UAE leads payments growth in MEA region

(MENAFN- Khaleej Times) There are several reasons why the UAE leads the high-potential Middle East and Africa region in payments growth. Not only is the country ahead in promoting card use through government initiatives but innovation is also high across the payments value chain ensuring that the benefits of payments growth reach all segments of the population.

From grassroots programmes such as the Wage Protection System to initiatives such as the World Expo the UAE is ensuring that it remains one of the leaders in the region and the world in the consumer space. At the same time localised innovation ensures that unbanked demographic segments are brought into the fold through mobile and electronic payment systems. This is one of the key reasons Network International acquired Emerging Markets Payments in March 2016.

Take a look at the comparative data: non-cash transactions across the world are growing at the rate of 8.9 per cent according to Capgemini data with the developing world growing at 16.4 per cent and the mature markets where the growth is from a stronger base increasing at 6.1 per cent in 2014.

The MEA region is blazing one of the fastest expansion rates in card transactions in the world at 24 per cent growth double the 12 per cent being recorded in the second-fastest growing region. And within the MEA the UAE is one of the standout performers.

By the end of 2015 card transactions in the UAE are estimated to have grown by 10 per cent compared to the previous year our data scientists tell me. Research by Lafferty Group shows that a bankable UAE population of 3.5 million had 12 million cards in their wallets in 2014. While credit cards transactions are growing at 18 to 20 per cent year-on-year point-of-sale transactions on debit cards increased by 29 per cent year-on-year in 2014.

When it comes to the rate of increasing card penetration as well the latest data show that at a seven per cent compound annual growth rate between 2011 and 2015 the UAE enjoys one of the world's highest rates comparable to a range of countries that includes Russia Qatar Ireland and Hungary.

The UAE's population is expected to continue on its upward trajectory as the government puts in place vibrant policies that ensure job growth. UAE Ministry of Health and World Bank data show the population was 9.3 million at the end of 2014 up from 8.4 million in 2010.

Unlike the world's other regions where a bulk of the population constitutes children who are yet to grow into what I'd call "money-making individuals" the UAE's population largely comprises expat workers attracted by what the country has to offer. For us it means that when new people come in they're spending right away.

Tourism is booming even if the mix changes depending upon what's happening in the world at any particular time. Dubai's Vision 2020 combined with Expo 2020 will see the number of tourists multiply from 10 million in 2012 to 25 million by 2020.

The combination of a growing population of resident spenders and increasing tourist footfall result in high retail spend which is growing at about 15 per cent per year. This is expected to more than double in the next four years.

That stakeholders don't rest on their laurels is one of the first requirements of growth. The figure that interests us most is that under 40 per cent of transactions in the UAE are card-based which means that the migration from cash to cards presents the opportunity of over 60 per cent growth over the next seven years.

For the MEA region as a whole the potential to grow is steeper as 75 per cent of transactions are in cash. Take the UAE out of the equation and the MEA proportion of cash transactions rises to a phenomenal 85 per cent. In developed economies this tends to be between 30 per cent and 40 per cent. From where we stand therefore all of the UAE's adjoining geographies have tremendous potential especially when we add in North Africa and Sub-Saharan Africa.

Even if one were to factor in a potential - and I've been asked this question many times - the flattening of oil prices and its impact on the economies of the oil-producers of the region the ability to migrate cash payments into the card realm alone is robust enough to drive this entire business pretty fast.

And the UAE is ensuring in multiple ways across the value chain - from government measures that make the UAE more attractive to expatriate workers international business and tourists to innovative technology start-ups that advocate the benefits of financial inclusion - that the country continues to perform at peak economic form.

The writer is the chief executive officer of Network International. Views expressed are his own and do not reflect the newspaper's policy.