Although it has taken longer than other parts of the world, the digital revolution in the UAE may finally be about to supersede the previous mantra that ‘cash is king’.
According to a recent study from the Federal Competitiveness and Statistics Authority, 90 percent of people in the UAE use digital banking, while the number of ATM users reached 100 percent.
The trend is showing no signs of abating, Samer Soliman, managing director, Middle East, Network International, who said digital payments are set to grow from $6.5 trillion in 2017 to $8.9trn in 2022.
“This will be further boosted by the growth of e-commerce, as card payments rise and cash-on-delivery gradually declines,” he said.
Cash-on-delivery represented 21 percent of e-commerce transactions in the UAE in 2017, over twice that of more developed geographies such as Europe, where cash-on-delivery represented only nine percent of e-commerce transactions. It's a stark change from the year previously, when a Yallcompare survey found that 85 percent of UAE residents still preferred cash on delivery.
Shahebaz Khan, Visa general manager for the UAE, said: “Cash has been in circulation for millennia, so while it may take time to disappear completely, we are optimistic that it will eventually be displaced with consumers, businesses and governments increasingly demanding digital methods to pay and be paid.
“Some consumers may prefer to use cash for small purchases, while others might use cash in situations where they are purchasing something from a cash-only merchant (mostly small merchants who don’t accept card payments or have a POS machine).
“In e-commerce, though some consumers still opt for cash-on-delivery, our ‘Stay Secure’ survey found that 92 percent of them would still choose to pay by card if a mobile POS machine was available upon delivery.”
The switch from cash to digital is being driven by the millennial generation, which accounts for almost 30 percent of the UAE population. And with smartphone penetration at 79 percent it is no surprise that digital payments are becoming more popular.
According to the aforementioned Stay Secure survey, from Visa, 93 percent of UAE consumers found card payments (both in-store and online) more convenient over cash.
Further, Visa statistics show that the UAE is now the leading country in the Middle East and Africa region when it comes to Visa contactless transactions.
Khan said: “Consumers are tapping their card or phone for a whole range of transactions, both big ticket, one-off purchases as well as low value, everyday purchases. In fact, according to Visa data, the average transaction on contactless is around AED100.”
Emirates NBD’s tablet banking initiative helps customers open an account or sign up for a personal loan, credit card or an investment product in a completely paperless manner.
Suvo Sarker, senior executive vice president, head of retail banking and wealth management, Emirates NBD, said: “Today 85 percent of our personal loans are opened fully digitally. Over two-thirds of all customer service requests are fulfilled digitally and straight-through.”
The shift towards electronic payments is also being supported by governments, with several ongoing initiatives in place, such as Dubai’s Smart City initiative, which has seen the migration of most major government services to online payment channels, with mobile apps following closely behind.
Soliman said: “As the government pushes its Smart Dubai initiative, consumers are increasingly choosing to make cashless spends, and based on historical figures, Network International expects this trend to remain positive going ahead – offering a lot of opportunities for banks and retailers alike.”
However, with a rapidly growing digital customer-base, there comes an equally expanding threat of cyber-crime, with cyber-attacks like phishing, smishing and vishing all attempts at fraud.
Sarker said: “Customers need to be ever vigilant to ensure no sharing of confidential and personal information with third parties, and adopting safe banking practices.”
Speaking at the Arabian Business Tech Forum as part of a panel debating the core issues surrounding the future of payments earlier this year, Jeb Million, vice president and chief technology officer, American Express (Middle East), said the company’s main challenge will be to develop cashless solutions that consumers feel are convenient and safe.
“As a connected consumer, what I’m looking for from cashless solutions is the advantages of digital [but] I also want the advantages of physical. I want to be able to touch the products. I want shopping as a shared experience with my family. What I’m looking for is for it to be a little bit easier, and for it to be a little bit more personalised, without the fear that I’m being watched,” he said.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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