Payment Institutions Rise in Morocco Amid Growth, Risks, and Regulatory Shift

With 13.8 million accounts opened by the end of 2024, payment institutions are establishing themselves as a credible alternative in the banking landscape. This success, driven by social transfers and regulatory relaxation, is accompanied by increased vigilance from the Central Bank, which is working to prevent any systemic overflow in a still nascent and undercapitalized ecosystem.

To kick-start its major projects, Morocco had to provide a substantial financial boost to various social categories. It thus relied on targeted support policies—particularly in social housing and the development of local infrastructure—with the aim of attempting to stem the disruptive effects of economic and social divides. With hindsight, these efforts can also be seen to have contributed to the growth of payment institutions.

Payment institutions increase financial inclusion

In fiscal year 2024, flows processed through transactional channels, whether authorized agents or mobile platforms, quadrupled to reach 43.6 billion dirhams (MMDH), according to the latest banking stability report.

This notable growth of payment institutions is based on a territorial network that now extends throughout Morocco. Located in major urban centers, these relays have also helped support local roots in rural areas that have long remained marginalized. This expansion owes much to social transfers provided by the State, which have acted as a lever for financial inclusion. By making certain aid conditional on the holding of a payment account, the authorities have opened a breach in usage.

By the end of 2024, more than 13.8 million accounts had been opened, compared to 10.3 million a year earlier. Level 3 accounts, limited to 20,000 dirhams, accounted for nearly 40% of new accounts, driven primarily by everyday needs.

Technical Risks of payment institutions

The boom in payment institutions, while reflecting an expansion of uses, cannot mask certain weaknesses. With a still modest balance sheet total of around 7.5 billion, these structures remain undercapitalized. Added to this is a significant exposure to technical and operational risks.

These vulnerabilities are due, in part, to the increased dependence on sometimes undersized information systems, but also to the growing complexity of outsourcing chains, particularly in hosting or processing flows. In 2024, the General Directorate for Information Systems Security (DGSSI) reported a resurgence of attacks targeting mobile payment operators, particularly through insufficiently secure APIs.

This vulnerability increases as the territorial network of payment institutions expands. In 2024, the network of payment institutions reached the milestone of 32,000 physical points, outside of bank branches, with growth driven almost exclusively by agents.

Nearly half of these points allow users to make transfers, open payment accounts, or perform cash-in and cash-out transactions. But this increase, concentrated in major urban areas, is increasing the pressure on technical infrastructure, which is expected to intensify in light of ongoing commercial expansion.

Monitoring Instruments

Aware of persistent weaknesses, Bank Al-Maghrib is gradually adjusting its arsenal. The Central Bank, without giving in to alarmism, is refining its monitoring instruments. A reform of the banking framework plans to introduce “early” intervention levers.

Moreover, a text awaiting adoption makes it possible to appoint a provisional administrator, temporarily freeze certain debts and, if necessary, recapitalization by shareholders. These measures are in addition to the battery of measures adopted to strengthen the resilience of the banking sector, including the creation of a secondary market for bad debts, to lighten balance sheets and free up credit distribution capacity. Non-performing loans, which still reach 97 billion dirhams, remain high despite a slight decline observed at the end of 2024.

“The quality of the portfolio is improving, but some pockets of fragility remain,” observes Nabil Badr, deputy director of the Banking Supervision Directorate (DSB) at Bank Al-Maghrib.

As a reminder, this market would allow institutions to transfer part of the assets in question to specialized operators, without compromising transparency requirements. The development of payment instruments in this direction, however promising, requires at the very least a more detailed understanding of vulnerabilities.

Central Bank loosens regulatory grip on digital payments

Bank Al-Maghrib is reshuffling the cards in the digital payments sector to facilitate the penetration of services in underserved areas. It is raising the limits applied to accounts and transfers and expanding the status of payment agents.

At the same time, to promote competition in the interbank electronic payment market, it was decided that banks would carry out this activity individually through a specialized subsidiary, with the aim of boosting the card payment network. In the same vein, BAM capped interchange fees in order to reduce the costs of electronic payment.

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(Featured image by AhmadArdity via Pixabay)

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First published in LES ECO.ma. A third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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