Cash or card?
Digital payments becoming more popular than cash
Recent research by McKinsey & company, a global management consultancy firm, now shows that digital payments will dethrone “cash as king” in the Middle East and boost regional GDP by nearly $100 billion. As Middle East countries accelerate their digital transformation agendas with nationwide high-speed technology connectivity, one of the biggest benefits will be quick and easy mobile payments. In the near future, Middle East residents will be able to pay for parking tickets and in-store purchases, top up mobile phone minutes and data, and send remittances via mobile apps.
Global case studies
This revolution has already taken place in other regions, most notably M-PESA in Kenya, and Paypal globally.
M-PESA is a mobile payment and banking solution launched in March 2007 and credited with having a significant impact on economic development in Kenya. Cash can be sent one place to another more quickly, safely and easily than taking bundles of money in person, or asking others to carry it for you. This is particularly useful in a country where many workers in cities send money back home to their families in rural villages. M-PESA is used in myriad different ways - Kenyans pay school fees, collect their salaries, shop for groceries, they buy everything from drinks in beer shacks to airline tickets thanks to mobile money, sending transfers at the push of a few buttons on a mobile telephone. As per capita incomes rise, people will make savings using the system or might be able to take out loans. Named after the Swahili word for money (pesa), it was originally a micro-finance project. The system is operated by Safaricom (40% owned by Vodafone). Less than 10% of Kenyans have access to financial services/banking, but more significantly nine out of ten adults have access to a mobile phone in Kenya.
Paypal was purchased in 2002 by eBay to operate as the primary transaction/payment method for those trading on eBay. In 2014, PayPal processed $235 billion in payment volume across 165 million active customer accounts, and handled one billion mobile transactions. In 2014, the company reported a profit of $419 million on revenue of $8 billion. In 2015, Paypal became a separate organisation from eBay, with eBay shareholders receiving shares in the newly listed Paypal. The beauty of Paypal is that the trasnfer of money happens entirely through the system. Users can then transfer the money from Paypal into their bank account without having to disclose bank account details to the other side of the transaction. This makes transactions more secure. There have been reports of some scams through Paypal, but generally it is a very secure payment conduit. PayPal is available in over 200 countries and in 26 currencies. Cross border payments can be more expensive - Paypal is at its best and cheapest (in most cases free of charge) if the transaction happens within one country/ currency as charges will not apply.
How UAE is embracing this trend
Paolo Gagliardi, Chief Business Officer of the UAE-based financial technology startup, Trriple, said: “Once fast, secure, and easyto-use digital payments become mainstream, that means ‘cash is king’ no more in the Middle East. Using digital payments, consumers and merchants can save time and money, and gain real-time insights on transaction history and spending trends.” Trriple estimates that about 80% of the UAE’s transactions are done in cash, which can be expensive to produce and secure, and often inconvenient to use. However, if the Middle East captured its full digital potential, and made digital payments widespread, then the region could add $95 billion in GDP by 2020, according to a recent report by the consultancy McKinsey. Experts agree that the UAE is a global leader in supporting digital payments. Already in 2017, the UAE Central Bank has issued regulations for digital payments, supporting UAE Vision 2021 of smart government, financial inclusion, innovation, and market competition. “The UAE government has set the stage for digital payments to transform transactions across every industry vertical, across public sector, to transport, tourism and healthcare. Trriple aims to leverage regional trade shows such as GITEX technology week to fuel our growth and expansion, by showcasing the latest solutions, meeting with investors, growing our partner ecosystem, and networking with fintech leaders,” added Paolo Gagliardi. Trriple’s mobile wallet provides a secure and convenient open source payment platform, which can securely connect with any government, organisation, or banking network in the world.