Advances in financial technology (fintech) have been slow to arrive to Algeria. A low bank penetration rate remains a significant challenge, notwithstanding substantial progress in recent years (see analysis), as do a cultural preference for cash and the dominance of state-run banks that have little incentive to innovate.
Framework
In June 2017 the government announced that Algérie Poste would roll out 50,000 mobile terminals by October 2017. To further cooperation in this area, it was announced in May 2017 that a number of banks and industry associations would establish Filiale Interbancaire Monétique, an e-banking entity dedicated to the commercialisation and distribution of electronic payment terminals (EPTs) in businesses. “Some 16,000 EPTs had been deployed as of June 2018, mostly in supermarkets, restaurants, clothing shops and malls, though independent shopkeepers are less keen to adopt EPTs because of their traceability, plus they want to see first if the demand for card payment is worth the investment, even if prices of EPTs are very attractive” said Newel Benkritly, director general of Satim, the company in charge of implementing the cards. “Algeria only chose to authorise mobile payments for those who have a bank account, which, while different from other African countries, is justifiable.” The 2018 Finance Law is expected to make these EPTs reasonably ubiquitous as it requires all businesses to install a terminal by the end of 2018, under threat of an AD50,000 (€363) fine for non-compliance. Mastercard has also partnered with Banque Extérieure d’Algérie, the country’s largest bank by assets, to allow clients with foreign currency accounts to apply for cards.
Circulation
By 2018 there were around 1.5m bank cards in circulation, with the distribution of 4m more cards by Algérie Poste under way. However, their use is limited: in 2018, 80% of transactions with such cards were made to the telecoms sector, followed by 15% for electricity and water, and 5% to e-commerce. Only 21 public and private businesses participating though a handful of insurance companies have started accepting digital payments (see Insurance overview).
As such, there has yet to be a meaningful extension of fintech beyond public utilities. By mid-2018 some 16,000 e-payment terminals had been installed in Algerian businesses, which comprises only a small share of the approximately 1.5m businesses registered in the country. For small shops in particular, the price of installing and maintaining the terminals is not inconsequential, with costs in France estimated to range up to €700 for installation and €200 per annum for maintenance. Transaction costs ranging from AD2 (€0.01) to AD6 (€0.04) are low, but these are incurred by the business rather than the consumer.
Barriers
The short supply and high cost of electronic terminals, coupled with limited enforcement measures to ensure compliance have sparked issues. “There is a need to offer more services with bank cards than just payments and cash withdrawals, since on their own, these may not be enough to attract clients,” Mohammed Tifour, general manager at Fransabank, told OBG. “It is also hard for private banks to increase their market share. There are some 18m-19m account holders between the post office and public banks, but private banks only have about 1m accounts between them. This slows the uptake of bank cards,” he added.
Meanwhile, Mohamed Arabi, secretary-general of Société Générale Algérie, told OBG that “the payment terminals are not manufactured in Algeria, so it is very unlikely that all businesses will be able to get one by end-2018 to comply with the law”. Poor network connections can also hamper e-payments and in-store terminal payments, while a lack of staff training in some stores presents added challenges.
Challenging Future
The uptake in internet card payments plateaued in mid-2018, suggesting issues remain in extending their use. Cultural resistance to formal financial services is likely to be a barrier to the universalisation of bank accounts and card payments.
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