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Dubai has strong ambitions to be a major cashless society within the next few years and with it will bring new ways of shopping, transferring money and ordering goods. Marcello Baricordi, general manager for the Middle East and North Africa at global digital payments firm Visa, outlines how advances are rapidly taking place and the huge advantages it offers consumers, merchants and regional governments.

Could a fridge order your food for you? Visa delves into the future of online payments

Marcello Baricordi, general manager for the Middle East and North Africa at global digital payments firm Visa

Picture the scene: You walk into a local supermarket in Dubai Marina or The Dubai Mall, wander around the aisles, collect your shopping and walk out the door, with no checkout queues, no searching for change in your wallet and no anxiety over whether the person in front of you has seen you type your pin into the credit card machine.

Instead, facial recognition at the entrance logged when you arrived, a smart basket recorded each of your purchases and the payment was processed electronically as you exited the store. Sounds futuristic, but the technology to make all this possible is coming a lot quicker than you may think.

“We envisage a future where biometrics are dematerialising payments even further,” Marcello Baricordi, general manager for the Middle East and North Africa at global digital payments firm Visa, says when I ask him how he sees the future in the next five to ten years.

“How do we make these transactions progressively even more seamless than they are today? Think about when you go through passport control. In the more advanced countries, they just do facial recognition. This, in theory, is also possible with payments. In the future, authentication through these biometrics will enable an even more seamless customer experience,” he believes.

In Dubai, the process has gotten even easier and you don’t even need to go to the supermarket, you just use an app to order what you want, the payment is made when you complete the transaction and the groceries arrive at your doorstep within a few hours.

But Baricordi takes this evolution even further to the next logical step: “Think about your fridge - in the future, it will be connected and be able to make payments by reporting automatically. You will have a future where you can have automatic purchases.

"Sounds too far-fetched? Smart fridges with sensors are already present in minibars in a lot of hotels and one laundry operator in the UAE told me years ago it wanted to launch a smart laundry basket that senses when it’s full and sends an order directly to the provider, which then sends a driver to your house to collect your dirty clothes.

“There are proof of concepts that can do that now,” Baricordi says in relation to the smart fridge idea. “It’s coming, in the not too distant future, and it's very exciting. That will mean we will have many more places, more connected devices from where commerce can happen.”

Checkout culture

While technology is certainly advancing, the introduction of such futuristic devices and payment methods has faced some initial setbacks. In April, British supermarket chain Sainsbury's launched its first checkout-free store in London, where customers used an app on their mobile phone to scan grocery items and then the bill was paid electronically, meaning there was no need for cash registers or cashiers.

However, a few months later, the store was forced to reinstall a few check-out counters as some customers refused to use the app and demanded the return of human assistants. The London experiment shows that the British public may not yet be willing to embrace new technological advances, but a recent survey in Dubai shows that this is certainly not the case.

In May this year, the Department of Economic Development (DED) in Dubai teamed up with Visa to launch a consumer education campaign promoting digital payments. According to the survey findings, 84 percent of respondents said they found cards more secure than cash, while 87 percent of those surveyed said they had started making more card payments online in the past two years.

With a young, digitally savvy population used to paying for their coffee in the morning with Apply Pay, their lunch with Deliveroo and dinner reserved through Zomato, it is no surprise that UAE retailers and consumers are more flexible than their British counterparts.

While around three-quarters of payments in the UAE are still made using cash, Visa’s figures show that contactless payments are surging across the country, especially with the launch of payment methods such as Apple Pay, Samsung Pay, Fitbit Pay, Google Pay and Garmin Pay.

“We have seen a major uplift in this type of transaction,” says Baricordi. “To give you a sense of the speed, approximately two years ago contactless transactions in the UAE were around two percent of face-to-face, in-store Visa transactions. Fast forward two years and in 2019 contactless transactions account for 30 percent of all in-store transactions made on Visa cards. These types of transactions are displacing those that we traditionally used to do by cash.”

The massive boom in e-commerce is also a major factor. The value of the sector in the UAE is expected to reach $27.2 billion by 2020, double what it was in 2016, according to a recent study by the World Economic Forum. At the same time, online shopping in the country increased by 48 percent year-on-year last year, according to a recent report by Mashreq Bank.

Again, Visa’s figures reflect this growing trend. Last year, e-commerce transactions comprised 28 percent of total Visa transactions and this is likely to get bigger in the years ahead. “Regionally last year, we saw e-commerce transactions grow more than two times faster than face-to-face or in-store card transactions. So, this shift towards digital payments is moving rapidly in the right direction,” Baricordi says.

Economic benefits

The surge in the uptake of contactless payments will also have wider economic benefits for the UAE economy. Last year, Visa teamed up with research firm Roubini ThoughtLab to measure the economic benefits the use of digital payments was having in major cities around the world.

The study showed that increased usage of digital payments, such as cards and mobile payments, could yield a net benefit of up to $2.2 billion annually for consumers, retailers and the government in Dubai.

A breakdown of the results found that by reducing the usage of cash, the study estimated that consumers saved nearly $200 million in time savings, as well as a reduction in cash-related fraud. For businesses the benefit was set at around $1.5 billion, again from time savings, as well as increased sales revenues, while the government of Dubai could save nearly $500 million from factors including increased economic growth, and cost savings from administrative efficiencies.

“Digital payments give access to faster top-line revenue sales,” says Baricordi. “The fact that for doing the same process it takes less time… ultimately that time saving means you are able to drive more sales. For merchants in the UAE that are currently accepting cards, 67 percent of them have seen an increase in footfall and they have seen increased sales because, ultimately, you have fewer lost sales.”

As part of the global Roubini ThoughtLab study, it was found that the benefits in Riyadh for Saudi consumers, businesses, and government in the KSA capital was estimated at around 25.12 billion Saudi riyals ($6.69 billion).

The studies also looked at the impact on employment and estimated that in the next 15 years the growth in cashless payment systems would boost employment in Dubai by 1.2 percent in Riyadh and 1.1 percent in Dubai.

Throughout the Middle East and Africa there is a lot of diversity in terms of growth levels when it comes to electronic payments. Across MENA as a whole the usage rate has grown from 9.8 percent in 2014 to approximately 15.3 percent in 2018. In more mature markets such as GCC the penetration rate is at around 25 percent, but some of the larger more populace markets are ripe for expansion.

“The rest of MENA - so that’s Egypt, Morocco and Pakistan – are at the three percent level,” says Baricordi. “That tells you how we have been successful in the last few years in displacing cash in the largest regional markets. Yet, there is still a lot of cash in the market, that is why we are so excited about the future as we see the potential and the progress we can make. In fact, the market volume of digital payments has been growing approximately 14.5 percent year-on-year so there is still a huge opportunity. Our region is developing.”

Person-to-person

The next big potential area for development for Visa is in the area of person-to-person (P2P) payments. “We are introducing new technologies that enable us to transfer money from one person to another person. This is a technology that is very popular for example in the United States,” says Baricordi.

However, while he points out that this is an area that “requires a lot of regulatory compliance”, GCC governments are “working in the right direction to enable this kind of payment” and if this was to get the green light soon it would be a “major boost” for Visa’s potential growth in the region.

A major step forward for Visa in the move towards P2P payments was its recent acquisition of Earthport, a company that provides cross-border payment services to banks and money transfer service providers.

At present, Visa can process payments for customers if they have a Visa card, but the link up with Earthport means if you want to send someone funds all they need to have is a bank account number. So when are P2P services likely to be given the regulatory ok and be made available in the UAE? “We are working to make sure that this is an opportunity that is captured,” says Baricordi. “It is happening in other parts of the world, including Russia, the United States and Asia. There is a demand for it from the payments ecosystem and consumers, so as we move towards a regulatory environment that makes all the stakeholders in the country comfortable, we’ll be in a position to [move] in that direction.

“Currently, Visa enables payments to be sent to or from Visa cards. The acquisition will make it possible for Visa clients, whether individuals, businesses and governments, to utilize Visa to send and/or receive money through bank accounts around the world. So, not only can international remittances reach the 3.4 billion Visa cardholders but also account holders who might have a bank but not a [Visa] card…. Long story short, we're very comfortable that we're going in the right direction,” he adds.

Security issues

Making money transfers and bill payments more flexible and easier obviously throws up some obvious security concerns, which Baricordi is used to addressing: “At Visa, we put security at the heart of everything. At the end of the day, our reputation, our brand, is driven by confidence and trust.”

But, as online payments surge in growth and payment methods become easier, more flexible and more futuristic, has the security apparatus and innovations kept pace?

“First and foremost, right now you can see that fraud is at the lowest historical point, as a percentage of the volumes,” Baricordi says categorically. “This is the result of a series of actions we at Visa are taking. We have been able to do this through our technology by protecting sensitive data and making stolen data useless; preventing fraud through advanced analytics; and, empowering consumers to be part of the solution.”

Visa has around 500 people around the world working in cyber fusion centres to combat online security threats, with the closest one to Dubai being in London. “Their day-to-day job is to monitor the internet, checking whether there are any fraudsters trying to attack the system. They work closely everyday with law enforcement authorities, like the FBI. The point is we take that very seriously.

“On top of that, we have deployed artificial models that check the behaviour of your transactions. There are many parameters and the artificial intelligence algorithm senses whether there is any unusual behaviour on that card. If [an attack] happens, the cardholder is informed and we take immediate action on that,” he adds.

In addition to cyber security, data protection is another big business buzzword in recent years which has proven to be divisive, but Baricordi says the advent of online shopping and artificial intelligence means merchants can increasingly use data to their advantage to help boost potential revenue opportunities.

“The element that is increasingly emerging is that [merchants] can track the digital behaviour of their customers,” says Baricordi. “So, the more sophisticated merchants are able to use the digital information to know their customers better… For example, if the customer usually travels in a certain period of the year you can send communications in advance of that travel period to promote the relevant products.”

Founded in the late 1950s in California, Visa is now one of the world’s biggest digital payment providers, capable of handling more than 65,000 transaction messages a second for it’s around 15,600 global partners.

“Our vision is to be the best way to pay, and be paid, for everyone everywhere. We are continuing to deploy new technologies that make better customer experiences. Our biggest effort is to expand the acceptance and access to financial services as much as we can in the world… Visa is the first disruptor,” Baricordi says.

I look forward to that truly disruptive day when running out of milk is a distant memory as my smart fridge has already sorted the weekly grocery shop online for me before I get home, I can throw away my wallet when I hit The Dubai Mall and sending money to a friend is as easy as the flick of switch and in seconds, no matter where in the world they live.

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