As we emerged from the Covid-19 pandemic this year, the acceleration of consumer adoption of emerging digital payment methods continued. According to Mastercard’s New Payments Index, 85 percent of respondents to the global survey said they had used at least one emerging payment method in the past year. In the MENA region, however, cash is still king. Yet, digital payments are becoming more commonplace, and the rate of adoption and enablement of digital payments is rising.
Here are the top digital payment trends to watch in 2023:
BNPL will continue to thrive in uncertain economic times
The buy now, pay later (BNPL) market will continue to gain popularity in the coming year, with more players entering the space and offering customers greater flexibility when paying for goods and services. The meteoric rise of BNPL has been credited to increased merchant adoption of the solution as inflationary pressures drive consumer demand for flexible payment options. Juniper Research predicts that BNPL will account for a quarter of all global e-commerce transactions by 2026, up from just 9 percent in 2021. In addition, a recent McKinsey survey found that more than one-quarter of e-commerce shoppers this year would either have bought less or not have made certain purchases had a BNPL option not been available, which speaks to the utility of this type of payment scheme in providing customers with greater flexibility when it comes to managing their finances.
An exciting collaboration we witnessed this year was between Tabby and Paymob. The integration of Paymob’s POS solution with Tabby’s BNPL offering made in-store BNPL payments possible for the first time in Egypt, delivering value to consumers and businesses in the Middle East’s third-largest economy.
Overall, the continued maturation of the BNPL market will provide customers with greater flexibility and choice when it comes to how they pay for goods and services. In addition, with more players entering the space, competition will also lead to improved user experience and better offers in terms of fees and repayment windows, resulting in a win-win situation for both consumers and businesses looking for more convenient ways to manage their finances.
Digital wallets on the rise
In 2022, we watched the rise of digital wallet adoption among consumers. This was primarily driven by increasing options available to consumers, such as Apple Pay, Google Pay, and Samsung Pay, as well as regional offerings. We will see this increase in adoption continue into 2023. Estimates suggest that 4.4 billion global consumers will shop with a digital wallet by 2023, accounting for 52 percent of all e-commerce payments globally. And 1.6 billion global consumers will pay with digital wallets at the point of sale (POS) in 2023, accounting for 30 percent of POS payments according to recent estimates.
The adoption of digital wallets will continue to play a crucial role not just for individuals but increasingly for businesses of all sizes. Small and medium enterprises (SMEs), particularly in the UAE, have been quick to embrace digital wallets. A recent Visa survey found that UAE SMEs and consumers exhibit a higher level of openness to cashless payment solutions compared to global averages. For example, 52 percent of consumers surveyed in the UAE, compared to 41 percent globally, plan to be cashless by 2024 or are already cashless. In addition, nearly all respondents (99 percent) indicated seeing the benefits of a cashless society. To meet these expectations, 71 percent of surveyed SMEs in the UAE, versus 59 percent globally, said they were either cashless or planned to become cashless by 2024.
Driven by this consumer demand for cashless payments and encouraged by the convenience, flexibility, and security provided by digital wallets, the proliferation of their adoption will become the standard for utility payments, e-commerce, and peer-to-peer transfers in 2023. We witnessed banks launching their own digital wallets globally and in our region. A national initiative by the UAE Bank Federation representing 16 national banks launched Emirates Digital Wallet, which allows money to be spent, remitted, and stored digitally through its klip app. There will also be increased demand across the region for white-label digital wallet solutions which build custom digital wallets using a secure infrastructure.
Consumers will tap more with contactless NFC-enabled payments
Mastercard’s Tap on Phone and Visa’s Tap to Phone solutions turn a merchant’s smartphone or tablet into a secure, contactless ‘soft point-of-sale’ terminal that can instantly receive payments from customers’ contactless cards or digital wallets, provided that both the paying and receiving devices are enabled for near-field communication (NFC). It transforms the merchant into an omnichannel business without requiring any additional hardware. It also allows merchants to accept in-store payments anywhere they have a mobile device and an internet connection, making it an ideal solution for micro-businesses and SMEs who don’t traditionally have a POS system. The NFC-enabled tap solution allows merchants to be more flexible and agile in conducting business by quickly and easily enabling digital payment acceptance, and it provides a better experience for their customers.
Visa recently partnered with banks in Qatar to deploy its Tap to Phone solution, enabling SMEs to easily accept digital payments from hundreds of thousands of football fans who have descended upon Qatar for the Mondial. Last year, Paymob partnered with Mastercard to roll out the ‘soft POS’ system to merchants in Egypt. We have seen tremendous adoption as merchants embrace the contactless payment solution, which is automatically processed through the Paymob app.
While the contactless NFC-enabled ‘soft POS’ solution was initially rolled out for Android devices, Apple announced that it would be available on its iPhone XS and newer models by the end of 2022. As the availability of the solution expands, I expect wider adoption, particularly by micro-businesses and SMEs.
Fast, simple, and secure checkouts with Click-to-Pay
As e-commerce in MENA settles into a high-growth era next year, the demand for fast, simple, and secure checkout experiences is set to grow in tandem. Click-to-Pay is a one-click checkout experience launched by Mastercard, Visa, and Amex to streamline the online shopping experience when consumers are using credit, debit, or prepaid cards to pay for goods and services. The technology is not new and has been available to Apple Pay, Google Pay, Amazon, and PayPal customers for some time and is a prime example of tech companies leading the way in payments innovation.
Click-to-Pay eliminates the need for customers to enter their details with every transaction or store passwords and sensitive information with numerous merchants. Instead, tokenization encrypts customer data by generating a one-of-a-kind digital identifier or token to replace a customer’s credit card number and personal data, creating a layer of data security. Simple, secure, and frictionless online experiences result in better conversion and lower cart abandonment rates for merchants.
Several businesses in MENA are supported with Click-to-Pay, including Emirates airline, utility company Etisalat, talabat, the delivery app, and Marriott International. In 2023, we will see an uptick in adoption by merchants of this simple, fast, and secure digital acceptance method.
2023 will be a boon year
2022 was the year consumers demanded and embraced more innovative, seamless, and frictionless digital payment solutions. 2023 promises to be a boon year for digital payments.\