How has the fintech sector impacted the development of the wider digital landscape in the Kingdom of Morroco?
According to The Fintech Times’ Fintech: Middle East and Africa 2021 Report, Morocco fares better than most of its African counterparts when economic development is measured by gross domestic product (GDP) per capita and wider infrastructural advancements. Via a wider strategic vision, Morocco set out an ambitious national strategy – Maroc Digital 2020 – to boost economic development via digital transformation.
Ambitions need to remain high as a lot remains to be desired in regard to the country’s implementation of financial inclusion. Reasons for this?
- Morocco has one of the highest rates of unbanked in the world at 71 per cent.
- It also hasn’t begun to completely trust online payments, or services that require cards. Moroccans tend to choose to pay with cash from an ATM that use a credit card.
- Moroccans also trust traditional establishments like banks. These figures and observances present a challenge for technology like fintech but also opportunities.
Remittances play a large role in the Moroccan economy, as many Moroccans live overseas, especially in Europe (mainly France, Italy and Spain). Remittances contribute to almost eight per cent of the country’s GDP. Although mobile wallets for digital remittances are available, only one per cent of Moroccans utilised these tools and services last year to conduct their transactions. This further solidifies that most Moroccans still prefer traditional methods even with respect to remittances.
Banks account for nearly half of Morocco’s financial system and the country contains two of the largest banks in Africa, Groupe Banque Populaire and Attijariwafa. They are helping contribute to the innovation seen in the sector. Many traditional financial institutions are working on their own new technologies in order to keep up with the services offered by fintechs and startups, as well as the traditional banks adopting fintech services for their own customers, such as mobile banking and other digitised platforms – all highlighted in the previous The Fintech Times report.
Morocco’s mobile market is one of the more mature in the region, with a penetration rate of 137.5 per cent; the Kingdom’s three largest telecommunications companies are Maroc Telecom, Inwi and Orange. Also, the Kingdom had an internet penetration rate of 83 per cent in 2020 (compared to 71 per cent in 2019).
Like the rest of the world, the pandemic helped accelerate digital transformation. For instance, e-commerce saw solid growth, as online transactions grew by 43 per cent in December 2020. Also, infrastructure upgrades, such as the Electronic National Identity Card (CNIE), and government initiatives including regulatory changes in banking laws, have helped fintechs to grow, according to an August 2020 report by CGAP and EY.
According to a study from Visa, the use of cash in Morocco declined especially during the pandemic. Even though e-commerce and contactless payments have increased in popularity and use since the start of the pandemic, paying by Cash on Delivery (COD) has declined significantly by 86 per cent, as with the use of digital payments – chip & PIN and contactless cards – for payment online or on delivery has grown by 74 per cent. Cash usage decreased with 43 per cent of consumers that were surveyed saying they are using it less for in-store shopping, while digital payments witnessed a percentage of almost half (49 per cent) on average saying they are using it more often. The case looks to be permanent, with consumer feedback showing that 46 per cent are more likely to use contactless payment methods in the future. Visa’s study showed that over four fifths of consumers surveyed (84 per cent) have high levels of confidence in contactless cards for shopping in-store and making delivery payments; top reasons showed trust in contactless include speed (62 per cent), avoiding human touch (46 per cent), convenience (three per cent), innovative to pay (40 per cent) and seamless experience (22 per cent).
Payment, remittance and point-of-sale (POS) systems are the most developed segment in terms of the fintech subsectors in Morocco. Examples of fintechs there include the likes of Invyad (a mobile end-to-end point of sale (POS) for small and medium enterprises (SMEs), Wafacash (remittances fintech) and HmizatePay (mobile payments).
Crowdfunding, personal financial management, lending and data analytics are other sectors present in the Moroccan fintech ecosystem. These include Cotizi (Morocco’s first crowdfunding platform) and MeilleurCreditImmo.ma, formerly SOS Credit, (online mortgage brokerage services).
According to a report from the University of Cambridge Fintech Regulation in the Middle East and North Africa, “In Morocco, for instance, an ‘omnibus regulatory framework’ governs the provision of international money transfer by mobile money providers, permitting them to undertake international remittances activity as part of their core mobile money business without need for a separate licence.”
Morocco is planning an open banking framework. In terms of frameworks in place, it has a financial service industry data protection framework and a financial service industry cybersecurity framework in place. The country also has general consumer protection laws with a set of explicit provisions pertaining to financial services.
According to a International Fund for Agricultural Development (IFDA) report, Morocco currently has a perfect score of 100 in its indicators pertaining to regulatory permission to process international mobile transfers and also with the presence of mobile services to process such transactions (mobile wallets).
To note, there is the Casablanca Finance City Authority (CFCA), a limited company born from a public-private partnership aiming to position Casablanca as a regional financial hub in Africa. The CFCA was established in 1010 through a high-level roundtable meeting which included various entities like the region of Casablanca-Settat, the Central Bank of Morocco (Bank Al-Magrib), key Moroccan banks, the Central Securities Depository (Maroclear), the insurance industry, and the Casablanca Stock Exchange.
Finally, cryptocurrencies like Bitcoin have been banned in Morocco since November 2017. Interestingly though, Morocco has many fans of crypto, where it is a major country in the region in terms of crypto trading and around a million of its population has crypto – the ladder stat according to cryptocurrency aggregator and provider Triple A.
Morocco, both in the Middle East and Africa, presents an opportunity for fintech to help accelerate its economic development.