The continuing trend away from cash is expected to be more persistent in economies such as the UAE, which already has a resilient e-commerce infrastructure and a young, digitally savvy population. That said, according to Economy 2021, as e-commerce rapidly becomes a way to pandemic-proof a business, adoption by older generations and added convenience and lower costs for consumers will contribute to the continued growth of digital demand in 2021.
Digitization is key to advancing financial inclusion
Within the scope of accelerated digital transformation, the report also notes that continued digitalization in MEA is key to advancing financial inclusion. This is especially relevant in regions such as East Africa, where IMF research found that even where financial inclusion through traditional banking services was declining, expanded access to digital tools and services increased financial inclusion. This trend is set to continue in 2021, especially in the more digitally advanced economies such as Ghana, Kenya and Uganda.
According to Economy 2021, the need to bring the population into the digital economy first through online banking solutions is paramount to delivering growth over generations to come. Fintech disruption in online banking is set to be a key driver for this, especially in East African economies. Brick-and-mortar business creation is expected to decline further in 2021 in favour of online business creation and the adoption of initiatives that connect a merchant’s sales data with access to capital.
Another aspect of advancing financial inclusion highlighted by Economy 2021 is leveraging cutting-edge technologies to connect consumers to small businesses and micro-merchants. As digital innovation improves and internet access increases, digital payment solutions such as Contactless, Virtual Card Numbers and Quick Response codes offer more possibilities than ever before.
Mastercard has been working to bridge the financial inclusion gap through a broad range of efforts, including partnerships with mobile network operators, ongoing work on government disbursement solutions, wage digitization of private sector workers, solutions for gig workers, scaling efforts with telcos via their digital platforms and digital wallets.
The future is young
A key success factor for regional economies when it comes leveraging the growth of e-commerce and advancing financial inclusion is the young and fast-growing populations across MEA. Africa is home to 19 of the world’s 20 youngest countries, and the Middle East & North Africa (MENA) region has the largest youth population in the world, with more than half of residents under the age of 25. As millions of young consumers become mobile users for the first time, GSMA anticipates Sub-Saharan Africa to cross a 50% penetration rate of unique mobile subscribers by 2025.
In addition to the advantages that this demographic presents, Economy 2021 also sets out the associated risks such as growing youth unemployment. The report notes that the link between high unemployment, high youth unemployment and social unrest is likely to remain an issue in 2021, as is the potential fallout from climate change – which carries both short- and long-term risks.
“This growth of the digital economy represents a ‘coming of age’ for e-commerce, a turning point in bridging the digital divide. We are heading for a multi-speed global recovery that favors low-touch over high-touch,” said David Mann, Chief Economist, Asia and MEA, Mastercard. “Small businesses and micro merchants are especially crucial to the region’s economies and by enabling them to accept digital payments, we can connect more people and communities to financial freedom and eventual prosperity.”
Mastercard has committed to powering small businesses through its payments technologies, network and insights, as part of a global $250 million pledge in products and services over the next five years.
Alongside e-commerce, the report anticipates automation around the Fourth Industrial Revolution (4IR), contactless interaction, local delivery services and ‘tele-everything’ to be other long-lasting trends. Among the trends expected to reverse as mobility restrictions are gradually lifted are eating out and leisure travel, a key GDP contributor in many MEA economies. Traditional tourism-focused economies, such as Kenya and Egypt, will benefit from international tourism’s eventual return.
About Mastercard Incorporated (NYSE: MA), www.mastercard.com
Mastercard is a global technology company in the payments industry. Our mission is to connect and power an inclusive, digital economy that benefits everyone, everywhere by making transactions safe, simple, smart, and accessible. Using secure data and networks, partnerships and passion, our innovations and solutions help individuals, financial institutions, governments, and businesses realize their greatest potential. Our decency quotient, or DQ, drives our culture and everything we do inside and outside of our company. With connections across more than 210 countries and territories, we are building a sustainable world that unlocks priceless possibilities for all.
© Press Release 2021