Banking Compliance Challenges in Algeria Amidst Economic Shocks

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Algeria’s economy has been severely impacted by the ongoing economic shockwaves exacerbated by the COVID-19 pandemic. With a significant real GDP contraction projected for 2020, digital transformation has emerged as a crucial element of the country’s recovery plan.

The Importance of Digital Financial Services (DFS)

Access to affordable financial services is vital for poverty reduction, economic growth, and resilience to crises. DFS have the potential to increase access to financial services such as savings, insurance, and credit by lowering costs, improving speed, security, and transparency.

• Only 16% of adults and 11% of women use digital payments in Algeria.
• Mobile money has leveraged mobile broadband connectivity to deliver DFS, but the country still needs to overcome significant hurdles.
• Digital payments offer several benefits, including reduced physical contact during lockdowns, increased security, and enabling governments to rapidly distribute social transfers.

Challenges Facing DFS in Algeria

Despite high mobile phone penetration in Algeria, the country lags behind regional averages in digital payment adoption. To address these challenges, policymakers must focus on creating a conducive legal and regulatory framework, building robust digital infrastructure, and providing ancillary government support systems.

• Critical issues to be addressed include digital connectivity, mobile-phone penetration, national payment infrastructure, and electronic money.
• DFS also introduce risks to users and the broader financial system, including data privacy concerns, unequal access to technology, cyber-security risks, financial integrity challenges, and competition authorities’ regulatory hurdles.

Opportunities for DFS in Algeria

DFS can help Algeria cope with COVID-19 by enabling rapid, secure payment systems for government transfers, reducing remittance fees, improving accountability, and addressing liquidity issues for businesses. Additionally, technological advancements such as digital ID and open APIs have facilitated the development of DFS.

• Digital ID has enabled financial institutions to onboard customers efficiently while ensuring compliance with anti-money laundering regulations.
• DFS are driving new business models that cater to low-income populations, including e-commerce platforms and mobile-based services such as solar energy and insurance.

Conclusion

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To promote economic activity and facilitate daily life for Algerians, it is essential to expand access to DFS while mitigating the impacts of the pandemic. By doing so, Algeria can increase assets, stimulate productive investments, and improve the lives of its citizens.