Morocco expands banking penetration through digital services

With a network comprised of 19 banks, 6388 branches and 7235 ATMs, the Moroccan banking sector is among the most structured in its region. However, with a banking penetration rate of 56% – versus the global average of 62% – there is still ample room for improvement. In recognition of the need to boost financial inclusion, Bank Al Maghrib (BAM), Morocco’s central bank, has identified the promotion of digital banking as a pillar of its national strategy. Thanks to an already high mobile phone penetration rate of 131% as of the third quarter of 2018, and based on the success of this solution in other emerging and developed countries, this appears to be a sound direction for the central bank.

Drivers for Adoption

To accelerate mobile money adoption – and taking into account lessons learned from other markets – three main business drivers are identified as particularly important. These are as follows: network and infrastructure, to convert cash-inhand payments to digital transactions, widen network reach and develop interoperability with other networks; customer adoption, to drive the use of digital payments in everyday transactions; and market conditions, to stimulate industry cooperation by developing shared infrastructure and standards.

Payment Ecosystem

After a failed attempt to launch mobile payments in 2010, BAM collaborated with the National Telecommunications Regulatory Agency, banks and telecoms operators to address the challenges associated with implementation. In 2015 the central bank passed a law allowing non-bank institutions, such as telecoms operators, to apply for a payment institution licence, thus paving the way for M-Wallet, a mobile payment initiative. System interoperability was identified a key success of the new system, meaning that regardless of their provider, users are free to transfer money, make payments and pay bills to any mobile money account in the country.

The Switch

All of the different M-Wallet solutions are interconnected through a national system, which is owned and operated by HPS Switch, a subsidiary of payment solutions firm HPS. HPS Switch will act as the link between mobile payment schemes, and as such, the company will process all mobile payment transactions and enable the interconnection of all operators licensed by BAM. HPS Switch will be able to recognise each wallet user by his or her phone number, which will also double as a user identification code.

Common Rules

In order to ensure fair competition as well as consistency in the services provided, all involved operators agreed to a set of common rules, which include five free services. These services are as follows: subscription to the M-Wallet, cash refill of the M-Wallet, payments to merchants (for the buyer), account balance queries and the termination of an M-Wallet account. Thanks to the scheme’s structure and the involvement of HPS Switch, the transactions will be processed instantaneously.

Outlook for Morocco

The launch of the mobile payment will benefit all players. Banks will acquire new customers, thereby growing the number of electronic transactions; merchants will benefit from instant settlement, irrevocable payment, and a reduction in the cost and risk of carrying cash; individual customers will gain access to convenient and secure electronic payment services that are free of charge; and the government will be in a better position to implement its national initiative to convert cash into electronic currency via new payment disbursal channels. Through this initiative, the central bank also aims to reduce the cash circulating in the economy and ultimately drive the financing of the economy towards a formal circuit.

Payment Programme Estimates

According to the central bank forecasts, the number of M-Wallet users is expected to rise from and estimated 400,000 in 2019 to approximately 6m by 2024, while the acceptance network should grow to include more than 51,000 agents and merchants. The central bank also estimates that there will be a total of 1.3bn transactions by 2024.