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The journey to a cashless Middle East

Though far from dead, the role of cash in the Middle East is changing. No longer, king, it’s under increasing threat from cards, contactless and digital wallets. This is giving all types of merchants, more reasons to invest in POS devices that accept a wider variety of payments.


Despite the huge swing to e-commerce during COVID, the high levels of smartphone penetration, and a young tech-savvy population, The Middle East is still heavily dependent on cash. But its stronghold is showing signs of weakening. The region is expected to process 139 billion individual non-cash transactions this year - 90 billion more than five years ago[i]. By 2023, it’s predicted that 69% of ME payments will be cashless - almost seven out of 10 payment transactions[ii].


What’s driving the shift away from cash?

There are many drivers impacting the gradual demise of cash. There is a growing shift in attitudes and behaviours, especially in younger, mobile-first populations. Moreover, as with many western markets, the COVID-19 pandemic has accelerated digital adoption and a flight from cash.

At the same time, there are powerful drivers at play that are empowering more people to use e-payments on a daily basis – to purchase products and services and pay their bills.


This includes:

  • Better infrastructure Government and regulatory initiatives are helping increase the infrastructure to support e-payments. In Saudi Arabia, for example, the Ministry of Finance’s Mada card payments network has rolled out 160,000 retail POS that now account for 40% of all payments[i]. Similarly KNET, in Kuwait, handles 80% of all consumer transactions, and for 50 government institutions. It has recently launched a new payment gateway for merchants[ii].

  • Access to e-payment methods There’s now wider availability of different payment methods - not just bank and credit cards but also prepaid and digital cards and mobile and e-wallets. These are all making digital value more accessible especially to the unbanked and financially underserved.

  • Cross-border opportunity The Middle East is an important center for cross-border commerce, this is fuelling new digital payment investments. For example, the development of a common digital currency between Saudi Arabia and the UAE; the Buna payment platform supporting multicurrency payments among members of the Arab Monetary Fund; and the AFAQ system connecting the real-time gross settlement (RTGS) systems of the six countries in the Gulf Cooperation Council (GCC).

  • Availability of affordable and flexible POS POS innovation is sparking merchant adoption across the region. The wider availability of high-quality, reliable, and reasonably priced payment devices - such as the android based Castles S1F2 or S1E mobile terminals - is helping more merchants, in more environments to take a card, contactless, mobile payments and bring added value to the POS.

Staying ahead of trends...


To keep up, merchants have been ramping up investment to ensure they can respond with the right acceptance platforms as consumers migrate on mass away from cash.

Over half of the region’s payments experts (53%) expect contactless will be the leading payment method five years from now [i]. At the same time, 60% believe digital wallets will become the most influential digital payment method[ii]. This is no surprise as the Middle East has the highest smartphone penetration in the world (97%)[iii].


It’s clear that cash’s dominance in the region is gradually diminishing. By working together governments, merchants and POS providers are doing everything they can to smooth the path to a cashless future. It’s a journey that will drive greater inclusion for all.


For more information about Castles in the Middle East contact info@castletech.com


 

[1] https://www.europeanpaymentscouncil.eu/sites/default/files/inline-files/World-Payments-Report-2019.pdf

[1] https://thefintechtimes.com/mena-fintech-association-divulges-the-state-of-the-regions-payment-ecosystem-in-new-shift-report/

[1] https://www.mada.com.sa/en/content/glance-saudi-payment-network-span/38

[1] https://www.knet.com.kw/services/tasdeed/

[1] https://www.mckinsey.com/industries/financial-services/our-insights/the-future-of-payments-in-the-middle-east

[1] https://www.mckinsey.com/industries/financial-services/our-insights/the-future-of-payments-in-the-middle-east

[1] https://www2.deloitte.com/content/dam/Deloitte/xe/Documents/technology-media-telecommunications/GMCS-whitepaper.pdf

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