As Egypt embarks on a journey to reach financial inclusion, digital transformation is the key to achieve that goal.
Ahram Online spoke to Jing Zhou, president of Pintec Technology Holdings, who participated last week in the Banking Technology North Africa Summit in Cairo, to learn how digital technologies can help in the move from a cash-based society to a cashless one, in order to reach financial inclusion.
Zhou has approximately 20 years of risk management experience in multinational banking and financial technology (fintech). Pintec, is a technology company based in China and provides financial product solutions to financial institutions, e-commerce companies and offline retailers.
Ahram Online: What do you think about Egypt’s current financial system?
Jing Zhou: We have come to Egypt as it is a promising market for digital transformation and financial inclusion.
Traditional banks still rely heavily on physical branches and more physical distribution models. Resource management models to reach customers, or for risk management, still have to go through many off-line processes to do their work and make decisions.
In the traditional way, sales representatives go and look for customers, documentation, data entry, verification, credit decisions, and so on. Through technology, we do all that in real-time, and there is no data entry here because the data goes in live through the system. Rsk modeling is done by machine.
All these procedures can be done and processed within minutes instead of weeks. This not only saves the customer's time, but also saves the processing costs inside financial institutions, like handing over work from one team to another to another for processing.
Risks can be managed effectively by financial institutions and at a sustainable and reasonable cost level, if technology is used effectively.
AO: Can technological solutions come a reasonable cost?
JZ: It is cost effective for financial institutions to digitally transform their operations because it saves the operating costs of processes in the middle, like manual data entry, manual verification, manual documentation, which are traditionally done by physical means and visiting the branches of banks. Doing all these digitally is cost and time effective compared to traditional means.
What we do as technology providers is bridge the gap in a way that the parts can work seamlessly together through technology.
Technology helps with the process of moving to financial inclusiveness. It can get to more areas that are traditionally hard to cover by traditional financial institutions that would have to set up more branches in order to provide their services.
The customer gets a faster, mobile and real-time experience, anywhere and anytime, without having to go to physical branches. So, to talk about inclusiveness, we can reach out to populations and geographic areas that have never been reached before, and at a cost that is still acceptable to financial institutions.
In China, for example, we work with telecom companies and banks to reach places that traditionally were not covered before, and more users now are coming from these places that were not bankable before.
AO: How can such technologies benefit ordinary people and SMEs?
JZ: Financial technologies help reach instant credit decisions for customers to pay overtime without going through a long process for that. We also offer small and medium-sized enterprises (SMEs) lending solutions real-time. SME lending is very different for banks. The segment naturally is more risky, because it is more vulnerable to economic problems. It is a worldwide issue and not only in Egypt because the credit risk is higher.
Pintec has built data infrastructure that can aggregate a lot of data sources real-time, and from those data sources we have risk modeling, deep learning systems to differentiate the risk profiles of clients real-time. And then be able to make a more precise forecast outlook of the customers’ profile, their payment behaviour, and help the banks make decisions faster.
AO: How can financial institutions benefit from the digital transformation?
JZ: Technology makes it easier for the banks to take quicker decisions, which in turn means more and faster business being done, reaching financial inclusion quicker. Fintech solutions are easily customised to the needs of each market and the needs of regulators. The solutions provided by fintech makes it easier for financial institutions to execute their policies, and makes it easier for consumers to take advantage of the financial system.
The technological solutions of Pintec in China, for example, cover 2-3 million transactions per month. We connect end users with financial institutions. We lower the friction from the integration of both sides, because today in the modern world, people look for good user experiences, faster decision time, and not having to go to physical branches to get loans or other financial products.
Pintec has generated 28 million registered users and five million unique borrowers, $4 billion of loans, and about $1 billion of management products sold through Pintec platforms. So, we are a company that has seen how it works in a large scale and we have seen the journey of evolution. We can bring not only the technology, but the experience as well.
AO: Many people are still afraid of online shopping and online banking. How safe it is nowadays?
JZ: Technology and security have become very strong now, and online thefts happen now very rarely. Financial institutions also have ways to protect their clients if that ever happens.
Of course, there is the fear of theft and hackers who might take money from bank accounts. But digital solutions are so convenient now and open many opportunities, so people get over the small chances of theft happening compared to the benefits they get.
In China, everyone was wary at the beginning of the digital transformation and the wide use of online banking, especially among the elderly, who are used to traditional ways of banking. It started with the younger generation, who are using their phones everywhere and who don’t like going to banks and physical locations and waiting in line. Plus, they are willing to take risks more.
Most people in China today are using online payment methods that are linked to their bank accounts. It became the way of life for a large segment of society. Online shopping has become a trend.
The need for this type of services is irreversible, because customers who try the convenience of digital solutions never want to go back to the inconvenience of traditional services.
Additionally, technology allows money to go directly from the customer’s bank account to the investments online within minutes. For example, investing in the stock market can now take a couple of minutes, as opposed to the traditional ways where it used to take at least a few days and sometimes weeks.
AO: How far is Egypt from being a cashless society?
JZ: You would be surprised how close Egypt could be to achieving digital transformation and becoming a cashless society. In China, no one could have imagined the total transformation to a cashless society that has happened during the last 10 years.
The wide reach of fintech technology is transforming people’s lives. Digital payment has reached every corner of Chinese society, and more countries as well. Ten years ago in China, it was still a cash society and no one really liked using credit cards. But today, nobody carries a wallet anymore. I personally carry a credit card just in case I don’t have access to internet sometimes, and I trust that.
Now, digital banking is so widely used in China that even some street beggars uses Quick Response (QR) codes to receive donations from people on the streets through smart phones, because nobody carries cash anymore.
A street performer would have a bucket for people to put change in and a QR code for those who don’t carry cash.
AO: How can Egypt achieve such a digital transformation?
JZ: The technology and infrastructure themselves are available. What is needed is the openness to undertake such a transformation and who should drive the trend. Because the need is already there, since consumers are always looking for convenience and cost effectiveness.
It is not an expensive technology. I think it is about willingness and the push from financial institutions and regulators. Because digital transformation needs all sides of society to do it. Once it starts, the transformation will happen quickly.
China was in the same position as Egypt 10 years ago, and Egypt can get there more quickly than you may think. Once digital transformation begins, things go smoothly and quickly.
AO: The willingness is here in Egypt. But how can digital transformation in banking be made faster?
JZ: How to get there is not in the hands of consumers, but financial institutions. They are the ones who can get there, by investing in digital solutions and technologies. And also the regulators need to help them, which is present in Egypt since the government wants to shift to a cashless society.
So, the willingness is there in Egypt, but how to get there requires planning and implementation. And that is why Pintec is here in Egypt, to see how it can bring the know-how experience of fintech, so that Egypt can skip the obstacles of each step and instead reach the goal more quickly.
In India, the transformation to a cashless society recently was very fast. There were no intermediate steps. Egypt, too, has a very good opportunity to start where China and India are today, skipping many steps that can hold the country back regarding fear of financial technology and achieving financial inclusion.
The advantage Egypt has is that when it started the digital transformation in finance, it started after many countries have gone through this. Egypt will not have to go through most of the complicated processes.