United Arab Emirates Payment Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

Key Highlights

• The customers in the United Arab Emirates (UAE) were dependent on cash payments as they believe that cash is a safer and quick payment option. However, card and internet-related payments are increasing, supported by government financial inclusion programs, the adoption of Europay, MasterCard, and Visa (EMV), promotional campaigns by financial institutions, and contactless technology.
• The Covid-19 pandemic, along with the strict government regulations for the shutdown of physical stores and cashless payment, has reinforced major market players to shift to online stores and payment systems. The transition of switching from physical stores to online shopping has created opportunities for payment players in the United Arab Emirates.
• The government of the UAE is also taking several steps in order to boost its payment systems. For instance, The Ministry of Finance (MoF) has developed a Strategic Plan for 2017-2021. The strategy also includes the development and improvement of relations with international financial organizations and institutions. Such strategies will help the country in enhancing its payment systems.
• Moreover, In February 2022, the Central Bank of the UAE (CBUAE) has selected Accenture to head up a consortium to support and develop a national payments infrastructure in the United Arab Emirates that will allow next-generation payments. In collaboration with SIA, now part of Nexi Group, and G42, Accenture will build and operate the National Instant Payment Platform (IPP) over the next five years.
• According to the findings of a Visa Stay Secure consumer survey conducted in June 2020 in collaboration with Dubai Economy and Dubai Police, 49% of UAE consumers surveyed have increased their online shopping as a result of the pandemic, with three out of five (61 percent) now using cards or digital wallets to make online payments rather than opting for cash on delivery. The main reasons for their growing preference for online payments were improved faith in the safety, speed, and convenience of contactless payments.

Key Market Trends

Significant Growth in Payment is Expected due to Digital Transformation

• Digital transformation has taken over since the Covid - 19 pandemic. Various organizations switched to online business by eliminating the need to come out of the home during the pandemic. Factors like increased demand for the internet and smartphones have boosted the Payment market in the United Arab Emirates.
• United Arab Emirates' government has been introducing various strategies for further growth and expansion of digitalization. For instance, Abu Dhabi Economic Vision 2030 aims to adopt and invest in ICT infrastructure. This will further help the country to increase internet penetration and will also boost the digital infrastructure. This will benefit various payment gateways by making the process easy and faster.
• In order to increase the growth of digital banking, robust regulatory frameworks are also being launched. For instance, The Central Bank of the UAE (CBUAE) announced its 2023-2026 strategy. The strategy includes issuing a digital currency and driving digital transformation in the nation's financial services sector using big data solutions and AI and creating a secure financial cloud infrastructure.
• The payment services in UAE are partnering with software technology companies to get aligned with digital transformation and adopt innovative solutions driven by advanced technologies. For instance, Abu Dhabi Islamic Bank (ADIB), a UAE-based Islamic financial institution, has announced it is a collaboration with IBM to accelerate its transition to become a modern, digitally-led Islamic bank, using IBM hybrid cloud solutions based on Red Hat OpenShift. The transformation complements the bank's Digital Transformation strategy, which leverages Big Data, analytics, and Artificial Intelligence (AI) to deliver operational and financial benefits.
• Various organizations are joining forces to accelerate digitalization in the UAE. In June 2021, Etisalat announced a partnership with Ericsson to deploy a 5G millimeter wave (mmWave) across its commercial network. TDRA (Telecommunications and Digital Government Regulatory Authority) is the first to allocate 5G millimeter-wave across the country. This will enable the country to facilitate its payment market with a high-speed network with low latency.
• The United Arab Emirates has gained several recognitions in the field of digital transformation. For instance, according to the UAE Digital Transformation Enablers Report 2021, the UAE has been ranked among the world's best countries in digital government transformation.

Retail Industry to Drive Market Growth

• The retail industry has observed tremendous changes in the United Arab Emirates. It continues to evolve in response to emerging technology. Retail shopping has been substantially influenced by emerging business trends and changing customer behavior.
• Many payment and financial services vendors are entering the UAE market due to the growing customer behavior towards internet retailing. In April 2021, Stripe, an Irish-American financial services and software as a service company that builds economic infrastructure for the internet announced its official launch in the UAE market. This launch will provide the expansion of the company in the Middle East. Stripe is also launching a new UAE office in Dubai Internet City, which will be the company's first office in the region.
• Startups are entering the UAE Payment market, which is further expected to drive the payment market in the region. For instance, a Dubai-based entrepreneur has launched an online activewear brand, F5's website. The online shop will provide organic, sustainable, and vegan streetwear. The collection will include joggers, hoodies, tees, and other related products. The purchase of products from the online retail store will further support the increasing payments in the country.
• Moreover, various market leaders are expanding their business in this region so as to derive profit from the customer's shopping preferences. For instance, In November 2021, a Dubai-based quick-commerce startup, YallaMarket, has announced a plan for expansion in the United Arab Emirates and will be stepping into Saudi Arabia and Qatar in the coming year to scale its grocery shopping. This expansion will allow the customers to explore another grocery shopping option which, as a result, will increase the usage of payment services in the market.
• The retail market in the United Arab Emirates witnessed continual growth. In September 2021, Majid Al Futtaim, an Emirati holding company, launched its checkout-free convenience store in Dubai, UAE. The store sells more than 1,300 items, including beverages, snacks, packaged food, ready meals, and other necessities.

Competitive Landscape

• In November 2021 -Telr announced that the company had raised USD 15 million from the India-based Merchant payments platform, Cashfree. This strategic investment in Telr will allow the company to introduce its offerings in the MENA region, utilizing Telr’s strong presence and payment infrastructure.
• In February 2022, Network International partnered with Amazon Payment Services to provide online payment solutions to merchants in the United Arab Emirates. Network International helps enable digital commerce in the Middle East and Africa. The firms are collaborating to provide merchants with Amazon Payment Services' gateway and services, which include EPP and increased fraud monitoring, according to a news statement.

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