwide viewed contactless as the cleaner way to pay, and 74% said they will continue to use contactless payment post-pandemic. In the Middle East and Africa, 70% of respondents said that they are now using some form of contactless payment, citing safety and cleanliness as key drivers. But there is another reason why banks are under pressure to digitise quickly: Big Tech companies are looking beyond payments to capture other profitable areas of banking, using vast databases and sleek digital interfaces to lure customers away. Big tech moves into finance In November 2020, Google announced that it is moving deeper into consumer finance. The California-based tech giant will let users open bank accounts, pay friends and manage budgets through a new version of its Google Pay app. The app was launched in partnership with Citi and Stanford Federal Credit Union to launch the mobile bank accounts and Google said it plans to add 11 new partner institutions in 2021. The app includes peer-to-peer payments — a feature that made PayPal's Venmo and Square's Cash App household names as people shift to digital payments during the pandemic. Unlike major banks, Google said its "Plex" checking and savings accounts have no monthly fees, overdraft charges or minimum balance requirements. Users can also request a physical debit card, which will run on Mastercard's network. Alphabet's Google is not the only Big Tech that has its eyes on the financial sector. Rival Apple launched its iPhone-integrated credit card with Goldman Sachs in 2019. Facebook lets users make payments via Messenger in certain markets. Chinese conglomerates Alibaba and Tencent have become giants in payments and investing thanks to their mobile payments apps. This poses a major threat to traditional lenders, unlike Fintech, Big Tech has all the advantages when it comes to mainstream banking: a wealth of data and a large, sticky existing customer base. Asian markets are a clear example, according to a report by the Institute of International Finance (IIF), Alibaba has issued almost $100bn in loans over the five years to 2018, while Ant Financial's MYbank had already extended around $17bn in loans with an average size of $2,500 in the two years after launching. According to the Bank of International Settlements (BIS) Working Papers No 887 in 2019, Fintech and big tech credit (together "total alternative credit") reached nearly $800bn globally. Big tech credit has shown particularly rapid growth in Asia (China, Japan, Korea and Southeast Asia), and some countries in Africa and Latin America. Greater ease of doing business, lower bank credit-to-deposit ratios and less stringent banking regulation enable alternative credit providers to thrive, according to another research by BIS. Egypt's drive to e-payments That falls in line with the Egyptian state shift toward replacing cash transactions with digital ones makes it easier for the government to gain oversight of payment activity and encourages economic formalisation. For these reasons, the drive towards a cashless economy forms a central part of the nation's economic development strategy. In November 2016, Egypt's President Abdel Fattah Al-Sisi launched the National Council for Payments, a body charged with overseeing the country's transition to a cashless society. Egypt also has issued a legislation or regulation of non-cash payment methods (Law No 18 of 2019), followed by its executive regulation (No 1776 of 2020) issued by decree of the Prime Minister. The Law makes it mandatory for most Egyptian businesses to settle certain payments by non-cash means, if they exceed a certain threshold. The deadline for compliance is 7 March 2021. The Law is set to achieve several key goals, in particular, promoting financial inclusion and developing financial services whilst eliminating financial crimes, such as fraud. The Law defines a cashless payment broadly and includes "any payment method that results in an addition to the beneficiary's bank account such as deposits, transfers, credit and debit cards, payment via mobile telephones, and any other payment method approved by the governor of the [Central Bank of Egypt] CBE". The Law's definition of a bank account includes Fawry e-wallets and e-wallets of mobile operators, such as Vodafone Cash and Orange Money. To ensure compliance, the law adopted the carrot and stick approach, providing several incentives, and penalties. Incentives include discounts of 5% to individuals opting for e-payment, refund of up to 3% to individuals opting for e-payment, and a point system that entitles regular e-payment users to up to a 5% voucher. On the other hand, in case of failure to comply, a penalty of 2% to 10% of the total amount of the transaction up to a maximum of EGP 1m will be charged. The penalty will be doubled in case of repeated offences. Nevertheless, the passing of the Banking and Central Bank Act provided a regulatory framework for the operation of digital payments, banks, and currencies. Egypt's fintech scene has shown resilience in the face of the COVID-19 pandemic, managing to raise funds from several venture capitals, in addition to the CBE's EGP 1bn fintech fund. According to the latest data, the number of mobile wallets jumped 17% between March and October 2020, thanks to the increased reliance on digital payments amid the pandemic. The current uncertainty has placed businesses everywhere under economic duress, and financial services are no exception. But many in the sector are already rising to the challenge, adjusting their products and services to meet the needs of customers who are struggling through the pandemic themselves. If history provides any lessons for this unprecedented crisis, it may be that adversity inspires creativity.
