The Middle East and North Africa (MENA) region is on a path similar to the rest of the world: declining cash use and increasingly sophisticated electronic payments.
However, this simple statement masks significant variations between individual markets which the GCC and other supra-national bodies in the region would do well to try to resolve.
While an argument could be made that there are similar differences between the various EU states, such variations are nothing compared to the difference between markets like the UAE and Saudi Arabia on the one hand, and Yemen and Egypt on the other.
A new study from Shift, “Cashless Enablement: A guide to payments in the UAE”, demonstrates the pan-regional switch from cash to electronic payment, with e-payments more than doubling in the current decade, and cash use declining.
Within cashless payments, business-to-business transactions are predicted to make up around half of all payments over the next decade.
Meanwhile, research from Mastercard says two-thirds of consumers in the region would like to try alternative payments methods, from wearables to crypto and similar numbers claim they will avoid companies that don’t offer a cashless option in the future.
Midnight at the oasis
Taking a break from such breathless positivity, it’s worth considering the wide disparities that exist across MENA’s many different markets. In the Gulf Co-operation Council (GCC) alone, for example, internet banking penetration varies widely, according to research from Tellimer and Entrepreneur Middle East.
Where the UAE and Saudi Arabia boast burgeoning fintech investment and stronger internet banking penetration, plus Open Banking frameworks that have been passed into law, the situation in Oman and Qatar is markedly less positive, with just one in three Qataris using internet banking, and one in eight Omanis.
Further afield, the situation gets worse. In markets such as Egypt, Morocco and Jordan, fewer than one in three citizens has a bank account, while internet access in Egypt and Libya sits at levels last seen in Western markets twenty years ago.
Pan-regional initiatives required
While it’s easy, fashionable even, to deride the work of bodies such as Payments Europe and the Payment Card Industry Data Security Standards, the importance of such bodies comes into focus when looking at regions that lack the co-ordinated roll-out of such standards as these bodies provide.
At its best, the Middle East includes some genuinely dynamic payments markets such as the UAE and Saudi Arabia, while at the other end of the scale, some of the least-developed markets have yet to see much of a shift away from a cash-based economy.
While more than 1 billion dollars has been invested in Saudi Arabian FinTechs in the last four years, 80 percent of payments in Egypt are still made using cash.
“The importance of pan-regional bodies becomes clear in those markets where they don’t exist.”
These disparities matter because young, ambitious payments companies are most likely to expand to those markets closest to them in terms of geography, culture, language and rule of law. If FinTechs based in Saudi Arabia and the UAE find it challenging to grow in Qatar and Oman, then there’s little chance of them prospering elsewhere.
To some extent, the GCC at least has recognised this challenge, and is looking at developing a passporting regime to make it easier for payments companies to be licensed across the Gulf.
Other initiatives related to talent and training and fintech incubators have also been launched.
However, it may be that some form of regulatory equivalence, of the kind practised between the US and Canada in specific areas, or the UK and EU, will be required before we start to see the development of a truly digital future across the Middle East and North Africa.
