"There is a tsunami coming in the next five years and we don’t want to miss it" declared Driss Maghraoui, Executive Director at Attijariwafa Bank, whilst addressing a roundtable conference in Casablanca in September. The conference, hosted by Infosys Finacle and Retail Banker International, focused on how the rapidly developing Moroccan retail banking industry is facing disruption and what it will take for Moroccan banks to succeed in the digital age, reports Alexander Atkins
Maghraoui’s comments were referring to one of Morocco’s biggest challenges, and at the same time opportunities, in the large youth market that will be emerging in the next five years. "Our country is a young country in terms of age population. One Moroccan inhabitant out of two is under the age of 27, so imagine the tsunami which will be upon us in five years" he explained. "Is there serious experimentation on the youth? No, because banks are concentrating on the wealthiest market segments and that must change. We must prepare for the future, today."
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Morocco is one of the fastest growing, competitive markets today, and the retail banking sector has recently undergone a series of reforms, mainly focusing on the improvement of financial institutions, the marketing of new products and the modernisation of the banking legal framework. Maghraoui’s key note speech was aimed at highlighting the key challenges and limitations that the industry faces in Morocco.
Whilst talking in relation to the youth of Morocco, he underlined three key factors that banks have to become more involved in if they are to reach this market effectively: mobile usage, social networking and customer loyalty. "Banks are not doing enough in terms of mobile solutions and social networks, especially when young people spend so much time connected to both." He remarked on customer loyalty, explaining that the youth market are much more informed by this internet presence and are demanding more than previous generations have.
"We need to create more customer loyalty from this next generation. For example, a lot banks play a presence when the youth are in their study years. But we do not manage to ensure the bond between the period of education and the time when they become active on the job market. This has to change."
This was a statement that was corroborated by the other speaker of the day, Vishwanath Thanalpatti, Market Strategy Director of Infosys Finacle, who spoke about how Moroccan banks can adapt and stay relevant to their customers. He also explained how two of the driving forces changing the banking industry today were social media and the internet which were making the customers more informed. "Earlier customers would come to the bank in person to meet the staff and form a relationship but now we have customers who are informed by social networks. This means that when they come in to talk to the bank, they know full well what they need. The result is a new generation who know what they want, who want it on the move and who want it available 24/7."
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By GlobalDataHe continued that the competition has also now expanded beyond banks and if a bank cannot fulfil specific needs the customer can go elsewhere. "They want banking services but not necessarily from banks. That is the kind of mindset the customer has."
Maghraoui went on to talk about some of the other key challenges that are faced in the Moroccan environment, one of which was the changing pace of life in rapidly growing cities and its effect on the future of branches. "Because of rapid urbanisation and other similar issues, customers will find it increasingly harder and harder to move around, they won’t have time to go and see their bank because of distance or transport problems" he explained. "So does the traditional model of having more branches in more locations deal with this? I don’t think so."
He made clear that it was unsustainable for banks to try to follow the traditional path and continue to set up branches in more locations. "It is not by establishing branches that we will conquer young people between twenty and twenty-five in five years. This model has had its life, and now we must find a new solution."
The solution he proposed was to stop over-investing in physical networks and to look instead to technological networks. "We must invest in technology rather than a physical presence and geographical proximity. We need to progress in a style of digital distribution."
His comments on the future of branches come as global debate continue to revolve around the place of the branch in the future of the retail banking industry.
Yet Maghraoui was adamant that branches could not disappear. He remarked on branch closures in Europe and made clear that the same could not happen in Morocco. Instead, he explained, those branches must adapt and evolve from the traditional into a new style that will serve both a physical and digital presence. "There will always be branches because there will always be growth but they must evolve into a new form."
A further point that was raised was the growing importance of the role of big data for banks in Morocco. Currently the data bases in Morocco are inadequate and need to be greatly enhanced, he explained, because they would play a prominent role in reaching customers and offering them the correct products when they need them. "All databases in Moroccan banks are greatly insufficient and therefore suffer from an inability to know the customer well, to segment him and to offer him the right products" he remarked. "This is a major constraint and something we must vastly improve on."
Thanalpatti further emphasised the importance of big data and how useful it will be to the future of banking as he stated, "We have so much digital data with us, so that when we look at our customer statements and their lives, it can help hugely in strategising new products and banking incentives for them."
The future of multichannel, an issue in worldwide discussion at the moment, also featured in the debate. As the digital banking world extends, banks are examining options other than multichannel including channel integration. This was a sentiment Maghraoui appeared to share as he explained why multichannel initially came around and how it needs to evolve to meet the customers needs. "Recently multichannel issues have appeared because there has not been enough development in regards to this." He outlined that one of the major constraints in the development of multichannel in Morocco lay in regulation and the lack of an electronic signature system which is key to those products and services requiring a signature. "The customer starts something on the internet but then has to go into a branch to sign something- he doesn’t want to do that and this kills the purpose of the multichannel experience."
A final comment from Maghraoui was the danger of looking at digital transformation from one end only, elaborating that the process needs to encompass every part of the bank. "If we think of digital transformation only from the front end, it will never be enough because we won’t arrive at the service we find and the processes won’t go from end to end.
"Often we come up with ideas that will stop at branch level and internally, the traditional system will delay the digital introduction. This needs to be tackled by parts of the bank, including HR and training who will play an important role here."
Thanalpatti reiterated many of these points and also broke down the major factors driving change in the financial world including big data, mobility, the cloud, bloc chain and the Internet of Things. He further underlined the importance of understanding payment procedures, especially in a world with growing competition from non-bank competitors. "So many of these ecommerce sites on the internet have their own payment systems. They handle the sales of customers who, rather than having to pay in the store, they would prefer to do it online because its 24/7 and they can order from the comfort of their home. But when it comes to the payments part, they are paying with a different system like Paypal, and this is the kind of markets that banks could engage in more."
The debate in the conference showed that Moroccan banks face many challenges and serious limitations. But it also showed that by understanding the fast evolving world of retail banking and making the necessary preparations to try to keep pace with that change, they will continue to grow and adapt rapidly.
