“COVID-19 related headwinds such as decreasing oil prices, a slowdown in tourism, and a substantial rise in expatriate migration have slowed overall economic growth,” said Godfrey Sullivan, Managing Director and Partner, BCG. “While payments revenue growth in the region is projected to be restricted as a result of the pandemic, we are also seeing a surge in electronic transactions, pointing towards an opportunity of growth in digital.”
Efforts are being made across the GCC to drive increased uptake of digital payment methods, with governments, banking institutions, and service providers enabling greater access and reducing transaction costs.
Countries are open to more international contributors entering the market, and Saudi Arabia and the UAE intend to implement real-time payment infrastructure within the next two years to facilitate economic growth, the report said.
“BCG’s research indicates that the cashless agenda, e-commerce growth, and vibrant competitiveness in the payments category will become more and more apparent in the region,” said Mohammad Khan, Partner, BCG. “Payment leaders in the GCC have an opportunity and urgency to make bold moves that can secure their business’s long-term prosperity.”
BCG’s market data and industry findings identified trends that will shape the payments sector landscape in the next five years:
COVID-19 will accelerate the cash-to-noncash conversion
Evolving customer preferences, improved accessibility, and higher transaction limits will drive this transition.
Across the GCC during the crisis, higher numbers of merchants welcomed contactless payments, including those of lower value. Likewise, consumers demonstrated the same enthusiasm, even in traditionally challenging markets. Governments may be interested in accelerating the cashless agenda, as research has shown that electronic payments can increase global GDP by as much as 3 percent per year.
COVID-19 will elevate e-commerce growth
A fundamental consumption shift has occurred due to the pandemic, which will change the combination of payment options and, in some areas, lower the prominence of cards.
Mobility-dependent sectors such as entertainment and travel have already witnessed a drop in payments, and others, including food and home entertainment, will likely record greater growth. Providers should be prepared for such change and align payment choices to accommodate different industries’ purchasing trends.
Industry consolidation will shape the competitive environment
Mergers and acquisitions (M&A) payments activity has been fostered through value chain ambitions, scale objectives, and the necessity to move money quicker.
Although the deal flow has predominantly revolved around payments processing and acquiring, it will likely spread to other value chain areas.
GCC payment markets are still developing in comparison to others, and private equity, ecosystem participants, and local competitors seeking to build scale regionally will most probably drive M&A activity.
(Reporting by Seban Scaria; editing by Daniel Luiz)
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