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UAE residents are more comfortable with online and digital payments: experts

People might just stop using cash in another three to four years, say experts

The trend of rising contactless and online payments in the UAE is here to stay and probably become a normal feature for many residents in the UAE in the future too, say banking and financial sector experts.

“At Mastercard, close to 70 per cent of our transactions at one stage were on e-commerce platforms. It has obviously normalised now, but it shows that customers have become more comfortable transacting online and the more important sub-point is that a lot of these online transactions are happening on mobile devices,” said Pankaj Asthaana, Vice President, Digital Payments & Labs, MENA Mastercard, during the DigiPay 2021 summit organised by Khaleej Times.

The changing customer behaviour is primarily due to the Covid-19 pandemic. In the last 18 months, there has been a significant increase in spends on groceries, pharmacies, and retail. Another interesting observation made by Mastercard has been the rise in use of debit cards, which points at a more risk-averse nature of consumers due to uncertainty around jobs and paycuts. “We saw a big uptick in debit card usage, which traditionally has been very low in the UAE. A very interesting sub-point here is that consumers have moved to a lot these online payments versus cash on delivery. However, this is not a one-time surge because of Covid, we expect it to continue,” said Asthaana.

A sound infrastructure providing online security to transactions, preventing frauds has made people across age groups comfortable with the digital landscape. “The UAE has managed approval rates very well. A couple of major factors leading to this change have been better and smarter use of AI security systems and the second is using high-security technologies. These trends will continue to change consumer behaviour in the future and allow us to go digital in our payment behaviour,” added Asthaana.

If the UAE was paying catchup with the world in terms of digital adoption a decade ago, today it is among the top ten globally. “The UAE now ranks eighth globally in terms of digital adoption. It is a massive jump considering the rest seven are Western countries or large economies who started on this journey way before,” said Sridhar Karlapudi, Group Head of Operations, Abu Dhabi Islamic Bank.

“To get to the eighth position so fast is incredibly amazing. And this is happening across sectors. You can see how we pay our Dewa bills now compared with how it was paid five years ago. The way we order an Uber or a Careem, or the way we order food has become far more convenient. Significant changes have been seen in education sector, too. All this was possible because of an underlying infrastructure that has been in place before the pandemic. The point of inflection in its usage, however, came after we were made more conscious of our environment due to the pandemic. But the changes are here to stay,” said Karlapudi, adding, that people might just stop using cash in another three to four years. “Once you experience this convenience, it is hard to leave.”

Buy now, pay later is another trend that has grown in popularity in the last few months. “Buy now, pay later (BNPL) existed even 10, 15 years ago but in those days consumers had the option of converting the payment online into monthly instalments. Now this facility is being offered at the time of purchase, which makes it more popular,” said Sridhar Iyer, Executive Vice President, Head of NEO (Digital Bank) and Liability Products, Mashreq Bank.

BNPL is benefitting a range of customers. “The first category of customers are the ones who are not eligible for credit. So, these are customers who were denied a credit card either by a mainstream bank and therefore they had no option of availing credit. The second segment of customers who will benefit from BNPL are money-conscious customers who are eligible for credit but would like to take the better option in terms of financial viability from the BNPL operators. People who are looking for great discounts and so on,” said Iyer.

This new ways of assessing credit risk challenges the traditional ways of banks that predominantly stress on credit bureau scores, behavioral scores and the income document. But the fintech companies through their innovations are bringing a paradigm shift and could inspire banks to look at new ways of underwriting.

—suneeti@khaleejtimes.com