Middle East ditching cash payments for digital

07 Sep 2021

Cash transactions are giving up their stranglehold over payments in the Middle East, with more and more being made digitally, according to a recent report by a respected global consultancy practice.
The McKinsey & Company report, titled ‘The future of payments in the Middle East’, says that this phenomenon is fuelled by industry pressures, disruptive forces, changing payment patterns, and the increasing prospects for banks and fintechs in a rapidly evolving environment.
The consulting giant also highlighted the new government and regulatory initiatives, combined with the entry of new payment providers, as well as the coronavirus pandemic, as more triggers for the flight from cash globally.


Cashless payments survey

 

Cashless transactions were rapidly on the rise before the pandemic. According to the McKinsey findings, consumer digital payments in the UAE grew at an annual rate of more than 9% between 2014 and 2019, compared with Europe’s average annual growth of 4-5%. Saudi Arabia witnessed even more sharp growth in cashless payments with over 70% between February 2019 and January 2020.
This staggering growth has been given an additional boost by the Covid situation. More than 80% of the merchants who took part in the McKinsey poll estimated that non-cash payments were up by more than 10% across the region as a result of the pandemic, and 43% believed that the increase was 20%.
The report also concluded that “non banks are poised to capture market share.” It comes as fintech companies move into fill the void left by legacy banks and meet fast-evolving client expectations, regulatory requirements and nimbly embrace innovation.
 


Reaction to UAE cashless society

 

Dr Saeeda Jaffar, Visa’s group manager the GCC, speaking to Arabian Business noted: “Whilst going cashless is a global trend and digital forms of payments including tap to pay or contactless now account for more than two thirds of transactions globally, excluding the US, in the UAE and Saudi Arabia, that number is even higher.”
He added: “In fact, nine out of 10 transactions in Saudi Arabia and eight out of 10 in the UAE are made with contactless cards or devices. Both countries were already making steady progress towards becoming a cashless economy, thanks to the government initiatives, and the pandemic has only further accelerated this trend.”
 


UAE firms embrace cashless

 

Last month, Talabat, a major food delivery and e- commerce platform in the UAE, announced that it has launched an option for its vendors to accept cashless-only payments, and aims at reaching 100% cashless payments in the coming years.
On the firm’s vision to move to fully cashless, Jérémy Doutté, Vice President UAE at Talabat said: “Moving forward, we see cashless payments as the primary currency. As a matter of fact, cashless already stands for the lion share of our transactions. Therefore, we want to support partners who want to engage in that transition. We will continue to offer cash-on-demand as a service while encouraging the usage of cashless payment methods. The future in the UAE is digital.”
It seems beyond any doubt the digital payments revolution in the Middle East is moving fast and gathering momentum.