The UAE moved significantly closer to becoming a cashless society in 2020 as shoppers stayed home, adopted contactless and rejected cash during and beyond the Covid-19 lockdown. The infrastructure for e-commerce has been in place for several years - but the emergence of smartphones and greater security levels combined to create the perfect conditions for mass adoption in 2020.
In the UAE, most major acquirers offer e-commerce acceptance, and almost all point of sale (POS) terminals accept contactless and digital wallet transactions. The UAE is also a frontrunner in 5G rollout, superb 4G infrastructure and, with more than 92 per cent mobile internet penetration; it is one of the world's biggest consumers of data.
A permanent preference
With the right infrastructure in place, Covid-19 nudged UAE shoppers towards digital payments and online shopping. Solid security has helped push the nation even closer towards majority digital transactions. High-security solutions like 3D Secure, PCI-DSS compliance, and other measures that give customers more peace of mind have been implemented in the UAE thanks to a government that was able and willing to create a digital economy and an enabling environment for FinTech innovators to flourish.
From a pre-Covid average of around 30 per cent, e-commerce now represents almost 50 per cent of transaction value at Mashreq Bank, which has been recognised as the 'Best Consumer Digital Bank' and the 'Most Innovative Digital Bank' in the UAE (Global Finance 2020). This figure of 50 per cent is significant: it has happened within the context of a collapse in airline and hotel bookings. After the national sterilisation and disinfection programme began, shoppers moved even closer to cashless, preferring to avoid touching machines to enter a PIN code. Market information indicates that four out of every five POS transactions are now contactless. This behavioural shift has accelerated through hygiene concerns that will largely be a permanent preference for shoppers choosing a safe, secure and faster checkout experience.
The shift is likely to become even greater thanks to the UAE's new national identity and digital signature solution, UAE Pass, which automates and simplifies managing digital identities in mobile devices. With the rapid evolution of credit bureau systems in the GCC, it is becoming significantly easier for lenders to know their customers and their unique needs.
Shop by voice
The region is still relatively young when it comes to credit reference agencies, a fundamental part of borrowing in the developed economies for many years. In the GCC, credit bureaus are maturing with more services, and central bank enabled solutions like the UAE Funds Transfer System (UAEFTS) and UAE direct debit system (DDS) are making salary verification and collections much easier than the days of salary certificates, bank statements and post-dated cheques.
Alongside a flourishing FinTech ecosystem in the UAE, these technologies have given rise to significantly higher rates of contactless payments on plastic, international funds transfer using mobile apps, and increased usage of debit, credit and prepaid cards on e-commerce. These technological developments and COVID-induced behavioral changes now place the UAE and other GCC nations on course to catch up with some of the world's more advanced cashless societies such as Sweden, where just one per cent of the country's GDP circulates as cash.
As the region's digital payment revolution unfolds and the rise of open banking transforms digital payment services, customers will be able to initiate payments from many places, without having to open their banking apps - such as China's WeChatPay or Alipay.
The near future will also see banking and payment solutions embedded into existing social media apps so that the online retail journey can become instantaneous. This represents a complete transformation of banking for shoppers, from instant digital onboarding to borrowing and spending. For retailers, the digital revolution provides opportunities to build sophisticated cross-border Omni channel retail offering. 'Shop by voice' solutions are also becoming a reality - Amazon Pay is currently registering retailers as 'Amazon developers' to build their very own voice pay tools that integrate Amazon Pay, allowing retailers to accept shopping orders by voice.
Voice-activated payments, biometric payments, cryptocurrencies and transactions by facial recognition are no longer science fiction. They are science fact - and if anywhere in the GCC is ready and waiting to adopt and roll out the digital payment technologies of the future, it is the UAE.
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