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Digital shopping surging in the Middle East

Daily figures have risen by 80 per cent over the past four years, study shows

Daily digital shopping in the Middle East and North Africa (Mena) region has grown 80 per cent between 2020 and 2023, a study showed.

According to Checkout.com’s ‘The state of digital commerce in Mena 2024’ report, the growth in its total processing volume in Mena from January 2020 to December 2023 rose by a staggering 658 per cent.

Meanwhile, cash is steadily losing its share. The percentage of shoppers in MENA who report cash on delivery as their preferred payment method for digital commerce fell from 41 per cent in 2020 to 20 per cent last year, data showed.

The Mena region is undergoing a profound transformation with a rapid shift towards digital payments, fueled by the rise of ecommerce and a growing preference for cashless transactions. The demise of cash is undeniable, and the adoption of digital payments is accelerating.

Digital wallets have experienced remarkable growth, with data indicating that Apple Pay currently leads the market. However, Google Pay and local alternatives like STC Pay are quickly gaining ground. Digital Wallets offer convenience, security, and efficiency, which consumers in the region seek when conducting their payments. Saudi Arabia and the UAE, have recorded the highest spend on Apple Pay and Google Pay in Mena, Checkout.com’s data showed.

Remo Giovanni Abbondandolo, General Manager, Checkout.com Menam said: “The power of consumer experience and expectation cannot be underestimated. They want payments to be faster, more secure and more flexible than ever. They want choice and control - when it comes to every aspect of how they shop, pay and move money.”

Amnah Ajmal, EVP, Market Development, EEMEA, Mastercard estimated that the digital payments market in Mena will reach $9 billion by 2028 (124% up from 2021), making it the second biggest digital wallet market in the world. And by 2024, cashless payment methods are likely to account for more than 50% of the population’s transactions, meaning there’s a significant opportunity to expand access to more secure payment solutions and drive financial inclusion. This all adds up to a major transition from traditional commerce to a digital-first approach.

“However, there is still much more we can do to reach underbanked and unbanked populations, integrating digital payments into government services, and enhancing cross-border payments. We are helping drive progress in this area by collaborating with regional stakeholders to tailor innovative solutions to the unique needs of the market. This includes credit access facilities, supply chain financing, B2B payments, and accounting solutions.”

The money movement sector has also seen impressive growth, with total processing volume for remittances increasing sixfold from January to December 2023. “This surge is largely attributed to the introduction of Automated Funds Transfer (AFT) for remittance and money transfer businesses. AFT has significantly enhanced user experience by enabling immediate fund transfers, in contrast to the days it once took to complete transactions. All of this data underscores the fact that today digital commerce in Mena has become mainstream and is a matter of customer habits, preferences and sheer demand,” the report said.

While digital payments are changing the game for businesses, money transfer is invigorating economies. Remittance flows rose in the Middle East and North Africa (Mena) in 2022, growing an estimated 5% to $620 billion, according to Mastercard data. “They contribute hugely to economic stability and have been instrumental in promoting financial inclusion by bringing more people into the formal economy. These transfers often support families and needs for education, healthcare, and improved living conditions, which can have long- term positive effects on human capital development,” Ajmal said.

The ecommerce landscape in Mena is incredibly dynamic and payments is playing an increasingly important role in shaping its future, said Arjun Singh, partner and global head of fintech at Arthur D. Little. “There are multiple trends, from emerging technologies to regulatory changes which will accelerate the evolution of payments in the coming years and that will have both a direct and indirect impact on the ecommerce ecosystem as payments gets embedded more deeply on both the demand and supply side,” he added.