Historically, countries in the Middle East have clenched to cash payments. However, digital payments are increasingly becoming more commonplace.
Thanks to the growth of fintechs, spurred on by a favorable regulatory environment throughout the region, cashless transactions are all set to become the norm.
One of the reasons for the switch to digital payments is the growth of the region’s e-commerce sector. Deloitte estimates the e-commerce sector in the Middle East will reach a market volume of $50 billion by 2025.
“In recent years, the Middle East has experienced significant growth in non-cash transactions, outpacing global averages,” asserts Neeraj Gupta, chief executive officer of Policybazaar.ae.
He points to a MENA Fintech Association report that suggests 70 percent of transactions could soon be cashless. This isn’t a surprise, as consumer surveys in the region show a strong appetite for digital wallets and contactless payments.
Ripe for growth
Christophe Morchio, chief commercial officer of Prepay Nation, approaches the situation from a different angle.
“Over 70 percent of surveyed UAE merchants reported increased revenue and foot traffic since adopting digital payments,” says Morchio, citing a Visa study that delves into UAE merchants’ perspectives on digital payments
Both Gupta and Morchio credit regional government master plans for creating a healthy ecosystem that allows cashless transactions to flourish.
“Government initiatives like Saudi Arabia’s Vision 2030, which targets 70 percent cashless payments by 2025, and the UAE’s linking of regional payment systems are fueling this cashless push,” says Gupta.
Morchio is particularly impressed by “the fact that many governments in the Middle East have been actively promoting cashless transactions as part of their broader economic and financial inclusion strategies.”
He asserts that regulatory frameworks help ensure the security and integrity of electronic transactions. However, growth rates for digital payments vary across different countries in the region.
Overcoming obstacles
Despite the accelerated adoption of digital payments across the Middle East, Morchio notes that cash is still in vogue. This is especially true in rural areas and among certain demographics.
Meanwhile, interoperability remains a key challenge. “Different digital payment systems often operate in silos, which can make transactions across platforms and providers difficult,” says Morchio. “Standardizing protocols and fostering collaboration among stakeholders are essential steps toward achieving interoperability.”
From a user’s perspective, Gupta says financial inclusion is a major concern. “Not everyone has access to smartphones or the digital literacy required for mobile wallets,” says Gupta. “Ensuring everyone can participate requires bridging this gap.”
Both Gupta and Morchio also consider cybersecurity issues a significant barrier.
“As digital payment ecosystems expand, so do the risks associated with fraud, data breaches, and identity theft,” says Morchio. “Investing in robust security measures, including encryption technologies and authentication protocols, is imperative to instill trust and confidence among users.”
Gupta says there are also cultural aspects. For example, cash still holds significance in some parts of the Middle East. He believes shifting mindsets and showcasing the benefits of digital payments to such people will require time and targeted efforts.
Simon Sharp, partner at Global Ventures, insists that, ultimately, user trust in digital payment systems is crucial for mass adoption. “70 percent of consumers in MENA prefer digital payments,” says Sharp. “To reach the remainder and address existing challenges, regulatory bodies are implementing measures such as regulatory sandboxes and open banking frameworks to foster innovation and ensure consumer protection.”
Innovations galore
Despite the challenges, the Middle East continues to witness the emergence of innovative cashless services and applications catering to the market’s evolving needs.
A notable example is Tabby, MENA’s first fintech unicorn, which thrives even as other Buy-Now-Pay-Later (BNPL) firms face challenges.
Then there’s Paymob, a fintech platform that offers comprehensive payments infrastructure solutions, including a mobile wallet solution. With a robust infrastructure across multiple regional markets, the platform enables users to conduct peer-to-peer transactions, pay bills seamlessly, and make purchases from merchants.
Sharp is also impressed with initiatives like the GCC’s common payment network (CPN) and Buna platform, saying “they facilitate cross-border transactions within the region, addressing long-standing inefficiencies in international payments.”
For Gupta, the growing ecosystem of fintech startups in the region also drives innovation in digital payments.
“What’s particularly exciting is the emergence of regional services and apps that cater to specific user preferences and integrate seamlessly with the existing infrastructure,” says Gupta. Standout examples include Careem Pay and the Emirates Digital Wallet.
Driving financial inclusion
Meanwhile, Morchio says another interesting area is the rapidly growing mobile payments landscape. He’s also impressed by the remarkable surge in the adoption of digital wallets and payment platforms.
Citing Maly, Edenred and Now Money as examples, he notes that such applications help people without bank accounts easily access online money transfers, among other services.
“What excites me the most about these cashless services and apps is their potential to drive financial inclusion and empower individuals across the region,” asserts Morchio. “By leveraging the convenience of mobile technology, we can bridge the gap between the banked and unbanked populations, providing access to essential financial services and fostering economic growth.”
Future perfect
Gupta believes that the growing fintech sector across the region and investments in digital infrastructure create fertile ground for cashless transactions. He’s also excited about the adoption of global mobile wallets like Apple Pay and the acceptance of regional options.
“However, challenges like financial inclusion and infrastructure gaps need to be addressed to ensure everyone can participate in this digital future,” shares Gupta. “Despite these hurdles, the Middle East’s rapid progress suggests a future dominated by digital payments.”
“While the transition toward a completely cashless economy may still be a work in progress, the Middle East is primed to accelerate its journey towards digital payments,” says Morchio, echoing Gupta’s sentiment.
“Through ongoing collaboration between industry stakeholders, technological advancements, and consumer awareness, I am confident that the Middle East will become a global leader in the transition towards a cashless economy,” the Prepay Nation CCO adds.