How have fintech solutions helped organisations across different industries control their expenses and manage financial operations efficiently?
Spend reconciliation and payment authorisation are still highly labor-intensive for many companies, absorbing considerable amounts of accounting time. This is where payment solution providers like Checkout.com come into play. They can help identify and implement a payment platform that is right for the business and enable them to bring the best possible experience to their customers.
In the Middle East region, we support some of the fastest-growing businesses such as – Careem and Al Shaya, as well as enterprises like Carrefour, Extra, Instashop and Vox Cinemas – helping them optimise existing payment methods and evaluate to add new payment methods.
What is the value of the global fintech market and what are your estimates for the value of the fintech market in the UAE?
Research shows that fintech is outperforming other finance subsectors in sheer growth. Over the next four years, the global fintech market is anticipated to grow around 20 per cent annually to reach a market value of $305bn by 2025, according to data from GlobalData.
A report by the UAE Ministry of Economy shows the UAE leading MENA’s fintech market, expected to reach a record high of $2.5bn by the end of this year. Digital banking, wealth management, remittances and payments mark the country’s biggest segments of the fintech industry. The Ministry also says consumers are interested in more complex financial products, including end-to-end financial services.
What are the key challenges for institutions and companies to seamlessly adopt fintech solutions?
There are obvious technical considerations to factor in when integrating fintech solutions into business processes. Technical innovation and consumer preferences are also constantly in flux, so it is important to ensure agility is built-in to processes. Companies must consistently test and optimise all elements of the user journey, including their payments process. Staying agile and consistent learning about customer behaviors will help improve approval rates and conversion while also aiding in reducing fraud and chargebacks – both of which can impact revenue.
Third, financial transactions are a natural target for hackers, and whilst the fintech evolution is rapid, cybersecurity and compliance measures are constantly playing catch up. The good news is that because innovators are developing from scratch, they can embed cyber-resilience as an intrinsic part of the architecture from the start.
Businesses that want to adopt fintech will sooner or later run into regulatory hurdles. Regulations typically lag innovation and often face national banking and financial laws drawn before the digital era. We are happy to note that MENA central banks and regulators are today some of the most progressive in the world in their approach to fintech while also protecting consumers from fraud.
But the biggest obstacle is a shift in mindset. As every organisation has discovered when introducing new products, shifting from conventional ways of processing payments and setting and monitoring financial policies requires employees and managers to think differently, which is not always easy.
Are digital payments an important component of fintech solutions, and what is the growth rate in demand for payment solutions in 2022?
Digital payments are a fundamental component of fintech solutions, which has grown massively over the past few years, and it seems as though they will continue to witness a steady growth in the future.
Our third annual report, Digital Transformation Report in MENA 2022 shows that 70 per cent of consumers across MENA prefer to use a digital payment method.This is up from 60 per cent in 2021 and 40 per cent in 2020 – representing a 75 per cent jump in just 24 months. The figure is even higher in the GCC region, which has greater digital penetration, with 80 per cent of GCC consumers favouring a digital payment method at checkout.
Moreover, this year’s results reveal a sharp rise in payment apps and digital wallets in the region, where 82 per cent of consumers in MENA report using some form of fintech app in 2022, up from 76 per cent in 2021. GCC countries such as Qatar and Saudi have seen a near doubling in the popularity of digital wallets. Conversely, the use of cash on delivery (CoD) has declined sharply in MENA, with a nearly 40 per cent drop in the past 24 months.
The intersection of cryptocurrency and digital payments is an exciting development. More than half of Gulf consumers under 40 surveyed in the report want to see cryptocurrencies used for payments, not simply as an investment asset. With Web3 emerging as a significant trend in the region, including informing national digital plans, merchants exhibit an increased appetite for transacting on-chain (25 per cent), with a desire both to be paid and to pay in digital currencies to complement fiat.
What are the latest digital payment trends and solutions shaping the UAE and MENA?
The rapidly evolving local fintech/digital payment ecosystem is highlighted by the increased sophistication of MENA’s e-commerce sector, which traditionally lagged behind the West. This is seen in the growing appeal of buy-now-pay-later (BNPL) and s-commerce (social commerce).
Across MENA, 3 per cent of consumers used a BNPL option in 2022, up from 24 per cent in 2021 – representing 64 per cent YoY growth. A further 28 per cent of consumers who have not used BNPL want to use it in the next 12 months, meaning as many as 67 per cent of regional shoppers may use it in 2023. Today, the penetration of BNPL is higher in MENA than in the US and Europe.
Similarly, with the ever-increasing average time people spend on social media daily, it is not surprising that a fifth of consumers in MENA say they now frequently shop via social media channels, representing a 43 per cent growth in the past 24 months. Invariably, the appetite for social commerce has doubled in Saudi Arabia and the UAE.
Coupled with the growing taste for digital payment apps is the rise of fintech app usage across the region. More people are using such apps to manage their day-to-day finances and feel the direct benefits of the region’s burgeoning fintech sector and the regulations being put in place to support it.
Remo Giovanni Abbondandolo is the VP of Commercial – MENA at Checkout.com