The Middle East & North Africa Digital Payments Market is expected to grow at a CAGR of 15.39% over the forecast period. According to a study from the London-based payment systems company, Checkout.com, stubborn cash usage could fall in the Middle Eastern region, after an acceleration in the uptake of digital payments amid the COVID-19 pandemic.
The study, which hinges on the regional survey of over 5000 consumers in the UAE, Saudi Arabia, Egypt, Bahrain, Jordan, Qatar, Kuwait, and Pakistan, found that 47% of consumers are likely to shop online more frequently over the next year. Such trends are expected to boost the adoption of digital payment solutions in the region.
Over time, the digital payment industry has recorded robust growth, with new providers, new platforms, and new payment tools being launched in the region. The growth in mobile phone penetration in the region is anticipated to pave the path for the digital payments market in the region significantly. The mobile market in the region is expected to reach various milestones over the next five years, with half a billion mobile broadband connections by 2021, more than half of the population subscribing to mobile internet services by 2023, and about 700 million mobile connections by 2025.
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Many countries have been joining the real-time payments scene due to the benefits these systems offer. Interest in real-time payments has been particularly robust in the Middle East region, where numerous faster payments initiatives have gone live or are nearing their debuts. Certain Middle Eastern governments are actively working to encourage the shift away from cash. For instance, Saudi Arabia aims to have 70% of the nation’s transactions handled digitally by 2030.
Further, in the region, mobile financial services’ transformation has been witnessed through payment methods such as Careem Pay in the UAE. For instance, Saudi Arabia’s telecommunications company, launched a digital wallet app, STC Pay, which allows people to send money to other users and pay restaurants and stores digitally.
Additionally, a few of the e-commerce platforms have been collaborating with banks to encourage digital payments. For instance, in July 2020, Oman Air and BankDhofar partnered to launch an e-commerce Payment Gateway platform, which will enable the airline’s customers to process their bookings online using their debit cards and receive instant responses of the payment transactions.
Key Market Trends
High Proliferation of Smartphones and Social Interactions to Drive the Market Growth
Smartphone adoption continues to grow rapidly in the region, and reached nearly 66% of total connections in 2020, in line with cheaper devices becoming more readily available. According to GSMA, the number of unique mobile subscribers in the Middle East and North Africa (MENA) region reached the 400 million mark during 2020, representing around 65% of the population.
Many operators have introduced affordable smartphones with financing options to stimulate mobile broadband adoption. Over the next five years, there would be about 200 million additional smartphone connections in MENA, taking the total to 565 million by the end of 2025, at an adoption rate of almost 80%.
A key factor that is boosting Saudi Arabia’s digital revolution is its astonishing rate of smartphone penetration. The country has the third-highest smartphone penetration rate globally with around 21 million smartphone users (in 2019, about 80.7% of the population used a smartphone), a number that is likely to increase to almost 24 million by 2022. According to the World Bank, the country is one of the wealthiest countries in the world in terms of spending power, and this combination of factors has contributed to the high penetration levels.
Additionally, immediate payment services provide various benefits to consumers and businesses alike. Users can often access such payments systems through mobile apps that allow them to send money to recipients identified by their mobile phone numbers rather than their bank account details. Such services can satisfy consumers who want fast, easy ways to shop online as well as those who use their mobile phones to pay for friends or brick-and-mortar retailers. Such options can spare consumers from carrying cash or cards.
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Launch of Real-time Payment Systems in Key GCC and North African Countries to Drive the Market Growth
As digital payment options continue to grow in popularity, an increasing number of businesses and consumers are expected to adopt these payments in the region. It is therefore crucial for the region to have an underlying real-time infrastructure in place to enable these payments to make it quick and effective.
The launch of a real-time payment service provides the core infrastructure which supports a range of new banking and payment services. At a macro level, the introduction of such technology offers tangible benefits to a national economy by increasing liquidity and efficiency of the payments system, which in turn, will support the GDP growth and also reduce costs of doing business in the region and provide convenient secure access to payments systems for banked and unbanked consumers, businesses, and governments.
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