Mobile payment industry has flourished steadily across various markets globally. Though certain markets have witnessed faster adoption and increased usage of mobile payments, it is indeed a global phenomenon. Middle East countries have witnessed strong growth over the last two years, a trend which is expected to continue over the forecast period. There are over 7 million mobile payment users in this region currently.
The Middle East region has favorable market environment for mobile payment development due to a variety of reasons. Firstly, in GCC region, there is a sizable unbanked population (especially migrant workers). Secondly, internet penetration is close to 70% and average mobile penetration rate is over 93% with over 75% smartphones. Another factor that has positively influenced this segment is growth of e-commerce and m-commerce.
Initially non-financial institutions launched mobile payments in Middle East. Mobile payment service provider Boloro became the first to collaborate with mobile telecommunications company Zain in 2013 to provide mobile payment service for bus fares in Kuwait. Along similar lines, recently mobile ordering and payment company QikServe entered into a distribution agreement with Key Information Technology which is a business and technology consulting firm. Under this partnership, KIT will make ‘Waiter in Your Pocket’ technology of QikServe available to its customers in Middle East.
While non-financial institutions are embracing mobile payment technology, banks have been slow towards adoption of this service. However, in recent years, the scenario has been changing. Contactless card payment service has been launched by banks that act as a bridge with mobile payments. Boubyan Bank launched contactless card last year in Kuwait, while Saudi Arabia’s first contactless credit card was introduced by Riyad Bank in partnership with NCB in the same period. It is expected that banks will invest towards development of HCE platforms that are compatible with majority of NFC enabled smartphones in coming years.
Saudi Arabia and UAE are the most important markets for mobile payment in Middle East. Mobile payment transaction value in Saudi Arabia accounted for USD 136 million in 2016, which is expected to rise to USD 1900 million by 2021 at a CAGR of 69.5%. Number of users is likely to reach 2.7 million during same period. MasterCard mobile payment readiness index of Saudi Arabia is 37.5 in comparison to global average of 33.2. Approximately, 74% consumers prefer mobile phones to make payments. Acceptance of digital innovation in payment infrastructure has been positively embraced by consumers. Smartphone apps are increasingly used for banking services by 44% consumers. With more people taking part in mobile banking and payments, it shows favorable market conditions for players towards business expansion. UAE is showing gradual progress towards mobile payment infrastructure development. The government has signed MoU with 16 largest banks for development of mobile wallet platform in August, 2016.
With mobile networks and banks showing interest towards rolling out mobile payment services, certain regulatory changes are likely to create favorable conditions for the same. One primary initiative is to permit non-banking institutions to launch mobile money services across every market in Middle East. Interoperability feature in this segment will broaden the horizon of functioning that is expected to attract consumers.
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