By Marcello Baricordi
More than 80% of small businesses in the UAE and 93% in Saudi Arabia have seen their revenues negatively impacted following the virus outbreak
It's no secret that companies of all sizes have been affected by Covid-19. Small businesses worldwide - particularly those with limited or no digital presence - have been among the worst hit. Cash-only merchants are amongst those struggling the most.
Visa's Covid-19 CEMEA Impact Tracker, an ongoing survey of merchants and consumers throughout Central and Eastern Europe, the Middle East and Africa (CEMEA) region, has found that more than 80% of small businesses in the UAE and 93% in Saudi Arabia have seen their revenues negatively impacted following the virus outbreak. These sellers may be small but, in addition to their own livelihoods, their businesses play a critical role in the lives of their customers, employees and vendors, and are a key contributor to their communities and economies.
But like with any crisis, the current pandemic is an opportunity – from our perspective, that opportunity is digital transformation. While we’re starting to see some estimates on when the economy will recover. in our experience of the pandemic, what will hasten recovery is responding to the increased consumer demand for digital experiences. From a payments perspective, this may be from contactless methods when shopping in-store or paying by card when online. Merchants who recognize this and act on it now as economies begin their recovery are setting their businesses up for relevance and growth in the post-Covid-19 normal.
This is why businesses now need to take post-pandemic planning seriously. While the short-term outlook varies greatly by industry, without a plan in place many will struggle to survive the financial havoc as they carry on exhausting their cash reserves.
As we use the power of our network, products and services to support the world’s immediate shift to digital for both buyers and sellers, here are five truths we’re recognizing that every small business in the region must consider in their recovery plan:
1. For many, old habits may forever be replaced
Covid-19 is changing more than just bottom lines and therein lies the opportunity for both survival and recovery. The pandemic has radically changed how we spend, send and use money. Visa’s Covid-19 CEMEA Impact Tracker found that the pandemic has driven nearly two-thirds of consumers in the UAE (68%) and Saudi (66%) to do their shopping online. These altered shopping behaviours, if carried over post-pandemic, could have a major impact on how merchants do business in the future, making it an important consideration once the economy begins to return to normal - or establishes a new state of normalcy. It's safe to expect a crisis on this scale will change the world permanently.
2. Business payment processes are being forced to go digital
A global virus that keeps millions contained in their homes and working remotely for months is also forcing companies to rethink the use of paper checks and cash to make their B2B payments. Businesses that have been accustomed to paying and receiving payments in paper form are recognizing that they cannot access and reconcile payments remotely while cutting off cash flow. Consumers, governments and businesses both need and expect secure, immediate access to funds digitally and are looking for new ways in which to make their payments. We have seen fast growing demand for new peer-to-peer money movement across the region as Visa Direct, Visa’s real-time push payments platform, continues to address the challenges of moving money in new ways, especially in the Covid-19 environment. In fact, we are now seeing more companies using processing capabilities like Visa Direct to pay employees and gig workers quickly by depositing money into their bank account or onto their Visa card immediately.
3. Contactless is here to stay
Covid-19 will forever change the way we interact with money. Our Impact Tracker shows that cash-only merchants in KSA and UAE experienced a negative impact with 58% and 50% recording a drop in revenue, respectively. In KSA this has pushed 68% of cash-only businesses to acquire some sort of point-of-sale machines. Currently, contactless payments represent at least a third of all face-to-face transactions in almost 50 countries globally. In the UAE and Saudi, that figure is higher - with 80% of transactions in Saudi and more than 50% of transactions in UAE made using contactless cards or devices. Over the past months we have seen fast growing demand for contactless payments on cards and on mobile phones to suit consumers' lifestyles amid social distancing guidelines and we can expect the popularity of contactless to be sustained and further increase post-pandemic. Understanding and planning for this is especially crucial for small businesses in the region that still have cash-on-delivery as the primary mode of payment.
4. eCommerce is on an upward trajectory
Offline merchants in the MENA region are seeing anxiety levels skyrocket as consumers have been staying away from all but essential retail, according to the Impact Tracker. The lockdown has considerably reshaped consumer purchase behaviour, with the majority opting to shop online no matter what they’re buying. As millions of new buyers experience the convenience of digital commerce for the first time, especially for groceries, meals and household staples, expect these newly formed habits to last. It is now critical that small businesses shift or enhance their digital presence to survive and thrive going forward, whether that means creating a new online presence or adapting to how consumers are spending online. To conduct online businesses successfully, it is also important for small businesses to incentivize customers so that they are encouraged to use the new channels and payment options.
5. There can be no decisions without data
As the pandemic continues to transform much of life and business as we know it, tackling decisions for recovery are now near impossible without data. In uncertain times and in a rapidly changing environment, understanding unique data patterns are pivotal to anticipate and foresee consumer trends to seize the opportunity ahead. As a global payments network, we have a unique view into money movement around the world, supporting more than 5 million merchants, 400 million consumers in the CEMEA region and enabling billions of payments through our network. Currently, we are equipping issuers, acquirers and fintech firms in MENA with the latest data, analytics and recommendations to understand the impact of the pandemic on their businesses thanks to our Visa Analytics Platform, a powerful application suite that enables businesses to easily analyse Visa debit, credit and prepaid data performance at the cardholder, merchant and transaction levels to make informed decisions and take action through analytics. Such data insights can be a game-changer for a business.
Clearly, things have changed but what’s here to stay is the consumers’ shift to digital commerce. The way we see it, merchants need to recognize that the behavior of their customers has changed forever. To adapt to these changes, they must optimize operations by digitizing the supply chain; recognize the importance of eCommerce and go online to expand their sales channels; design and deliver great customer experiences – that includes providing contactless payment options - to help re-attract existing and attract new customers in store; and optimize marketing costs by using data to develop hyper-targeted marketing.
Marcello Baricordi is Visa’s General Manager for the MENA region