Tapping opportunities in Fintech

With global lockdowns, work from home arrangements, and fear of infection, most commercial activities have moved online. The foundation for this digitisation is a quick, reliable and secure online payments infrastructure.



By Nisthula Nagarajan

Published: Mon 18 Jan 2021, 9:21 AM

Last updated: Mon 18 Jan 2021, 11:23 AM

With Covid-19 confining people indoors this year, e-commerce and digital payments portals have seen a vast surge in growth, globally. More people are using smartphones, e-commerce, digital wallets and mobile and QR-code payments to avoid contact with others. Many businesses were also forced to shift online from a traditional brick and mortar setup.

There is untapped e-commerce potential in the region, as Forbes Middle East and Marmore MENA Intelligence revealed. Only an estimated two per cent of the overall retail sales are from online sales in the Middle East versus 15 per cent in developed markets.

From 2018 to 2019, non-cash transactions increased by almost 14 per cent globally to reach 708.5 billion transactions, the highest recorded growth rate in the last decade according to the World Payments Report 2020 by Capgemini Research Institute.

China, India and other southeast Asian markets led this growth, which was driven by the surge in contactless payment methods. Taking this into account, a report by Research and Markets, a global online market intelligence provider, estimates the global digital payments market to grow from $3.88 trillion in 2019 to about $5.43 trillion in 2020.

However, this is a small portion of the total amount of money that is made through credit and debit cards, online and mobile payments, and other digital channels.

A Boston Consulting Group report from July revealed that Covid-19 and all its repercussions present a tremendous opportunity for the FinTech sector.

Untapped potential

With the UAE and Saudi Arabia leading the market, e-commerce sales are forecast by Deloitte to surge at a compound annual growth rate (CAGR) of 16.9 per cent from 2016 to 2021 to reach $48.8 billion (Dh179 billion). Though Internet penetration in the region (60 per cent) is higher than the global average (51.7 per cent), currently, the region's e-commerce potential is untapped. A report by technology research company Gartner revealed that in the Middle East, only 15 per cent of businesses have an online presence and nearly 90 per cent of online purchases are shipped from abroad.

e-commerce growth

Checkout.com, a leading digital payments portal in the region, released The Connected Payments report for the Middle East and North Africa, Pakistan (MENAP) region revealing several factors across the board that are pushing the growth of e-commerce forward. The report is based on inputs from polling more than 5,000 consumers in the region.

It showed that while only 15 per cent of consumers are expecting their online shopping frequency to decrease, 47 per cent foresee an increase and the rest do not expect any change. 49 per cent of GCC consumers, including 45 per cent in the UAE alone, plan to shop online more in 2021. The report reveals that the online shopping frequency of wealthy consumers, men aged 35 and older and those who are already making contactless payments, will grow in the coming year.

Sebastian Reis, Executive Vice President of global e-commerce at Checkout.com, said, "Our report suggests that what we are seeing today is more than a temporary change in consumer behaviour. While this may present a major opportunity for businesses across the region, to leverage this shift in consumer behaviour and to succeed in what's already a highly competitive space, businesses will need to offer not only the products and services consumers look for but also the best online shopping experience, including payment processes that are safe, secure, and convenient for consumers."

Food delivery companies have been positively affected due to the pandemic, 41 per cent report a higher number of users and orders. Some of the other industries that have grown online are fashion at 37 per cent, groceries at 33 per cent, and electronics at 30 per cent. Consumers prefer paying digitally to cash, owing to the convenience of online shopping. Within those who shop once a month, 62 per cent pay by card or digital wallet, such as Apple Pay.

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In the future, consumers will prefer to order necessities such as food, beverage, and groceries from the comfort of their homes using their phones. Convenience and payment experience will be the deciding factors for choosing preferred vendors or banks for digital payments.

Amazon has also entered the UAE by offering Amazon Payment Services (APS) to businesses. This is being done through Amazon's purchase of Payfort in 2017.

APS will aid in accepting online payments through global and local methods, offer instalments to customers, and monitor pay performance.

According to the World Payments Report 2020, Middle East and Africa had an 18 per cent surge in digital payments from 2018 to 2019, making them two of the fastest-growing smart payments markets.

The Middle East market is transforming, with businesses and financial institutions being forced to shift towards smart payment solutions.


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