UAE SMEs, Consumers Embrace Cashless Payments at Fast Pace

In the United Arab Emirates (UAE), digital payments and cashless transactions are becoming the new norm as both consumers and small and medium-sized enterprises (SMEs) continue to actively embrace these solutions.

A new research study by Visa found that compared to global averages, UAE SMEs and consumers are showing a higher level of willingness to embrace cashless payment solutions.

52% of surveyed consumers in the country, against 41% globally, plan to be cashless by 2024 or are already cashless. Nearly all respondents (99%) indicated seeing benefits of a cashless society.

To meet customers’ expectations, 71% of surveyed SMEs in the UAE, against 59% globally, indicated being either cashless or planning to become cashless by 2024. Additionally, all small business owners surveyed in the UAE said they plan to accept more digital payment methods in 2022, with 35% (versus 24% globally) indicating a willingness to accept cryptocurrencies such as Bitcoin.

Accelerated adoption of cashless payments

Adoption of digital payments in the UAE has accelerated since COVID-19, but had been on the rise before the onset of the pandemic. Between 2014 and 2019, payment transactions in the country grew at an annual rate of more than 9%, according to McKinsey.

Several drivers have been pushing the market towards digital payments. These include regulatory changes like open banking, and the rise of an ecosystem of apps and fintech companies.

In particular, the Middle East and North Africa (MENA) region is seeing the birth of its first super apps which are looking to win more users for digital payments.

In Dubai, Careem launched as a super app in July 2020 after being acquired by Uber for a whopping US$3.1 billion. The Careem super app provides a wide range of services including food delivery, bicycle hire and Careem Pay, a digital wallet.

In Egypt, MNT-Halan provides digital solutions, including lending, buy now, pay later (BNPL), e-commerce, payments, and on-demand logistics, serving more than 4 million customers. MNT-Halan closed a US$120 million round in September 2021.

“Innovation in the UAE’s payments industry will continue to gain traction over the decade, which will, in turn, lead to record numbers of digital transactions being registered continuously,” said Markus Massi, managing director and senior partner at BCG.

“Services will become integrated with more digital ecosystems and thus present consumers with more seamless options, with the retail segment set to capitalize as a result.”

Booming e-commerce activity

Rising e-commerce activity will also help fuel the growth in digital payment adoption. In 2020, the UAE retail e-commerce market reached a record of US$3.9 billion, a 53% year-over-year increase, an analysis by Dubai Chamber of Commerce and Industry shows.

The value of the market is projected to surge to US$8 billion by 2025, a trend supported by several key factors including high-income potential, high Internet penetration, developed transport logistics network, and strong government support.

The UAE’s digital payment sector is forecast to grow by 67% between 2020 and 2030 to reach US$14 billion, according to the Boston Consulting Group (BCG). The number of transactions is expected to rise by 94% from approximately 644 million to over 1.2 billion during the same period.

Out of the UAE’s top seven most well-funded fintech startups, two are digital payment companies (PayTabs and Telr), and two are BNPL solution providers (Tabby and Postpay), showcasing the dominance of digital payments within the country’s fintech sector.

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