The UAE ecommerce market has been in growth mode for some time. It is expected to surpass $16bn by 2027. Across the region and around the world, the writing is on the wall and retailers are reading it. Standalone brick-and-mortar engagement is being slowly supplanted by hybrid and online retail.
B2C companies that lived through (and survived) the pandemic, invested hard in digital. We saw commendable innovation built around not only the expectations of consumers in the “new normal”, but around the desire to do more with less. Everything from finance to logistics appeared to undergo an overhaul. Retailers were bridging the gap between physical and digital stores.
But, of course, all this change was not unique to the retail sector. The payments industry also got to work reinventing itself. We saw a wave of transformation in the way consumers pay for goods and services. Buy now, pay later (BNPL) was a huge hit. Additionally, we had subscription boxes and sustainable payment methods. And as more and more of these offerings enter the mainstream, retailers will have to deal with the fact that they are now fixtures on the customer’s list of expectations.
No discounting the value of connected payments
Currently, most UAE retailers rely on third-party payment gateways to manage back-end payments. But while outsourcing can be a great optimiser, it may not always yield outcomes that best fit customers preferences. Just as retailers have successfully modelled the end-to-end customer journey, they must incorporate payments in the manner customers prefer.
Failure to do so could mean missing out on growth opportunities or losing customer loyalty. And while enterprises remain constricted by payment-provider tie-ups, those that have taken the plunge with connected payments are more agile. To stay competitive, others will need to follow suit, taking ownership of authorisation, transaction routing, settlements, and even compliance. Automate and optimise every link in the payment value chain through a single, connected platform and new value can be unlocked.
But moving from gateway partnerships to in-house solutions can be tricky without the right talent pool. Challenges lie ahead from day one of the transition journey. Effective payments orchestration calls for all payment gateways to speak to each other regardless of location. Partners are no longer responsible for the massive amounts of secure payment data that flow back and forth. That is now the retailer’s domain. They must tangle and get to grips with PCI compliance.
The challenge list goes on. In introducing value-added products such as consumer finance, the business must establish new teams and workflows to combat fraud and money-laundering and manage things like the lending process, loyalty schemes, and reward systems. And care must be taken to ensure the payments system automatically instals rolling updates to issued cards without any disruption to the customer or employee experience.
Mapping out the future
All these tasks and responsibilities that used to be handled by gateway providers are now resting on the retailer’s shoulders. They need to be ready to lift the veil on the payments landscape and gain new understanding of all the systems, processes, and integrations they used to take for granted. Today, we tend to think in a cloud-first way, but a simple cloud migration may not fulfil all the needs of the business.
What if a mission-critical system currently hosted on on-premises servers cannot be easily migrated? A prime example is an in-store POS system. Another is hardware closely tied to a specific payment service provider tied to a contract that has years left on the clock. Even if the contractual obligation were absent, replacing the current system could entail billions of dollars in change projects, after which the cloud-native version might introduce multiple unforeseen pain points.
The lesson from these considerations is to take a beat and map out the payment landscape unique to the business before charging ahead with the launch of value-added services such as credit cards and loyalty programmes. Consult with technology and financial services specialists on the initial phases. They will be invaluable in identifying risks and opportunities, and formulating approaches on how to manage them.
The typical UAE retailer is what Endava calls a Star Retailer — an intermediate-to-high level of industry maturity characterised by a single brand and territory, multi-language and currency support and multiple supported payment methods. The Star Retailer operates national delivery and collection points and offers mobile and desktop websites with detailed product data, and enhanced search with content linked to products.
Also on offer is a high degree of personalisation, with purchase recommendations as standard and the option to rate and review experiences and products. Most retailers in the UAE fit this template and most will therefore fit a specific roadmap for connected payments. But they still must evaluate this alongside financial and technology specialists to ensure every box is ticked before taking any steps toward implementation.
Worth it
It is worth taking this time to plan because the results of a successful implementation — with a technology partner that understands the challenges, vision, and market at play — are extraordinary. AI-assisted decision-making and more accurate reporting and reconciliation have eliminated payment friction, so the customer experience has been improved. The business can respond proactively to changing payment trends.
The retailer can join forces with third parties to offer credit, loyalty benefits, and other financial services in-store and online, which enhances the value chain. And such offerings can lead to increases in average basket value, checkout conversion rates, and engagement with personalised loyalty schemes, all while minimising the cost per transaction.
The modern retailer simply cannot afford to ignore the connected payments proposition. There are too many upsides. While implementation is not without struggle or risk, proper management and association with the right specialists can ensure a smoother transition into a future-ready business that is a cost-cutter and a crowd-pleaser.