The UAE payments industry is projected to record a 55 per cent jump in total revenue pool to $19.8 billion in five years, on the back of growing digital transactions and technological advancements powered by GenAI.
Analysts at Boston Consulting Group said in a research note that the UAE-based payment providers are “uniquely positioned to redefine their roles and services” as the global payments ecosystem undergoes changes.
BCG's in-depth analysis of the UAE payments sector expects that the overall revenue growth will increase in the next five years (2023-2027) to a compound annual growth rate (CAGR) of 3.6 per cent pushing the revenue pool to $19.8 billion. In comparison, the global payment revenues are projected to grow by $2.2 trillion by 2027 at a CAGR of 6.2 per cent.
According to GlobalData, the UAE cards and payments market size was valued at $119.8 billion in 2022 and is expected to achieve a CAGR of more than 8.0 per cent during 2022-2026. The payments landscape in the UAE is dominated by cash, which accounted for more than 64 per cent of overall payment transaction volume in 2022.
Mohammad Khan, managing director & partner, BCG, said the UAE is experiencing a defining moment for those in merchant services, issuers, transaction banks, and payment infrastructure. “While our research shows a slower growth seen globally, the UAE payments revenue pool is expected to grow in the years ahead. This is largely in part to the UAE being an early adopter of technological advances powered by GenAI which is being utilised across organisational processes. This evolution will improve customer pathways and offer specialized solutions, resulting in heightened service quality and profit growth," said Khan.
“Amid global challenges such as the pandemic and economic fluctuations, the UAE payments industry has demonstrated resilience. Between 2018 and 2022, the total revenue for the UAE payments industry grew at a CAGR of 9.7 per cent, reaching a revenue pool of $12.8 billion by the end of 2022, the report noted. In contrast, the global payments industry registered an annual growth rate of 8.3 per cent to reach $1.6 trillion by the end of 2022, said the report titled ‘Global Payments Report 2023.’
BCG analysts said the preceding development in the UAE payments sector can be attributed to a combination of factors, including the transition from cash to non-cash transactions.
From 2023 to 2027, the UAE's transactions are forecasted to grow at a CAGR of 10.9 per cent. “This growth is spurred by the country's shift from cash to digital transactions. Key drivers include technological advancements in payment systems and supportive government initiatives. Additionally, the UAE's economic expansion and changing consumer preferences towards digital payments are leading to continuous growth,” said the report.
The report noted that the UAE payments industry is grappling with multiple disruptions, from technological advancements to new market entrants. “These include the rapid growth of real-time payments, the introduction of value-added services, and the commoditisation of basic payment processing. Over 5,000 fintechs globally are now making their mark in the payments arena, collectively accounting for a significant portion of the industry's revenue. In this evolving scenario, UAE-based companies must strategise effectively to maintain their competitive edge.”
The report highlights four pivotal areas that are shaping the strategic direction of the UAE's payments industry. These include operational resilience, Generative AI, risk management and compliance, and mergers and acquisitions.
The investment dynamics in the UAE's fintech sector reflect global trends, the report noted. With a shift in focus from large-scale deals to capability-centric acquisitions, companies must revisit their partnership strategies. This approach will enable them to identify and capitalise on current M&A opportunities, ensuring long-term growth and success.
Lukasz Rey, managing director and partner, head of Middle East Financial Institutions Practice, BCG, said the significance of GenAI is growing in the payments sector, particularly in its ability to enhance compliance measures as it becomes more integrated into core organisational processes. Additionally, smart partnering and M&A are proving to be valuable in building capabilities in this domain.”
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