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Digitalisation set to boost UAE payment revenues to $18.7 billion

The payments industry in the Emirates is expected to record a compound annual growth rate of 7.7 per cent between 2021 and 2031 on revenues

The fast-paced transformation of the financial services landscape in the UAE is expected to significantly boost the nation’s payment revenues to $18.7 billion by 2031 from $3.0 billion in 2021.

Consequent to the ongoing efforts by the UAE to accelerate digitalisation of its financial services ecosystem, more than half of consumers in the country are expected to go cashless by 2024 compared with the global average of 41 per cent. The country is also pressing ahead with initiatives to implement a financial market infrastructure that will enable instant payments in the Emirates, the Central Bank of the UAE has said.

The payments industry in the UAE, according to a study by Boston Consulting Group (BCG), is expected to record a compound annual growth rate (CAGR) of 7.7 per cent between 2021 and 2031 on revenues. Among the areas of particular strength will be revenues from credit cards, debit cards, and current accounts.

“The UAE continues to see robust growth in payments and fintech activity in general. This year alone we have seen the launch of multiple digital banks as well as specialized payments players,” said Mohammad Khan, managing director & partner, BCG.

He said a combination of drivers such as the country’s young, tech-savvy, and fast-growing population, the nation's bid to become a crypto and fintech hub, and the planned launch of a domestic payments scheme are resulting in greater competition and paving the way for future growth. “Cross-industry participation in digital payments will provide an added impetus to the region's already burgeoning sector,” Khan pointed out.

In 2021, helped by the acceleration of digitalization of financial services, CBUAE’s payment systems remained robust without disruptions, leading to the processing of a total of 231 million transactions, amounting to Dh11 billion (about $3 billion).

In particular, the Instant Payment Instruction System (IPI), offering real-time instant domestic fund transfers, witnessed a significant increase in transaction volumes, confirming the trend of higher use of digital payments over traditional fund transfer methods, according to industry data.

According to payments solutions provider Checkout.com, online payments and use of digital wallets increased during the pandemic with more than half of all residents now transacting online.

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Payments revenues in the GCC will see acceleration on the back of real-time payments infrastructure, a growing number of specialized payments players bringing new solutions to the market, and enabling policies from governments, the BCG report said.

It outlines several trends that will shape the outlook for the global payments industry, which has some impact on the UAE, over the next five years. A key trend is that with the demand for electronic payments getting stronger, the sustained cash-to-non cash conversion, the ongoing growth of e-commerce, and the increasing integration of payments into retail and corporate customer journeys will drive payments revenues globally. Central bank digital currencies (CBDCs) are also gaining momentum. Central banks are tailoring CBDCs to complement cash with digital central bank money to implement monetary policy faster.

Since payment businesses are under increasing scrutiny from regulators, market participants must address risk dimensions, be it financial, compliance, cyber, or crypto to install the required safeguards for their businesses on their path to growth, BCG said.