GCC payment revenue growth outlook subdued by COVID-19

DUBAI, Oct 18: The COVID-19 pandemic has brought about widespread change to everyday life in various aspects, and how consumers and businesses transact is no exception. Boston Consulting Group’s (BCG)18th annual report titled ‘Global Payments 2020: Fast Forward into the Future,’ looks at the global payments industry’s performance in the near-term and emerging industry trends in the years ahead.

The report sheds light on the projected outlook for key economies in the GCC, comprising of the United Arab Emirates (UAE), Kingdom of Saudi Arabia (KSA), and Kuwait. Given the uncertainty surrounding the pandemic, BCG’s payments forecast includes three revenue growth scenarios.

Under a quick-rebound scenario, BCG’s outlook suggests that the GCC’s payment revenue pool will expand from $23 billion in 2019 to $24.3 billion in 2024, a Compound Annual Growth Rate (CAGR) of 1.1 percent. However, this level of growth is lower than the 7 percent that the regional industry recorded between 2014 – 2019. In a slowrecovery scenario, the regional revenue pool would reach $23.1 billion by 2024, a CAGR of 0.1 percent. Under a deeper-impact scenario, the revenue pool is projected to shrink by a CAGR of -0.9 percent.

“COVID-19 related headwinds such as decreasing oil prices, a slowdown in tourism, and a substantial rise in expatriate migration have slowed overall economic growth,” said Godfrey Sullivan, Managing Director and Partner, BCG. “While payments revenue growth in the region is projected to be restricted as a result of the pandemic, we are also seeing a surge in electronic transactions, pointing towards an opportunity of growth in digital.”

Efforts are being made across the GCC to drive increased uptake of digital payment methods, with governments, banking institutions, and service providers enabling greater access and reducing transaction costs. Countries are open to more international contributors entering the market, and KSA and UAE intend to implement realtime payment infrastructure within the next two years to facilitate economic growth.

Such actions will ensure further revenue growth moving forward, and BCG’s market data and industry findings identified noteworthy trends that will shape the payments sector landscape over the coming five years.

COVID-19 will Accelerate the Cash-to-Non-cash Conversion: Evolving customer preferences, improved accessibility, and higher transaction limits will drive this transition. Across the GCC during the crisis, higher numbers of merchants welcomed contactless payments, including those of lower value. Likewise, consumers demonstrated the same enthusiasm, even in traditionally challenging markets. Governments may be interested in accelerating the cashless agenda, as research has shown that electronic payments can increase global GDP by as much as 3 percent per year.

COVID-19 will Elevate E-commerce Growth: A fundamental consumption shift has occurred due to the pandemic, which will change the combination of payment options and, in some areas, lower the prominence of cards.