Cairo on: 12 May 2020

Dear Sir/

Chairman of the Board of Directors

Bank

Central Bank of Egypt’s Initiative for Electronic Payment

In light of the precautionary measures taken by the Central Bank to confront the coronavirus, aiming to maximize the banking sector's contribution to implementing the state's plan to deal with the potential repercussions of the virus, and believing in the importance of making all financial services available to all citizens fairly and working to raise their usage rates of these services easily, safely, and at an appropriate cost, the infrastructure of payment systems is continuously strengthened and various electronic means are provided to banks to help them disseminate digital financial services and achieve higher levels of financial inclusion.

In light of the challenges facing electronic acceptance in Egypt, including but not limited to:

• The need to increase the number of electronic point-of-sale (POS) terminals.
• The need to rely more heavily on Quick Response (QR) codes.
• The necessity of paying attention to the geographical distribution of electronic acceptance points.
• The need to put programs in place to increase awareness among citizens, companies, and merchants regarding the importance of electronic collection and incentivize their use.

For the vision of the Central Bank of Egypt to increase electronic acceptance points across all governorates, and in this regard and in implementation of the Arab Republic of Egypt, the Board of Directors of the Central Bank of Egypt, in its meeting held on 01 May 2020, decided to launch an initiative for electronic payment to increase the dissemination and activation of electronic acceptance channels, to be carried out as follows:

First: Dissemination and Activation of Electronic Point-of-Sale Terminals (POS) through Acquiring Banks Licensed for Electronic Acceptance via POS Terminals:

A. Dissemination of Electronic Point-of-Sale Terminals:

The Central Bank will fund the dissemination of 500,000 new electronic point-of-sale terminals, geographically distributed from its date until the end of December 2020. All acquiring banks shall purchase and disseminate these electronic POS terminals, adhering to the following specifications:

• Observing the geographical distribution of new merchants across all governorates of the Republic (refer to the Guideline Geographical Distribution attached as Appendix 1).
• Giving priority to vital sectors or those with high densities of paper cash transactions (such as gas stations, supermarkets, pharmacies, etc.).
• Adhering to the minimum specifications for electronic POS terminals and Mini POS terminals (Appendix 2).
• It is mandatory to place the phrase "Gift from the Central Bank of Egypt" on these machines.
• The use of these machines is restricted to new private sector companies and merchants not registered with any other acquiring bank. The bank must ensure that no other electronic POS terminals belonging to other banks or payment facilitators exist at the targeted merchants. The bank may obtain a declaration from the merchant as one of the means to verify this.

The following machines are prohibited from being used:

• Any closed system; the machines must accept all cards issued by all networks licensed by the Central Bank to operate in the Arab Republic of Egypt.
• Replacement or renewal operations for existing machines at the bank.
• The bank is obligated to activate QR code acceptance on these machines.

The type of machine | Location of installation | Incentive amount in Category (A) ---|---|--- Mini POS | When installing the machine in Governorate Category (A) | 3,000 EGP POS | When installing the machine in Governorate Category (B) | 2,000 EGP Mini POS | When installing the machine in Governorate Category (B) | 1,500 EGP POS | When installing the machine in Governorate Category (A) | 2,500 EGP

• It is necessary to train the merchant on using electronic POS terminals, QR codes, and contactless operations, and to place distinctive signs at merchants indicating acceptance of these payment types.
• Adherence to the Central Bank’s rules regarding technology service providers for payments and electronic payment facilitators issued by the Central Bank in March 2020, in case of engaging companies from payment facilitators.
• The bank or payment facilitators shall not charge companies or merchants any additional amounts for providing the aforementioned electronic POS terminals.
• Payment facilitators shall not load more than one electronic payment application on these machines, and the application must be approved by the acquiring bank.
• Developing marketing plans and plans specifically designed to incentivize merchants to use electronic collection channels for each POS terminal in the governorates, ensuring that electronic collection exceeds 6,000 EGP monthly per POS terminal for Category (B) governorates and 10,000 EGP monthly per POS terminal for Category (A) governorates.
• The bank is obligated not to add a profit margin exceeding 0.5% over the following:
  • The interchange fee specific to the national payment system for transactions conducted using national payment cards.
  • The average interchange fee determined by companies holding international acceptance marks.

B. Activation of Electronic Point-of-Sale Terminals:

Regarding the machines mentioned in Item One (A) of this circular, an activation incentive equivalent to 0.5% of the total value of purchase transactions conducted on these machines is allocated to acquiring banks for a period of three months starting after the expiration of the fee exemption period mentioned in the circulars dated 20 and 21 March 2020. The aforementioned incentive is paid to banks that have collected an average monthly amount of 6,000 EGP per POS terminal in Category (A) governorates and 10,000 EGP per POS terminal in Category (B) governorates, for all POS terminals activated by the bank.

The Central Bank will pay the incentive for the machines installed under Item One (A) and the activation incentive under Item One (B) based on a monthly report submitted by acquiring banks to the Central Bank of Egypt, containing the following:

1. A detailed statement of the number of new merchants and the number and types of new machines, geographically distributed according to the classification of governorates in the attached appendix.
2. The total value and number of purchase transactions using electronic POS terminals for each POS terminal activated by the bank according to the specifications mentioned in Item One of this circular.
3. The detailed value due for addition based on the specifications mentioned in Item One.

Second: Dissemination of Quick Response (QR) Codes through Acquiring Banks Licensed for Electronic Acceptance via QR Codes:

The Central Bank will pay an incentive to acquiring banks for adding new merchants to this system as follows:

• The incentive is restricted to the dissemination of QR codes among new private sector companies and merchants who do not have a QR code acceptance system or electronic POS terminal at the bank or any other acquiring bank. The acquiring bank must verify this, and may obtain a declaration from the merchant as one of the means to verify this.
• The aforementioned QR code cannot be used for collection in any closed system.
• The acquiring bank is obligated to train the merchant on using QR codes for electronic collection and to place distinctive signs at merchants indicating acceptance of this payment type.
• Adherence to the Central Bank’s rules regarding technology service providers for payments and electronic payment facilitators issued by the Central Bank in March 2020, in case of engaging companies from payment facilitators.
• The acquiring bank or payment facilitators shall not charge companies or merchants any additional amounts for providing the aforementioned QR codes.
• Developing marketing plans and plans specifically designed to incentivize merchants to use QR codes.

The added incentive is estimated at 3,000 EGP for each new QR code after its initiation and until the end of December 2020.

B. Activation of QR Code Acceptance via Issuing Banks and Acquiring Banks for Mobile Wallets:

In light of the need to ensure the activation of QR codes, an activation incentive equivalent to 0.5% of the total value of purchase transactions conducted using QR codes for a period of three months starting after the expiration of the fee exemption period mentioned in the circulars dated 20 and 21 March 2020 is allocated. The acquiring bank shall share half of this incentive with the issuing bank of the payment instrument.

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The Central Bank of Egypt will pay the two incentives mentioned in Item Two (A) and Item Two (B) to acquiring banks at the end of each incentive period, based on a report from the acquiring bank containing the following:

1. A detailed statement of the number of new merchants and QR codes, geographically distributed across the governorates of the Republic.
2. The total value and number of purchase transactions using QR codes, specifying transactions performed via on-us instruments (issued by the bank) and off-us instruments (issued by other banks), with the number and value of transactions executed using instruments issued by each bank specified separately.
3. The detailed value of the incentive due based on the specifications mentioned in Item Two.

On the other hand, banks are required to comply with the following:

Banks licensed for electronic acceptance (Acquiring Banks) shall launch a unified advertising campaign to raise awareness about the benefits of electronic payment using electronic POS terminals mentioned in Item One and QR codes mentioned in Item Two, as well as current exemptions related to electronic collection service fees. This is to incentivize customers using payment instruments and merchants to pay and collect electronically. The Egyptian Banks Union, in coordination with the aforementioned banks, shall design, execute, and launch the campaign.

All issuing banks of electronic payment instruments (payment cards or mobile wallets) are obligated to prepare incentive programs for their customers to increase the issuance and use of electronic payment instruments issued through them in electronic payment transactions. Issuing banks of electronic payment instruments must provide the Central Bank of Egypt with details and specifications of these programs, as well as submit monthly reports to the Central Bank of Egypt containing the following:

• A statement for each electronic payment instrument issued by the bank and the number and values of electronic payment transactions associated with it.
• A statement of the number and types of new electronic payment instruments issued by the bank.

Please be kind enough to direct the necessary actions.

Yours faithfully,
Tarek Amer

Appendix No. (1) Guideline Geographical Distribution of Electronic Point-of-Sale Terminals

Number of Targeted POS Terminals	Governorate	Incentive Category
6,018	Cairo, Giza	Category A
7,579	Alexandria	Category B
4,081	Port Said
3,697	Damietta
7,398	Beheira, Dakahlia
7,209	Sharqia
8,070	Qalyubia
6,753	Gharbia
5,888	Monufia
5,114	Kafr El Sheikh
3,930	Sohag
5,795	Minya
6,542	Fayoum
4,008	Beni Suef
1,637	Asyut	Category A
5,246	Qena
3,808	Luxor
3,791	Aswan
1,377	Red Sea
1,686	New Valley
1,344	North Sinai
758	South Sinai
298	Matrouh
551	Ismailia
750	Suez
Outside the Initiative Scope	South Sinai

Appendix No. (2)

POS Detailed Specs.

ITEM	Description
Memory	128 MB RAM, 256MB Flash.
Printer	30 lps, 40 mm paper roll
Card reader	Magstripe ISO 1/2/3, 500K lifespan. Smart card EMV Level 1. Contactless ISO 14443 Types A and B, ISO 18092-capable, EMVCo L1 certification, supports local / international schemes according to issued rules and each bank standard setup.
QR Code	Perform QR transactions as per Meeza digital specifications
Communication	Wireless, 3G Dual SIM model, Dial up and Ethernet
Card slots	2 SAM slots, 2 SIM slots
Security	PCI PTS 5.X-approved
Battery	2200 mAh Li-Ion
Terminal Management System	Display Geo locations (longitude / latitude) of each POS terminal. Dispatch updates for the POS terminals. Display status of each POS terminal. Supports integration with 3rd party APIs to extract details such as terminal location, POS status ,… etc.

Mini POS Detailed Specs.

ITEM	Description
Card reader	Magstripe ISO 1/2/3, 500K lifespan. Smart card EMV Level 1. Contactless ISO 14443 Types A and B, ISO 18092-capable, EMVCo L1 certification, supports local / international schemes according to issued rules and each bank standard setup.
QR Code	Perform QR transactions as per Meeza digital specifications
Communication	Wireless, Bluetooth, 3G
Card slots	1 SIM slot
Security	PCI PTS 5.X-approved
Battery	2200 mAh Li-Ion
Terminal Management System	Display Geo locations (longitude / latitude) of each POS terminal. Dispatch updates for the POS terminals. Display status of each POS terminal. Supports integration with 3rd party APIs to extract details such as terminal location, POS status ,… etc.

Mini POS detailed Specs.