Banking, like many other industries, is steadily moving toward digitization to accommodate changing lifestyles. People now need solutions to banking challenges that did not previously exist. With busy schedules, more travel, a surge in e-commerce, and a plethora of innovations that are spurring a global shift, the growing tech-native generation is increasingly asking to conduct their finances and spending on their own terms, and is moving away from using physical cash and toward alternative payment solutions that better suit their lives. In order to retain clients, traditional banks are feeling the pressure to address an onslaught of disruptions from within and outside the industry. Even older generations and those not necessarily asking for cashless alternatives are finding themselves nudged into using fintech.
As cash sees itself out, alternative payment solutions are becoming more mainstream. They include products like physical debit/credit cards; mobile payment systems and digital wallets issued by banks; payment applications, such as Paypal (which does not operate in Lebanon), and local varieties like PinPay; as well as other electronic banking platforms for payment, transfers, and more autonomous management of banking needs. Cryptocurrencies, for all their controversy, are growing in popularity abroad as a payment alternative too, but are not yet in use in Lebanon. Bank du Liban (BDL), Lebanon’s central bank, has been vocal about their imminence, announcing in 2017 that it would launch its own digital currency.
A cashless society has its benefits, many experts Executive spoke with agree, but that is not to say it does not have drawbacks or raise questions: from money laundering, tax evasion, and privacy concerns, to overspending (linked to cashless transactions), as well as what this shift could mean for the unbanked, estimated to be almost 2 billion people worldwide.
Getting with the times
Lebanon’s current alternative payment offerings should be examined in the context of the global digital revolution, a time of adjustment for many sectors. Among the main woes of digitization are security concerns. The Lebanese government is said to be taking steps toward cyber security legislation (see Q&A with Minister of State for Information Technology and Investment Adel Afiouni). The much talked about digital signature law came into effect in Janurary, and once fully implemented it should boost online banking and transactions, among other things (see interview with Nadim Gemayel). These actions will pave the way for further development in the payment solutions landscape.
A certain number of failures is inevitable in any new venture, and there have been alternative payment solutions that have flopped over the years. Experimenting with offerings is one of the few ways to find out what works, but the downside is the hefty investment of time and funds that go into such R&D. The use of relatively affordable offerings like rented cloud space and Software as a Service has eased the cost of testing new financial products for many banks. Ultimately these often-bureaucratic institutions must demonstrate sufficient agility and consistently offer solutions that meet the new needs of clients in order to survive (see Q&A with Credit Libanais Deputy General Manager Randa Bdeir).
Catering to new lifestyles
Banks in Lebanon are focusing on the user experience, adapting their products and services to a growing population of connected, tech-savvy multitaskers that need convenience, speed, and security. BLOM Bank Deputy General Manager Jocelyne Chahwan explains their strategy: “The rise of advanced technologies and new regulations have led [the bank] to provide a better customer experience and enhance the security level of all innovative payment solutions offered, thus offering seamless experience to clients.”
One of the more traditional solutions, the card, has come a long way. There are even blockchain credit cards available in some markets—an alternative that could help merchants foot the bill of high processing fees but comes with a slew of its own disadvantages. Traditional cards are gaining in popularity, however. According to 2018 statistics from BDL, 2.78 million cards were issued in Lebanon, a rise from 2.63 million in 2017. These include prepaid, debit, and credit cards, and range from specialized options for use online, to cards born of partnerships among banks and merchants, as well as options with a variety of loyalty schemes.
Byblos Bank’s Head of Group Cards, Accounts, and Bancassurance Products Georges Fares explains that they are constantly developing payment solution options, and boast a wide range of debit and credit cards in different currencies. “These cards are divided according to specific segments, and in a way that caters to the evolving needs of [the bank’s] clients,” he says.
Many banks have rolled out mobile payment solutions where cards are stored digitally on mobile apps, allowing users to pay with their Android mobile devices at points of sale (POS). Banque Libano-Française (BLF) will soon be introducing its mobile payment solution so customers can make payments mobile app, says Myrna Wehbe, BLF’s director of cards services. Byblos Bank and BLOM Bank have integrated Visa Token Service (VTS) technology into their mobile apps. Chahwan reveals that by the end of April 2019 all the payment cards issued by BLOM bank will be equipped with the EMV chip for a higher level of security and contactless technology.
The relationships between banks and merchants is developing as payment options increase. Fares says the launch of their ByblosPay app has encouraged merchants to install accompanying contactless technology at POS. “Such technological advancements constitute business disruptions that are gearing Lebanese banks more and more toward mobile payments,” Fares explains. “They are also allowing us to be ready to offer new types of mobile payment, such as Apple Pay, when it becomes available for our market.” On the other hand, BLOM Bank is enabling this disruption, partnering with General Security in 2017 to equip its centers with BLOM POS machines.
Chahwan says BLOM is currently negotiating future partnerships with international players Apple Pay and Samsung Pay, but points out that this depends on their appetite to enter the Lebanese market. Neither is available locally because of these companies’ decisions not to enter Lebanon.
Byblos Bank is planning to expand the mobile payment options on ByblosPay, also making it available to debit cardholders by April, thanks to enhanced security measures which ensure cards are used online safely. They are also working on offering e-commerce solutions, including payment gateways, to local businesses through partnerships with local processors.
While millenials are the ones driving the digital revolution across sectors, and many banking products are geared toward them and the younger Generation Z, it is their parents and grandparents that still retain much of the world’s wealth. A common reluctance to adapt to technology makes it necessary for banks to coax these clients into newer products and services.
A cashless future
The currently available assortment of alternative payment offerings falls in line with a wider trend of fintech developments in the country, including those spearheaded by startups, as well as banking digitization initiatives like the opening of more and more Interactive Teller Machines (ITMs) and e-branches. BLF’s Wehbe explains that part of their digitization has included transforming ATMs into multiple services teller machines that let customers make deposits, make payments for tuitions and wedding registry, and will soon be enabled with payment options for taxes and donations. “We have a very clear roadmap that will transform our business and solutions in the next three years,” BLF Director of Marketing and Retail Ronald Zirka adds, citing the enacting of the digital signature law and the inclusion of Lebanon in the list of oil producing countries as key events that could propel the sector.
Despite digital financial products fast becoming integral parts of daily life, there are still barriers to growth for alternative payment solutions in Lebanon. Wehbe credits payment service providers Visa and Mastercard for “assisting the market in this shift by imposing mandates on licensed banks to adopt new advanced technologies in electronic payments.” But despite this support, the speed with which the local market can move forward with the development of these options heavily depends on how quickly and efficiently public sector stakeholders resolve existing digitization challenges, specifically those related to security. It is then up to banks to continue their efforts in bettering payment enabling infrastructure, amping convenience, increasing awareness of the benefits of various payment solutions to consumers and merchants, and further improving incentives.
The experts interviewed for this article point out that with all the technological innovations aiming to reduce cash usage, the Lebanese are still heavily dependent on cash. Even so, there is a growing shift in client habits and business culture toward digitization that is putting Lebanon on track to becoming a cashless society—time will tell if this happens at leapfrog or snail speed.