The MENA region is on the cusp of a digital payments revolution
According to a whitepaper from Amazon Payment Services (APS), a digital payments revolution is taking place in the MENA region.
APS says the region is brimming with potential, and the retail industry is thriving, with more and more businesses turning to online retail to reach consumers. And in line with the rest of the world, large economies in the region are adopting digital payments systems to support online retail sales.
The whitepaper presents insights to highlight the important trends currently shaping the digital payments industry in the region, particularly in UAE, Saudi Arabia, and Egypt.
Elsewhere in the region, Bahrain recorded over 14 million cashless transactions in January 2023, according to data published by the Central Bank of Bahrain (CBB). According to the data, over 75% of the transactions were contactless, reflecting a definite shift in customer behavior.
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“Digital payments are evolving at a rapid pace, supported by an innovative ﬁntech sector, with around 85% of ﬁntech ﬁrms in the MENA region operating in the payments, transfers and remittance sectors,” notes the report.
Analyzing the reason fueling this growth, the whitepaper argues that it was the onset of COVID-19 that created viable conditions for players to adopt digital payments, pushing online retail volumes to more than double since 2019.
Secondly, it suggests that countries in the region have relatively high internet penetration rates, with the UAE and Saudi Arabia comfortably outpacing the global averages.
Then there are multiple government initiatives that act as a catalyst to fuel this growth. The whitepaper specifically points to Saudi Vision 2030, Egypt Vision 2030 and UAE’s digital strategy, and their role in helping the economies race towards becoming cashless societies.
No surprise then that the region has become an incubator for ﬁntech ﬁrms, which the whitepaper estimates account for a total valuation of over $800 million.
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Banking on these developments, APS expects the digital payments industry to nearly double in size across MENA’s three countries of UAE, Saudi Arabia, and Egypt by 2023.
The Gen Z advantage
The whitepaper argues that digital payments, which are driven by technology, have always been associated with the younger generation, as older generations are more likely to maintain traditional payment methods.
The claim is backed by APS’ survey, which found that the growth in the digital payment sector in the region is being driven by Gen Z’ers between 18-24. Their preferred payment methods were cash and credit/debit cards, however almost half the respondents claimed to use digital/mobile wallets for daily payments (UAE 51%, Saudi Arabia 48%, and Egypt 43%).
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APS analyzed over a dozen industries that have recorded the fastest growth in digital payments. It discovered that while they have different dynamics that vary across different countries in the region, a whole lot of industries rely heavily on younger generations, particularly Gen Z to drive growth.
“Understanding the ever-changing needs of the growing Gen Z and Millennial consumer base is key to unraveling the future of digital payments,” concluded the whitepaper.