“The government is trying to regulate the sector but structural challenges weigh heavily on its efforts. So far, fintech regulation in the country remains limited,” said the same source, noting that “efforts to regulate the sector are driven by the government’s desire to improve financial inclusion and position Morocco as the financial hub of Africa”.
According to Fitch Solution, Morocco’s fintech environment is regulated by two entities: Bank Al-Maghrib and the Moroccan Capital Markets Authority (AMMC). BAM is responsible for banking activities such as digital payments, mobile banking, insurance and loans. “The Central Bank of Morocco has positioned itself as a promoter of fintech adoption and encourages the country’s well-structured financial system to invest in digital adoption,” the rating agency notes.
And to continue that the strengthening of financial inclusion is one of the pillars of the national strategy of the central bank. This, the agency adds, expects mobile wallet users to grow to 6 million by 2024, with a total number of 1.3 billion transactions. BAM also aims for the value of transactions to reach 50 billion dirhams by 2023.
“These initiatives demonstrate the commitment of the government and the central bank to improving financial inclusion and encouraging the transition to a cashless society. However, their efforts are arguably best exemplified by the creation of M-Wallet, a mobile payment platform jointly launched by BAM and ANRT in 2018. M-wallet is designed to be interoperable between payment providers and, at the same time of its release, the central bank has awarded eleven digital payments licenses,” said Fitch Solution.
Essential regulation for mobile money
She also points out that Morocco was a relatively early player in the field of digital payments, introducing “payment institutions” in the banking law of 2014. Before this date, traditional banks and credit institutions were the only entities allowed to provide bank or prepaid cards with digital payment capability and therefore users had to have a bank account with a traditional financial institution.
This update of the banking law was, according to Fitch Solution, essential to stimulate the adoption of mobile money in Morocco. Prior to the introduction of the banking law, mobile money platforms supported by telecom operators (namely MobiCash by Maroc Telecom and Meditel Cash by Meditel) failed to gain traction as regulation at the he era forced mobile wallets to focus on banks and therefore required the possession of an account, which is unfavorable in the financially underpenetrated Moroccan market.
“As required by regulations, the two platforms were launched in partnership with the two traditional banks in the country, preventing operators from directly exploiting the market and obtaining sufficient returns to justify the investment,” he explains. -she.
Mobile money adoption still low
Despite the promotion of the digital payments ecosystem and the efforts of telecommunications operators, Fitch Solution believes that the adoption of mobile money in Morocco has remained low. Ditto for the adoption of digital payments which has also remained weak. Supporting World Bank figures, only 6% of Moroccans over the age of 15 had a mobile money account in 2021, compared to 1% in 2017, and only 30% made or received a digital payment in 2021 compared to 17% in 2017.
Fitch Solution attributes this poor performance mainly to two reasons. First, current legislation remains restrictive for non-bank entities given strict guidelines that place heavy limitations on owning a mobile account. Second, Moroccans are wary of cashless means of payment and new technologies.
Stimulate the emergence of BNPL
As digital payments have yet to really take off in Morocco, Fitch Solution believes there is potential for new players to emerge. However, she believes that the low penetration of contactless/QR code POS devices needs to be addressed.
This is where, according to the agency, the most opportunity lies. “Installation costs for point-of-sale terminals have limited their use, but the emergence of a low-cost player – perhaps similar to Yoco in South Africa – might support the large-scale deployment of infrastructure to get digital payments off the ground. Banks and traditional operators might capitalize on this opportunity by partnering with market players who offer this service. The high penetration rate of smartphones in Morocco, around 80% of the total number of mobile subscribers in 2021, will support the emergence of this vertical”, explains Fitch Solution.
She also believes that the widespread use of digital payments and mobile wallet usage will allow e-commerce – and by extension Buy Now Pay Later (BNPL) – to emerge in Morocco. According to Mastercard’s New Payments Index 2022, the same source continues, only 10% of Moroccans have used a BNPL payment plan, giving players the opportunity to exploit the market.
Similarly, Fitch Solution believes that “cross-border payments offer for Morocco, the 2nd largest remittance market in the MENA region in 2020, a huge opportunity for mobile money operators. “Foreign workers have turned to online channels for cross-border payments during the pandemic as movement restrictions were imposed. The transition to digital continued and Moroccan telecommunications operators worked hard to introduce international payment capabilities on their platforms…”, underlines the agency.
Currently, the relatively low usage of mobile money platforms will limit the use of digital payments. That said, the actors struggled to gain traction due, among other things, to a sense of mistrust among the population.
