May 13, 2014
Topic: How is Middle East different from US or Europe when it comes to payments and commerce?
Response: What might appear like an easy case for success of mobile payments in MENA is not the case.
In some studies it was found out that Saudi & UAE has the highest penetration of smartphones in the world. But only 5% of them use it for business / Banking applications. Use of smartphones is really extensive in UAE but people are using smartphones for purposes other than banking. Only corporate people use it widely during work related things, for email, browsing, etc. Others just use it for entertainment social media and games. This is an important aspect to understand the market.
Also you have to keep in mind that MENA is very cash based society. In day-to-day scenario, most of the transactions we see happen in cash. Since cash is the source of fund. People also want to see and feel the payment instrument during transactions and that is why they like cash.
Topic: Despite recent initiatives, why more than 97%+ of transactions in MENA are performed in cash?
Response: People prefer using cash because of the source of fund being cash. The system in such areas is such that cash is the major option. That is why you see such a high percentage in cash. But it’s not going to remain the same in future. UAE also boasts one of the largest expatriate populations in the world and has mobile penetration exceeding 100%. Such factors will make mobile payments a natural fit.
Topic: What is the focus area of Mobibucks?
Response: Speaking of Mobibucks, we believe that the most important concept to make a successful payment product is look at the source of funds. It’s clearly either your salary account or checking account where you receive salaries or other sources of income. So we wanted to link to the source of funds (bank account) and provide mobile payments options using that bypassing the credit card networks. In UAE it makes so much sense to do that and same is the case in rest of the Middle East.
We are using technologies like NFC to create mobile, cashless solution for payments. The target is adoption of payments through devices on a wide scale.
We are also focused on changing payment systems in banks. Banks like Abu Dhabi Commercial Bank have already started providing the Mobi payment system, developed by us, as a solution to offer patented cash-less, card-less and paperless payments.
In Saudi Arabia, around $27 B gets transferred out of the nation. With Mobibucks, we strive to provide cross border transfers with minimal fees. We hope to capture a percentage of the amount by making cross border transfers very simple.
Topic: How do you see the uptake of electronic payments evolving over the years?
Response: In big cities, electronic payment is prominent and demand is growing steadily. New merchants are adopting electronic payment methods and are gaining insights about consumers as well. The entire MENA region is a huge market for mobile payments – not only because it’s a fast-growing mobile market, but also because of higher prevalence of cash transactions than credit cards.
Globally companies usually introduce one system of payment and expect it to work. But customers should be given the option to choose from different kinds of wallets in mobile.
There is a need to introduce the right kind of tools to the customer through the bank network/channel directly or through third parties when it comes to making payments. In the EMEA market, the adoption of innovation has a different timeline. The GSM revolution started in 1994-95 but in Middle East region it took time to catch up and actually started in 2002. Same is the scenario with payments. The adoption of new payment technologies will indeed take some time in this market.
Topic: Considering the cases of frauds in digital payments in other markets, how much concerned are the early adopters of payment gateways in MENA?
Response: Payment companies tend to forget about the source of funds. The source of funds is bank accounts. Banks do not want to share customer as well as transaction information with other companies. Once the payment information goes outside the bank it becomes risky.
Hence, firstly basic systems need to be developed with banks to overcome frauds.
Topic: What is your take on credit cards popularity with consumers?
Response: Most of card payments are in bigger denominations. How many one in MENA would buy coffee using cards? Very few do that, and if the amount is substantial, only then the use of card is justified. But lately we see a lot of debit cards transactions and it’s increasing.
Topic: What is your take on the global remittance and digital money?
Response: Technology has facilitated banks to provide transfer services. With involvement of banks, it becomes easier for the customers to trust. The cost of transaction is also going down from time to time. Services are becoming cheaper than earlier known ones like Western Union.
Topic: How has been the response of banks towards adoption of mobile banking in UAE?
Response: Banks don’t want to lose customers and will do anything to retain existing customers. Banks are keen on providing different value added options to customers. UAE banks are investing heavily in developing their digital payments infrastructure so that they can be on par with global advancements. Financial institutions such as ADCB are looking for new and innovative technologies that will enable them to replace existing systems with modern, flexible payments architecture.
Topic: Can you highlight some major developments in payment industry from MENA?
Response: MENA is a difficult market because of lack of culture towards payment using cards. The market will accept new initiatives as customer experience starts improving. Some payment projects will take time depending on their ROI projections. The banks want to currently make money by providing loans, that being the major priority.
But banks can look to provide new payment methods. UAE, Saudi, Jordan and Egypt are a great example in Arab countries with the increasing cashless payment services.