Covid sparks UAE e-commerce boom

The UAE e-commerce sector is expected to capture a bigger share of the card payment transaction values in 2020 than was predicted before the pandemic — up from 19.7 per cent to 21.9 per cent.

Going forward, in the post-Covid scenario, the online trend is expected to continue upward, with e-commerce payments estimated to account for 28.2 per cent of the total UAE card payment transactions value, according to a joint study by Dubai Economy and Visa.

Findings from the study show that while UAE consumers still prefer to pay using credit cards (35 per cent of transactions), the use of debit cards to shop online has increased by more than seven per cent between 2018 and 2020, “pointing to a higher degree of trust in the transaction process that is reflective of a maturing market.”

The World Economic Forum has estimated the UAE’s 2020 e-commerce market at $27.2 billion with similar growth across the region.

In the post-Covid era, government policies, entrepreneurship and changing consumer behaviour will continue fuelling e-commerce growth and digital payments adoption, according to the “UAE e-commerce landscape” report.

“With many consumers and merchants experiencing the convenience of e-commerce for the first time during the lockdown, the shift to shopping online is expected to hold long-term as consumer confidence in digital payments surge across the Middle East and North Africa region,” said the study.

The study revealed that 61 per cent of the consumers are now using cards or digital wallets more to make payments online instead of opting for cash on delivery. In the post-Covid era, 43 per cent will continue using contactless payments while 48 per cent will opt for digital payments online over cash on delivery.

Sami Al Qamzi, director-general of Dubai Economy, said the increasing shift to digital payments is “not only a strong testament to the efficiency of the infrastructure and regulatory framework in the UAE, but also an indicator of the growing confidence among consumers and businesses in the country.”

He said Dubai Economy has prioritised digital payments as a key enabler of the ease of business and smart transformation that will set Dubai apart as a competitive global business hub. “Cashless payments and e-commerce are definitely on a faster trajectory than anticipated, and we look to translate this unprecedented growth into an opportunity for businesses of any size to establish and enhance their presence online.”

He said the key takeaways from the study would lend strategic support to Dubai Economy’s future initiatives in enhancing customer happiness through innovative cashless and contactless transaction solutions.

Based on the latest transaction data from Visa, the study also compares UAE to mature and emerging benchmark markets including the US, the UK, Australia and Singapore, as well as Brazil, South Africa and Malaysia.

According to the report, in the wider Middle East, North Africa, and South Asia region, the UAE represents the biggest annual spend per online shopper at $1,648. The UAE continues to maintain a healthy lead in average transaction size compared to both mature and emerging e-commerce markets. The average transaction value in the UAE was $122 in 2019-20, compared to $76 in mature markets, and $22 in emerging markets.

“The digital payments ecosystem in the UAE and wider Mena region was already experiencing strong growth, but the pandemic has helped accelerate the pace of change and progress,” said Marcello Baricordi, Visa’s general manager for Mena.

“We’ve seen a number of adoption barriers reduce as the demand for e-commerce and contactless commerce skyrocketed during the lockdown. We call these habit forming behaviours as more consumers and merchants have now experienced the security, convenience and range of online commerce and we anticipate this trend to continue post-pandemic. Because of this, businesses that work to adapt to this new world of e-commerce and digital payments have the best chance at both recovery and thriving,” said Baricordi.

— issacjohn@khaleejtimes.com