How have fintech solutions helped organizations across various industries to control their spending and manage their financial operations effectively?
Expense reconciliation and payment authorization are still very labor-intensive for many companies, absorbing significant amounts of accounting time. This is where providers of payment solutions such as Checkout.com come into the picture. They can help identify and implement a payment platform that is right for the business and enable them to provide the best possible customer experience.
In the Middle East region, we support some of the fastest growing businesses such as – Careem and Al Shaya, as well as enterprises such as Carrefour, Extra, Instashop and Vox Cinemas – helping them optimize existing payment methods and evaluate to add new payment methods.
What is the value of the global fintech market and what are your projections for the value of the fintech market in the UAE?
Research shows that fintech surpasses other financial sub-sectors in pure growth. Over the next four years, the global fintech market is expected to grow around 20 percent annually to reach a market value of $305 billion by 2025, according to data from GlobalData.
A report by the UAE’s Ministry of Economy shows the UAE’s leading MENA fintech market, expected to reach a record high of $2.5 billion by the end of this year. Digital banking, wealth management, money transfers and payments mark the country’s largest segments of the fintech industry. The ministry also says that consumers are interested in more complex financial products, including end-to-end financial services.
What are the most important challenges for institutions and companies to seamlessly adopt fintech solutions?
There are obvious technical considerations to take into account when fintech solutions are to be integrated into business processes. Technical innovation and consumer preferences are also constantly changing, so it is important to ensure agility is built into processes. Companies must consistently test and optimize all elements of the user journey, including the payment process. Staying nimble and consistently learning about customer behavior will help improve approval rates and conversions, while helping to reduce fraud and chargebacks—both of which can impact revenue.
Third, financial transactions are a natural target for hackers, and although fintech evolution is fast, cyber security and compliance measures are constantly playing a role. The good news is that because innovators are developing from the ground up, they can build cyber resilience as an inherent part of the architecture from the start.
Companies that want to adopt fintech will sooner or later encounter regulatory obstacles. Regulations typically delay innovation and often run afoul of national banking and finance laws that were drafted before the digital era. We are pleased to note that MENA central banks and regulators today are some of the most progressive in the world in their approach to fintech while protecting consumers from fraud.
But the biggest obstacle is a shift in mindset. As all organizations have discovered when introducing new products, transitioning 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 the demand for payment solutions in 2022?
Digital payments are a fundamental component of fintech solutions, which have grown tremendously in recent years, and it seems that they will continue to witness steady growth in the future.
Our third annual report, Digital Transformation Report in MENA 2022 shows that 70 percent of consumers in 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 percent of GCC consumers favoring a digital payment method at checkout.
Moreover, this year’s results reveal a sharp rise in payment apps and digital wallets in the region, with 82 percent of MENA consumers reporting using some form of fintech app in 2022, up from 76 percent in 2021. GCC countries such as Qatar and Saudi has 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 drop of almost 40 per cent in the last 24 months.
The intersection between 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 just as an investment asset. With Web3 emerging as a significant trend in the region, including informing national digital plans, merchants are showing an increased appetite to shop on the chain (25 percent), 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 developing local fintech/digital payments ecosystem is highlighted by the increased sophistication of MENA’s e-commerce sector, which traditionally lagged behind the West. This can be seen in the growing appeal of buy-now-pay-later (BNPL) and s-commerce (social commerce).
Across MENA, 3 percent of consumers used a BNPL option in 2022, up from 24 percent in 2021 – representing 64 percent year-on-year growth. Another 28 percent of consumers who have not used BNPL want to use it in the next 12 months, meaning as many as 67 percent of regional buyers could use it by 2023. Today, BNPL penetration is higher in MENA than in the USA and Europe.
Likewise, with the ever-increasing average time people spend on social media daily, it’s no surprise that a fifth of MENA consumers say they now often shop via social media channels, representing a 43 percent growth over the past 24 months. Inevitably, the appetite for social commerce has doubled in Saudi Arabia and the United Arab Emirates.
Along with the growing taste for digital payment apps is the rise of fintech app usage across the region. More 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 in place to support it.
Remo Giovanni Abbondandolo is VP of Commercial – MENA at Checkout.com
Read: Checkout.com Leads $110M Round for Saudi Fintech Tamara