6. Mobile payments
Mobile payments and fintech companies are playing an important role in boosting competition and financial inclusion in developing countries, but take-up of mobile payments is still very low in Tunisia. Mobile payments and greater use of online banking could increase consumers’ choice of banks and significantly intensify competition. Chapter 4 showed how the reliance of banks on their branch networks has effectively excluded a large proportion of consumers in rural areas, where branches are less common, from access to financial services. Yet e-wallets in Tunisia remain rare. Given that Tunisia’s mobile payment services sector is still developing, and that concerns expressed by stakeholders centre on potential barriers to entry, this chapter presents an analysis of relevant legislation using the OECD Competition Assessment Toolkit and identifies barriers to competition.
The chapter describes two main barriers to competition in the mobile payments sector. First, the process for obtaining licences to offer mobile payment services favours fintech companies with ties to traditional banks. Second, certain provisions may lead payment service providers (PSPs) to exclude customers that tend to make small payments.
Circular No. 2018-16, introduced in December 2018, regulates the activities of payment service providers. The range of services defined by the circular includes all operations initiated with mobile phones, such as opening payment accounts, making cash payments and withdrawals, transferring money, making electronic payments, and using pre-paid electronic cards. Payment accounts are divided into three groups:
level-1 accounts with a ceiling of TND 500, with transactions capped at TND 250 daily
level-2 accounts with a ceiling of TND 1 000, with transactions capped at TND 500 daily
level-3 accounts with a ceiling of TND 5 000, with transactions capped at TND 1 000 daily.
Different types of accounts require differing levels of authentication; accounts with higher limits require stronger authentication.
6.1.1. Payment service providers
As of May 2023, companies allowed to offer mobile payment services in Tunisia included several traditional banks and five fintech companies. The five fintech firms licensed to offer mobile payments were ViaMobile, Zitouna Paiements, Enda Cash, Wafacash and Payvago. The OECD understands that out of the five fintech companies, ViaMobile and Zitouna Paiements are the only ones actively offering payment facilities.
ViaMobile obtained a payment services licence in April 2021. Zitouna Paiements obtained a license in November 2021 and launched its mobile payment application in March 2022 (IlBoursa.com, 2022[1]). Enda Cash obtained a licence in August 2022, Wafacash in October 2022 and Payvago in February 2023 (Banque Centrale de Tunisie, 2023[2]). In addition to these providers, the Central Bank of Tunisia has said it is reviewing applications by other institutions (the OECD understands that the three telecoms operators in Tunisia jointly received preliminary authorisation, but that they subsequently withdrew their application). Most of the licensed payment service providers are firms either connected to traditional banks or to the large domestic industrial groups.1
As of December 2022, around 200 000 e-wallets were in use in Tunisia (Banque Centrale de Tunisie, 2022[3]), and the majority of them was provided by traditional banks. Although there is no requirement that consumers have a current account associated with an e-wallet, there is no evidence that consumers in Tunisia are substituting e-wallets for personal current accounts (PCAs).
6.1.2. The mobile payment system
The payment system that processes mobile payments was established in 2022 and it is operated by the Société Monétique Tunisienne (SMT). The SMT defines the standards for interoperability, which includes technical standards, rules related to disputes and how revenues are distributed between the providers that participate to the payment system. The SMT was established in 1989 to process card payments, and it is jointly owned by the largest domestic banks and La Poste. Bank transfers, direct debits and cheques are processed by the Société Interbancaire de Télécompensation (SIBTEL) (Banque Centrale de Tunisie, 2023[4]).
The main regulatory framework for payment services is provided by Law No. 2016-48, circulars of the BCT No. 2018-16 and No. 2020-11, and the decisions of the Commission d’agréments No. 2017-04 and No. 2019-20. This sub-section covers only the key principles and provisions of relevance to the analysis.
Article 10 of Law 2016-48 defines payment services as: 1) cash deposits and withdrawals; 2) direct debits; 3) payments in cash, by cheque, bills of exchange or postal orders; 4) transfers of funds; and 5) execution of payments remotely, including electronic transactions.
The provision of payment services, as defined under Article 10 of Law No. 2016-48, is subject to a licence granted by the BCT that includes two steps: a preliminary authorisation and a final authorisation. The same licensing procedure applies across the industry, irrespective of the specific payment services being offered. Annex 9 of Decision No. 2019-20 provides an exhaustive list of information and documents required to obtain a preliminary authorisation.
Several parts of the licensing process may represent a barrier to entry:
First, conditions for obtaining licences include minimum capital of at least TND 5 million (see Article 32 of Law No. 2016-48), unless – as in the case of banks – the BCT requires more capital in accordance with the applicant’s business plan. Although ad hoc capital requirements are common across jurisdictions, stakeholders indicated that the level of capital the BCT requires on a case-by-case basis may represent a barrier to entry, particularly for fintech start-ups. Capital requirements for similar services are significantly lower in other countries. For example, Box 6.1 explains that capital requirements in the EU and the United Kingdom are between 12 and 76 times lower, depending on the service provided.
Second, in addition to complying with the applicable capital requirement, pursuant to Article 21 of Law No. 2016-48 and Article 3 of Circular No. 2018-16, a payment service provider must hold an insurance policy or obtain a bank guarantee proportionate to its funds and in accordance with the conditions set by the BCT.2
Third, regarding the procedure, Article 30 of Law No. 2016-48 states that a preliminary decision should be taken within four months of the date upon which all required information and documents have been submitted, and that a final authorisation should be granted within two months of compliance with all the requisite conditions. In practice, however, stakeholders indicated that the procedure takes 12 to 18 months. Moreover, stakeholders indicated that, despite the “checklist” in Annex 9 of Decision No. 2019-20, the conditions and requirements in place are still not transparent and seem to favour bank affiliates.
Finally, Article 20 of Law No. 2016-48 states that governance rules (Section IV) that apply to banks and financial institutions do not apply to payment service providers. Nevertheless, governance rules prescribed for payment service providers under articles 5 to 13 of Circular No. 2018-16, and information on governance to be submitted under Annex 9 of Decision No. 2019-20, largely mirror the framework applicable to banks.
The capital requirements for payment service providers are significantly lower in the European Union than in Tunisia.
The EU’s Payment Services Directive 2 requires payment institutions to hold between EUR 20 000 and EUR 125 000, depending on the services they provide. For example, the capital requirement for institutions providing money transfer payments is EUR 20 000, while the requirement for institutions providing cash withdrawal services is EUR 125 000.
Source: Payment Services Directive 2, Title II, Chapter 1, Section 1, Article 7.
To conclude, some of the requirements and elements of the process for obtain a licence represent a barrier to entry to the payment services market. Higher capital requirements than other countries, ad hoc provisions, and uncertainty about the length of the process increase costs for applicants. Furthermore, the governance and infrastructure requirements, which are in many respects similar to those for traditional banks, considerably increase the costs for potential applicants. Indeed, BCT’s licensing commission confirmed to the OECD that almost all the applications received at the time of writing had a much higher capital than the required TND 5 million. As a result, the licensing process and the required conditions do not seem to favour potential new players – particularly fintech start-ups – which generally do not have the required financial resources.
Stakeholders interviewed by the OECD said that the combination of the fees charged by the SMT to PSPs to process mobile payments and the cap on the fees that PSPs can charge to their customers risk to make the business model of PSPs not financially viable.
Article 21 of Circular No. 2020-11 states that for fund transfers and for payments made to purchase a good or a service, the maximum fees that PSPs can charge to their customers is equal to either 0.3% of the value of the transaction if the latter is greater than TND 15, or zero if the transaction value is equal or smaller than TND 15. Article 21 also states that the mobile payment system, operated by the SMT, can charge a fixed tariff for such payments (regardless of the value of the transaction).
As a result of Circular No. 2020-11, payment service providers have to provide payments under TND 15 effectively at a loss. As the market is still in its infancy, it is difficult to assess the impact of this regulation. However, it creates two main risks. First, PSPs may focus on higher-value transactions and thus on higher-income segments of the population, ignoring or excluding a segment of the population already unserved by traditional banks. Second, if the provision of payment services is not financially viable, standalone PSPs may be at disadvantage when competing against traditional banks who may cross-subsidise payment services.
Other provisions include barriers to competition.
Pursuant to Article 2 of Circular No. 2018-16, licensed payment service providers must offer services exclusively in local currency and within the country. This limits the range of services that payment services operators can offer, restricting their ability to compete with traditional banks, which can open current accounts in foreign currencies.
Article 20 of Law No. 2016-48 requires payment service providers to distribute only pre-paid cards issued by banks or La Poste. Payment service providers are thus prevented from issuing other payment cards.
The licensing process for payment service providers creates unnecessary barriers to entry. Law No. 2016-48 introduces capital requirements that are between 12 and 76 times higher than capital requirements for similar service providers in the EU. The process for obtaining licences also appears to be very lengthy and includes ad hoc requirements that increase the discretionary power of the BCT. Finally, Law No. 2016-48 requires that payment service providers have governance structures like those of traditional banks, which increases costs for potential market entrants.
These barriers are likely to discourage smaller firms from applying for licences. In fact, the only firms that have applied successfully are either traditional banks or firms with ties to traditional banks. This has a negative effect on competition and innovation as it reduces incentives for new entrants to compete.
References
[2] Banque Centrale de Tunisie (2023), Réglementation régissant l’octroi et le retrait d’agréments, https://www.bct.gov.tn/bct/siteprod/page.jsp?id=229 (accessed on 24 May 2023).
[4] Banque Centrale de Tunisie (2023), Systèmes de paiement, https://www.bct.gov.tn/bct/siteprod/page.jsp?id=96 (accessed on 13 June 2023).
[3] Banque Centrale de Tunisie (2022), Les paiements en chiffres en Tunisie, https://www.bct.gov.tn/bct/siteprod/documents/Bulletin_des_paiements_003.pdf (accessed on 24 May 2023).
[1] IlBoursa.com (2022), Zitouna Paiement, filiale de Banque Zitouna, lance son application de paiement mobile, https://www.ilboursa.com/marches/zitouna-paiement-filiale-de-banque-zitouna-lance-son-application-de-paiement-mobile-izi_33599 (accessed on 24 May 2023).
Notes
← 1. ViaMobile is a subsidiary of Menix Holding, a minority shareholder of three listed banks (BIAT, Amen Bank and UBCI). Zitouna Paiements is a subsidiary of Banque Zitouna, which obtained a universal banking licence in 2010 and has grown significantly in recent years (see Chapter 7 for a description of recent entrants to Tunisia’s retail banking sector). Wafacash is a subsidiary of Attijari, one of Tunisia’s largest banks. Payvago’s owners are shareholders of some of the largest Tunisia’s industrial groups. Enda cash is a subsidiary of Enda, Tunisia’s largest microfinance institution. The largest traditional banks in Tunisia are financial partners of Enda. The connections between payment service providers and traditional banks weaken their incentives to compete by offering cheaper and more innovative services.
← 2. According to Article 21, the insurance company or the bank issuing the guarantee must not be part of the same group to which the payment service provider belongs.