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  • Writer's pictureNeeraj

The money trail

Original article here.

The Middle East has come a long way - from being a cash economy to being a hub for fintech innovation, in the space of 10 years. The scene's heating up with global and local ecommerce giants doing everything it takes to expand the online market. Ancillary benefits for everyone else in the online space.

The UAE is seeing a boom in online payments as the landscape becomes ever-more tech literate. With growing numbers of digital natives, improved security, smart government initiatives and more, things are changing, and fast.

Buyers have more confidence in online payment methods, spurring an e-commerce boom in the region. Regional payment methods have played a pivotal role. The convenience is obvious; security concerns have been allayed as regulations have become more stringent. Government reforms have also had a big part to play in increasing the adoption of online payment methods, the likes of Smart Dubai slowly funneling everything into one, streamlined system. While cash on delivery and bank transfer are still used quite frequently, they are fast being replaced by credit cards and net banking.

Payment gateways are supporting e-commerce companies in enhancing reporting and personalization while adhering to data privacy regulations

With the increase in scale, the region has also become more lucrative for cybercrimes, so understandably, security has become a prime concern as the relative cost of fraud has increased. Technology has had to stay one step ahead of the criminals. A high penetration of expats has mandated the provision of multiple currencies and payment modes by gateways (MIGS, CyberSource) and aggregators (Checkout, Payfort). Tokenization has also been a key development, especially for low-value high-frequency transactions such as food delivery. The risk of higher chargeback on unsecured transactions or one-click transactions has been more than countered by a surge in customer interest and purchase.

Visa and Mastercard still rule the roost, but alternative payment methods from beyond are seeping into the region. Alipay & WePay are already very popular in luxury retail, Rupay has just been announced and will cost 10-15% that of Visa and Mastercard, both for the acquirer and the merchant. In the long term, cryptocurrency could be a major disrupter.

Local payment methods will continuously improve. KNET has just upgraded to a newer version and it is clear that OmanNet and Fawry should follow suit. Closed-loop wallets will be opened up to third parties soon, which should drive standardization in the overall digital wallet ecosystem.

This has had a powerful impact on the business of travel. As with all e-commerce sectors, increasing comfort and security in online payments is an essential element in pushing the offline to online transition. Offering a wide range of payment methods across a big basket of currencies is now a must. Tokenization is good to offer, but online travel agencies have had to balance the higher risk due to higher ticket sizes. The popularity of virtual payment modes for supplier payment (virtual cards, B2B wallets) is on the rise as the end supplier is protected from all risk.

The future is digital. As banks close down branches, and the next generation sets future trends, this is clear. Demand for both regional (KNET, OmanNet, Fawry) and international payment methods (Applepay, PayPal) have increased and KNET already accounts for around 70% of online transactions in Kuwait. The adoption of open digital wallets (Applepay, Googlepay, Samsungpay) is on the rise and almost every e-commerce company either has a closed-loop wallet or will be having one soon. So, where next? Keep up, or be left behind.

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