Mastercard estimates that the 20 to 30 percent increase in e-commerce spending due to COVID-19 will be a permanent feature in the share of overall retail spending.
Mastercard Institute’s Economy 2021 Report analyses the economic impact of COVID-19 including permanent changes in digital consumer spending habits, growth of online banking, fintech disruption and opportunities to boost financial inclusion.
In terms of the e-commerce spending surge, the Institute estimates a permanent stickiness factor of 20-30 percent in overall retail spending, a key consideration as businesses contemplate scaling up their digital transformation efforts.
This shift was also highlighted in a recent Mastercard e-commerce study, which revealed that 73 percent of consumers in the UAE, as well as in the wider MEA region, were shopping more online than they did before the pandemic.
“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.”
The report also notes that continued digitalization in MEA is key to advancing financial inclusion.
The report said that while the fact that the young and fast-growing populations across MEA is a key leverage for e-commerce growth, it notes that youth unemployment poses a threat to growth prospects.
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.”
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.
(Writing by Brinda Darasha; editing by Daniel Luiz)
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© ZAWYA 2021