A new tenant has made a home in the business center of Beirut. Monty Holding and its numerous business units have established a highly visible all-round inclusive presence. They’ve achieved this virtually by venturing on the arduous endeavor of strengthening digital finance in Lebanon, and physically in visibly invigorating the Gefinor business center. They’ve added a corporate flavor reminiscent of the region’s most active investment hubs – from an office of payment gateway unit, MontyPay, and the publicly accessible “Monty Café” on the ground floor, right up to a private business club at the center’s highest point. To understand the digital banking proposition of the group’s Banque du Liban licensed financial institution, MyMonty, Executive sat down with Charles Matta, a member of the group’s MontyFinance technology venture team and the chief strategy and partnerships officer of MyMonty.
E Is it right what I heard about Monty earlier this year acquiring a license for an e-wallet from Banque du Liban?
That is 100 percent correct. We [have initially] acquired a license as a Financial Institution (FI) that allows you to provide a broader spectrum of services. Under the FI [status] we applied for an e-wallet license that was granted three months ago. There are also other licenses [that we will be seeking] to have the full spectrum but as we speak, we have two licenses from the central bank of Lebanon.
E Will you work as financial intermediary under your local license?
The FI status allows you to do lending and brokerage activities, meaning trading and fiduciary activities for assets under management and so on. But [for us] the primary purpose of the FI is digital lending because that is something that is not [available] in the market. This would be a major product under the financial institution.
E By descriptions of the My Monty financial concepts that you gave on our website and in other interviews, your business concept and vision is that of digital banking, sometimes called a neobank. Is there a geographic scope to your business model? Is the scope focused only on this country, on the Arab region, or other?
Basically, the scope of the vision is to have digital banking across the globe. It is not just Lebanon, not just the region, because digital obviously surpasses geographical borders. But for all the well-known reasons which we respect, regulatory authorities are bound to a geographic location. Hence, we applied for a license to operate in Lebanon. It unfortunately is not a digital banking license as the whole infrastructure for a digital banking license has not yet been defined by the regulator.
E In operating an e-wallet as a private sector Financial Institution, what is your target group in Lebanon?
We follow the same approach and vision in Lebanon, the region, and globally. We cannot call ourselves a bank here because we don’t have a banking license, but we are proud to call ourselves an impact bank globally. Why impact? Because it is financial inclusion of a target segment that is unbanked, under-banked, or under-served. An under-banked person is one who may have a bank account for transactional purposes or emergency purposes but who is not actively using these financial services. This is our target group internationally. Unfortunately, under the environment of the Lebanese crisis, I can call everybody an unbanked or an under-banked person. I would say that in Lebanon, all the people are our target segment because all are in need of new financial services.
E When talking about Lebanon as a market, which is a minuscule market in global terms, did your plan to address this market by rolling out a digital bank originate before the pandemic, did you devise it during the pandemic, or did your strategy perhaps change due to the economic meltdown?
Internationally, where our overall vision is focused on the unbanked and under-banked, the fastest strategy to acquire unbanked customers is through mobile [phone] operators. Presenting that strategy [here in Lebanon] started in 2016. We held one of the first summits as a group where we invited some of the local banks to the Four Seasons [hotel] to talk about mergers between mobile operators and banks. Everyone was surprised; it was [like we were talking] Chinese to them. It was not something they cared about. But our vision started at the time, and we worked on it internationally. The first project was a credit card that was issued by a local [banking] player and a mobile operator in Asia.
As you said, Lebanon is a tiny market that might not show if you put it on a score card. But if you zoom in, you understand that it has a huge value from a financial aspect. People are educated, smartphone penetration is very high, and the crisis is a huge opportunity for new players as most of the people lack all trust in the legacy players. All this triggered us to move in, [spurred on by] pain points in our own daily lives. Part of our team is located here and [we had to deal] with problems in salary domiciliation, usage of funds, and all this. This was a big driver for us. The licensing process unfortunately took a bit longer than we expected. We were planning to roll out our products more than one year [ago] but this [slow licensing] is understandable when a new player is coming into the market.
E So, while some e-wallet startups and electronic money transfer platforms in Lebanon were motivated by the crisis and the emergence of near monopolies in the money transfer market, you had the strategy of developing an e-wallet already before the crisis. Was your e-wallet vision inspired in any way by the success of the famous Alipay platform in China?
Even Asia in general was an inspiration for mobile money because of the super apps that they have built, one of which is Alipay. From our side, we believe that the potential for such services is huge because you can easily target millions of subscribers when you go through a mobile operator. For example, we are in advanced discussions with a mobile operator in Indonesia that has more than 100 million subscribers.
E But you are not particularly interacting with mobile operators in Lebanon at this time?
No. [Our value proposition here] is direct-to-market acquisition of customers. But for inclusion, it is to note that we are offering three things: we have the direct-to-customer approach, but we also sell our services as a technology provider under a white label, empowering other [providers] who are interested in offering these services. The third thing, which we are currently discussing with the regulator, is agent banking, allowing non-financial services providers, including mobile operators, to leverage on the whole package.
E In the “New Economy bubble” of “click and mortar” bank-type ventures, some large mobile telephony groups from Europe and the Middle East – Africa realm were assessing the potential for financial inclusion through mobile telephony. Did your group have experience in Africa back in those earlier iterations of the digital financial economy?
We have international experience. We have 25 offices around the globe and are connected to more than 1,000 mobile operators in many more countries. We have a big customer base in Africa and Asia and have, from mobile operator perspectives, huge experience in Africa and long relationships with mobile network operators there.
E In how many places do you do direct-to-customer digital banking?
The trading name of our brand is MyMonty and we are currently live across the whole European Economic Area, 31 countries including the UK in Europe with a digital banking application that we rolled out in 2021. We are currently working on [further] markets, starting with the US. Another strategic market that we are advanced on is the Philippines and there are three markets in Africa where we are very advanced. We follow a light operating model internationally, so we start by partnering with an existing banking license [holder] and act as a digital bank.
E In simple terms, 99 percent of your business is outside of Lebanon. What then is the plan you have for this market in the coming 12 months?
Even though there are large international markets that I have spoken about, there is that special relationship with Lebanon, especially since Mountasser [Hachem], the owner of the group, is himself Lebanese. We also have a big team in Beirut [of about 700 people] and even though the market is tiny from a population perspective, we see a large opportunity. We are putting a lot of efforts into our rollout plan for Lebanon. We are planning to go live by mid-December of this year, with an e-wallet proposition where customers can onboard digitally and have an account. [Editor’s note: This interview was recorded in October 2023] We already closed a number of deals with local providers [from payment to payout providers] and on top of this have a virtual lending product as I mentioned at the beginning of this interview.
Our major goal is to gain the people’s trust. We are working a lot with other players who are our peers in the market and want to really bring awareness into the market, of understanding the importance of having an e-wallet account and the use of these accounts. As regulations are shaping up, we have bigger plans, but our first strategic objective is to show the capabilities that we have and that we have succeeded in delivering internationally and are planning to deliver in our home country. We want to gain people’s trust in terms of financial services.
E Would the lending product be of a retail lending type, similar to attractively priced car loan products that some banks were pushing into the market in the years before the crisis? And what is your equity proposition?
We will have different lending products, the first one starting with an advance on your salary. Every person will have the right to get an advance on their salary as long as the salary is domiciled with us. The mechanism will be purely digital at our end. There will be other fintech related lending products down the line. At a financial institution, lending has to come from equity as we are not supposed to have deposits. Se we are lending from our own money, from equity that is injected into the financial institution from our part.
E Thinking beyond the very large local challenge of rebuilding trust, trust has always been a fickle asset in the business of banking and trust in the digital era has become hyper-fickle if one goes by the evidence of how fake financial news and rumors can go viral and cause a bank run. We have recently seen digital bank runs, are those not scary for you as operator in this space?
I see it as the opposite because bank runs have always [involved] physical branches. In digital banking, you feel as if you are digitally owning the money. If I take my own case, I felt insecure and that I did not have access to my money when the banks closed back in 2019. But even as the banks closed, money was available online and I did small purchases online. When this still worked, I felt much more comfortable as a consumer. I do not disagree that digital banks have a long road ahead in proving their trustworthiness. Traditional banks have existed for centuries, digital banking is very new. A good indication of trust in digital banking is that the average deposits remaining in digital accounts has increased significantly, by almost 250 or 300 percent.
E When compared with when?
From five years ago. So, you see that when people first start [using a digital bank], they look at digital banks as being much cheaper in terms of transacting and much more reachable. But with time, there are other services and people start using them.
E You mentioned impact finance as your value proposition. Impact investing and socially conscious investing with focus on inclusion have been highly touted propositions for years but on the other hand, the digital era since the beginning of the 2000s has seen numerous failures of digital banking visions that were not as powerful as the brick-and-mortar banking model. But in Lebanon, the question has turned into a question of if and how this country can find a future as a place of finance.
The situation looks shaky, but I believe that every experience you go through is temporary. If I go back to 2019, Lebanon was among the top five countries regionally in terms of FinTech [startups]. Development, technology, innovation, and so on, and this was just prior to the October 2019 crisis. Things can turn around very fast. Everything in Lebanon can be a quick fix if there is an international and local decision.
E From your perspective, is inclusion still just a hype word that sounds great in speeches, or is it something that is happening?
Inclusion is a huge problem that [development finance institutions] have been talking about internationally. But I believe honestly that Covid 19 had a positive impact on it and drove up financial inclusion. When you look into Africa, it is very unbanked and under-served, whereas mobile money penetration is at very high percentages. But this still does not represent a full digital banking proposition with the whole spectrum of financial services that the consumer has the right to benefit from. However, we as a group interact with international players in Africa, Asia, the US and Europe, and we see a lot of advancement when it comes to mindsets, readiness and acceptance by banks to collaborate.
E Did you see the readiness for more collaboration also in Lebanon? And from the perspective of digital finance, what was for you the bigger change factor in this country, the pandemic or the economic meltdown?
In Lebanon, it has been quite a journey. I would say we have two, three banks that we were able to collaborate with on different opportunities. This has not been the mindset before. To be honest, not just in Lebanon but in the region, banks have [previously] been in very strong positions and did not need to collaborate. But I believe the need is striking them. Even in the UAE and Saudi Arabia, we see and hear of a lot of collaboration opportunities today that were far away two or three years ago. In Lebanon, I believe both [the pandemic and the economic crisis] were change factors. Covid-19 has driven up customer expectations on digital readiness and digital savviness. The [economic] crisis has driven banks or major players to have a more collaborative mindset, to collaborate seeking to have different and more diversified revenue streams. Both aspects [of the Lebanese crisis years] had their positive impacts in terms of digital readiness. Unfortunately, they had many negative impacts on people, their trust, their money, and their health when it comes to Covid-19. But speaking about digital readiness, [this crisis] has helped internationally and locally.
The interview has been edited for brevity.