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The Future Forecast: Digital Payment Trends in the Middle East and Africa

Jul

18

2024

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Written by: 

Miriam Diffenhard

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Customers in the Middle East and Africa are willing to leave their wallets at home, but always carry their phones. Digital wallets are emerging as the preferred payment method in both regions. Offering digital payment solutions and pursuing digital transformations is key for banks to stay competitive.

On March 6, 2024, we hosted a webinar with Nazia Magray (Regional Director Product Management, Digital First - EEMEA) from Mastercard and Timothée Grüner (VP Sales Digital Cards) from Entrust. During this deep-dive exchange about digital payment trends in the region, our speakers talked about changing consumer behavior, digital cards and payments, and the benefits of a digital-first transformation for banks.

Here is what we heard from them:

Digital Payment Adoption in the Middle East and Africa

With more than 50 years of serving financial institutions in the Middle East and Africa, Entrust knows that convenience is top of mind for cardholders. More specifically, they seek seamless, instant payments. Consumer expectations are changing as digital interactions are considered a standard part of user experience. Banks can observe changing consumer expectations in the payment and banking space.

The Middle East and Africa region has seen a strong decline of cash use for in-store payments, supported by the rise of mobile payments (Global Payments Report, Worldpay by FIS 2024). This shift from cash aligns with the growth of digital and mobile payments, driven by governments, banks, and fintech.

Smartphone penetration is at 80%-90% in the Middle East in leading markets, and 85% of consumers in the Middle East and North Africa (MENA) region used at least one emerging payment method in 2022, with usage expected to continue to increase. Digital has officially become the new normal.

Digital wallets are also increasing in popularity. In countries like the UAE, cards are still preferred, but digital wallets are the second-most-preferred e-commerce payment method. They’re set to become the preferred payment method in the next five years. Consumers in this market have access to global wallet brands like Apple Pay, Google Wallet, Alipay, and Samsung Wallet, as well as regional digital wallet brands.

The picture is a bit different in Africa, where Apple Pay, for example, is only available in South Africa and Morocco. Digital payments are often driven through mobile money accounts (e.g. 296 million registered mobile money accounts in East Africa in 2021). According to GSMA, mobile money transaction values in 2021 grew fastest in the Middle East and North Africa (49%), followed by Sub-Saharan Africa (40%). 84% of internet users in Kenya and 60% in Nigeria regularly made payments with mobile phones in 2021.

Mastercard’s New Payments Index 2022 found that 95% of people in South Africa had used at least one emerging digital payment method in the previous year.

Reasons for financial institutions to follow a digital-first strategy

Nazia and Timothée also reported on the reasons for banks to follow a digital-first transformation strategy.

  • Flexibility is a priority: 76% of consumers want to have as many payment options as possible
  • Loyalty is not guaranteed: 86% of consumers say anytime, anywhere accessibility and on-demand banking can motivate them to switch
  • Digital is the norm: 85% of consumers in the Middle East and Northern Africa region have used at least one emerging payment method in the last year

Banks are listening to this feedback from customers in the region. 80% of banks recognize the critical need to accelerate their digital transformation and prioritize their customers’ user experience. If consumers expect a flexible, secure experience, it’s important for banks to deliver against those expectations. But developing a world-class digital journey to meet their needs can be technically challenging and require extensive resources.

Mastercard Digital First framework

We then discussed the Mastercard Digital First™ program, which allows financial institutions to enable digital solutions for a new consumer reality, touching the entire consumer lifecycle:

  • Acquire: Apply for and enroll a card digitally, receive a response from the issuer, and instantly issue a digital card that can be used right away
  • Use: Ability to transact digitally across all channels (at point-of-sale, online, and in-app)
  • Manage: View card credentials and customer service contact information via a digital environment
  • Engage: Access and receive benefits, offers, loyalty solutions, and more through a digital environment

Financial institutions can enable consumers to access a fully digital card experience via any connected device through the Digital First Card Program. The program helps enforce an enhanced consumer experience through a set of foundational requirements, enabling a digital, seamless, yet secure customer experience.

Digital First issuers can achieve:

  • Operational efficiencies: More customer self-servicing, quicker time-to-value yield times, and cost savings (Up to 40% average reduction in customer servicing costs)
  • Increased revenues: Security benefits and seamless onboarding drive differentiation versus competitors (10%-15% average increase in new customer sales)
  • Greater customer satisfaction: Improved user experience leads to more frequent purchases and adoption of associated products (Up to 15% average increase in transaction volume)
  • More effective fraud prevention: Tokenization and dynamic card verification help combat fraud, notably for card-not-present sales (20%-25% reduced fraud for Digital First transactions)

The Entrust platform

Timothée then introduced how Entrust is a certified partner of the Mastercard Engage and Mastercard Digital First programs. Entrust is taking part in the Mastercard framework with a unique platform offering that covers the various pillars Nazia introduced.

Entrust recently acquired London-based Onfido, a leader in identity verification. With this acquisition, Entrust now provides the industry’s most comprehensive portfolio of AI-powered, identity-centric security solutions. Digital onboarding for financial services and payments starts with real identity, verifying the person and their credentials. Banks and payments companies will now be able to onboard trusted customers, authenticate them, and issue debit cards in a matter of minutes while helping to reduce their fraud exposure and facilitating compliance with international regulations and standards.

From onboarding with identity verification to the issuance of a digital card, which can be enhanced with instant or central card issuance of a physical card, we enable banks to offer a variety of digital and physical touchpoints and payment options.

Implementing and supporting a digital-first strategy can be more complicated than it sounds. Tokenization must be supported. Building a digital card program in-house can be complex, with prohibitive costs and long go-to-market times. The regulatory framework depends on the country; therefore, close collaboration with the central banks may be needed.

The Entrust Digital Card Solution offers the full range of digital payment enablement, from the issuance of the card to push provisioning to wallets like Apple Pay or Google Pay, and to “tap and pay” payment options (NFC Issuer Wallet) directly from the bank app. This is especially beneficial for countries where third-party wallets are not available. Entrust also offers the full control of digital payment credentials in the app, with tokenization and token controls, card and transaction controls, strong customer authentication, and more. With Mastercard and Entrust, you can receive full support with digital payment expertise as part of your digital transformation.

For more insights from the webinar, watch the on-demand recording now.

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Miriam Diffenhard
Product Marketing Manager, Digital Card Solution
Miriam Diffenhard joined Entrust in October 2021 through the acquisition of Antelop Solutions and now serves as Product Marketing Manager for the Digital Card Solution. Miriam’s past work experience has been across many industries including automotive, software, insurance, cosmetics, and financial technology. Miriam, who is based in France, enjoys working on digital card solutions messaging, sharing its benefits with leaders across the financial industry to help them tackle digital transformation challenges and deepen their customer relationships.
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