EGYPT

e-commerce payments overview

Egypt offers long-term growth opportunities for KEY STATS

e-commerce merchants willing to be pioneers in a
challenging business landscape. E-commerce market size

Over the past year, Egypt’s e-commerce market has

$1.5 spend in 2017
billion in total e-commerce
been spurred by external factors including a doubling
of the inflation rate – which drove the population to
29% CAGR
projected 2017-2021
tap into cost-effective sourcing methods including
e-commerce – as well as government initiatives
meant to increase financial inclusion. Desktop vs. mobile purchasing

55% took place on a mobile device

While macro-economic factors will continue to of online sales
influence growth going forward, demographics
also contribute to an optimistic outlook of Egypt’s
45% took place on a desktop
of online sales
e-commerce market. Egypt is a country where
over 50% of its population, or 45 million, under
the age of 30. These young consumers are likely Domestic vs. cross-border shopping
to have a speedy transition from offline to online
14% on an international website
shopping and payments accelerating the growth of of online sales were
e-commerce in the country.

86% Egyptian merchants

of online sales were to local,
Simultaneously, a wide range of challenges exists
for e-commerce players as the online shopping
market moves from the early adopter stage to
Sources: Interviews, AMI & Global Growth Markets
the early majority stage. E-commerce companies analysis
in Egypt must navigate poor connectivity on
overloaded networks as the online community * 2017 data.

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 FIGURE 1. HISTORIC AND PROJECTED E-COMMERCE VOLUME, EGYPT, 2015-2021,
USD, MILLIONS
Sources: Interviews, AMI & Global Growth Markets analysis
continues to grow and antiquated ICT infrastructure
becomes increasingly inadequate. Cultural issues
rooted in the centuries-long tradition of market
shopping, negotiation and establishing trust between
buyer and seller continue to constrain growth.
As a result of such market barriers, e-commerce
has been slow to take hold in Egypt, leaving much
of the potential untapped—creating opportunity
for innovative merchants. With new government
efforts to drive growth in e-commerce through
investment in payments, logistics and other
programs, the time for private sector money to
flood-in is increasingly imminent.
Furthering the country’s ambition, in April 2018,
Egypt revealed a plan to double the number of
businesses selling products and services online by
2020. The plan aims to make use of e-commerce to
provide job opportunities, increase competitiveness
in the market, as well as double the share of digital
payments, by 2020.
Going forward, the 85 million Egyptians who do not
yet shop online are expected to use cash payments
with less frequency and turn more to e-commerce
stores. This will be driven by the rising number
of products available online and the reduction of
concerns around fraud, addressed by zero-liability
policies on digital wallet purchases.
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One of the key long term growth constraints for
e-commerce in Egypt is the greater than 50% of
the population living outside of major metropolitan
areas. While the urban/rural divide is not expected
to change much in the near future, logistics
companies such as Aramex and e-commerce
companies Jumia and Souq are putting great efforts
into enabling deliveries to a much wider section of
the population. Further, government initiatives are
continuing to increase Internet connectivity in all
corners of the country.
As these issues are addressed, it is possible that
growth rates will outpace forecasts.
WHAT IS DRIVING GROWTH?
Egypt’s geographic location, at the intersection of
Africa, the Middle East, and Europe, positions it as
a natural hub of culture and trade. The Egyptian
government has recognized this opportunity and
has put in place measures to incentivize both the
use of digital payments and e-commerce. In 2018,
the government announced it will reduce restrictive
regulations and take steps to encourage the use of
digital wallets and increase the number of e-commerce
outlets. As these initiatives begin to bear fruit, they will
increasingly underpin continued growth in the market.
 Egyptian consumers. Credit and debit card
FIGURE 2. E-COMMERCE VOLUME BY adoption is reportedly growing 40% annually, to
make up 19% of the pie collectively, while digital
VERTICAL, EGYPT, 2017, USD MILLIONS wallets account for 9%.

While card adoption continues to increase, Egyptian

banks have yet to offer common features which
are taken for granted by most of the banked world:
a high density of ATMs, phone banking, chip cards
and contactless payment, for example.

FIGURE 3. E-COMMERCE VOLUME BY

PAYMENT METHOD, EGYPT, 2017, USD
MILLIONS

Sources:
Interviews, AMI & Global Growth Markets analysis

HOW EGYPTIANS PAY

The unbanked population of more than 50 million

people has long been a thorn in the side for
e-commerce companies in Egypt. Conscious of
the opportunity and inevitable transition of the
large unbanked community to digital payments,
e-commerce companies, local digital wallet
companies such as Fawry, and traditional retail
Sources:
banks have all been shortening payment product Interviews, AMI & Global Growth Markets analysis
application processes for consumers with the hope
of luring-in this latent segment of the market.

In 2015, cash-on-delivery payments made up as

much as 80% of e-commerce payments, but COD
has been on the retreat, dropping to 64% in 2017, as
usage of credit cards, debit cards and digital wallets
continues to grow. Paying with cash for utility bills,
online purchases, education fees and subscription
can be done at thousands of retail service locations
around the country and quite popular among

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While the banked population is steadily growing from
a low base of 10-15%, two key factors will continue
to constrain the use of credit and debit cards:
First, Egyptians primarily rely on their bank accounts
to receive wages, and use cards to withdraw funds
in cash from the bank. Most payments for goods
and services are still conducted in cash, even by the
minority of the population with bank accounts.
Secondly, many banks do not permit online
payments with debit cards. This is either a result of
concerns around fraud or a sheer lack of ability on
the part of the bank on how to facilitate and approve
online transactions. To counter fraud, all credit card
transactions are subject to 3DS, requiring users to
take an extra step during the checkout process to
validate their identity.
Alternatives to debit and credit are now being
pursued by banks and telcos, in addition to fintech
companies. In early 2018, there were 12 banks and
three telecom operators offering digital wallets, with
a total of nine million wallets downloaded in the
country at a clip of 250,000 downloads per month.
Pre-paid cash cards are growing in popularity as well,
offering the unbanked population an alternative to
digital wallets. In 2015, pre-paid cash cards made up
only 1% of total sales, but have since grown to 4% in
2017 and are forecasted to account for 10% in 2018.
While Egyptians are coming from behind in term
of their payment options, various socioeconomic
factors are contributing to digital payment adoption
and the payment space is expected to change
significantly to 2020.
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ESSENTIAL EGYPT TAKEAWAYS
„„The fundamental promise of a large and young
population in Egypt points to long term growth in
digital payments and e-commerce
„„At the end of 2017, less than 5% of the total
population was considered an e-commerce
customer, but that is changing rapidly as
e-commerce and digital payment methods
become more accessible.
„„Cash payments makes up 64% of e-commerce
payments, but is on the retreat as credit cards,
debit cards and e-wallets grow their presence.
„„Government encouragement for e-commerce
development and investment in digital payment
is forthcoming.
„„Because of significant barriers, international
merchants have not yet made major inroads into
e-commerce in Egypt. This creates opportunity for
merchants with a solid understanding of Egypt’s
local payments landscape and cultural factors.
RELEVANT REGULATORY
DEVELOPMENTS
In 2016 the Central Bank of Egypt issued new
regulations for cashless payments using
smartphones, enabling banked and unbanked
customers to “transfer money, pay telephone
and other utility bills, and make donations”.
However, it also stated that “Only licensed
banks can apply to provide mobile wallets
and to act as an issuing bank to take cash
deposits in exchange for issuing electronic
money”, limiting fintech companies’ role in the
playing field.
The plan to double the number of online
businesses by 2020 calls for increased
awareness of e-payments, which may be
achieved by measures such as offers digital
wallet owners to be included in ‘lucky draws’
and the national lottery. Banks are also
offering zero liability fraud protection for
digital wallet customers in unauthorized
transactions.