The Gulf is going cashless – and sooner than you think

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Hany Fekry has been living in the UAE for about six months. In that time he says he has spent a grand total of AED40 in cash transactions. It’s why the group MD (Processing) of regional payments giant Network International is so certain that the UAE will effectively be a cashless society within three years.

“I think before 2025 cash will represent 5 per cent or less of transactions in the UAE.

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“You can pay with your watch, you can pay with your phone, you don’t even need a card to make payments so there will be literally no need for cash … No one will ask for cash. Even for the taxi drivers, their tips will be electronic,” Fekry told AGBI.

“We can say now that almost 75 per cent of the transactions in the UAE are electronic; five years ago it was only 30 per cent.

“I believe that by the end of this year with the introduction of the Invoice Processing Platform (IPP) that will rise to 90 per cent.

“For me it’s all electronic transactions – from having a coffee to buying electronic goods,” he added.

His views are backed up by a recent report by the MENA Fintech Association which said almost seven out of 10 payment transactions in the Middle East will be non-cash in 2023, as the region catches up with the global trend towards cashless economies.

All this despite the fact that the region has historically been inclined to cling to cash payments, which meant the banking sector has been slower to modernise.

In Dubai, the Government is committed to digitalising its economy and in November 2020 it formed a new working group to develop an action plan and roadmap that will propel the emirate towards being a cashless society.

And this is part of a trend that’s paying dividends for Network International, which provides technology-enabled payments solutions to over 154,000 merchants and more than 200 financial institutions in the Middle East and Africa.

“The UAE moved faster in terms of digitalisation. It is the leading market in the region for cashless transactions but we believe this is now happening across the Middle East and Africa,” Fekry explained. “We put all our focus here because we believe this is where the future is happening.”

And the changes in consumer behaviuor have undrepinned strong growth for Network International.

Full year revenue topped $352 million, up 23 percent in 2021 while profits soared to $56.5 million as the company processed about $42 billion in payment volumes. It also managed more than 16 million payment credentials and processed 980 million transactions on behalf of financial institutions and fintech customers.

Fekry cited the boom in e-commerce during the global coronavirus pandemic as one of the drivers of this growth. “E-commerce is phenomenal,” he explained.

“Pre Covid, electronic payments were an option but post-Covid it’s almost mandatory. Everything is online. The enforced use of electronic payments during the pandemic revealed to people that it is easier and safer.”

And it’s not just about the Emirates – Network International operates in more than 50 markets across the Middle East and Africa, with a special focus on the UAE, Saudi Arabia, Egypt, South Africa and Jordan – all of which offer large consumer spending pools, significant headroom for growth in digital payments and high expected growth.

The company has data hubs in Egypt, Nigeria, Ghana and South Africa and also owns DPO Group, Africa’s largest and fastest-growing payment service provider (PSP) which works with over 63,000 online merchants across 21 countries on the continent.

The region as a whole is ripe for the digital revolution as apart from a small number of markets, cash remains dominant: only 19 percent of total transaction volumes in MEA were digital last year.

So the company continues to target “structurally attractive, underpenetrated markets which are experiencing an accelerated shift towards digital payments”.

One such market in Saudi Arabia, where the government’s Vision 2030 strategy seeks to make 70 percent of transactions non-cash by the end of the decade.

Fekry revealed that Network International will soon announce a number of contracts with banks and partners, with its first live transaction in the kingdom expected very soon. “Our systems are operating… and we are accelerating extremely fast in Saudi Arabia,” he said.

Saudi represents the largest economy in the Middle East but with digital payments penetration at 18 percent in 2020, it offers significant opportunity. “We invest in markets where we believe there is a huge potential,” Fekry added.

“From a processing point of view, our plan is to be in every market in the Middle East and Africa. We are growing steadily but cautiously to avoid an oversized expansion that would fail our customers.”

Another focus for the company is Egypt where, after 21 years of running a processing business for as many as 26 banks, Network is planning to launch a direct commercial operation.

Smaller merchants will be targetted in Egypt in the first instance, underscoring the company’s desire to help and enable SMEs.

“SMEs are most important to us. In Egypt we have no plans to go after any large merchants. In the UAE, our team is also doing a fantastic job with SMEs … We are spending a lot of time and money to understand how to fulfil their needs.”

So what does the future hold for the digital payments industry?

Fekry is in no doubt. “The future is fintechs”, he said. “The time for conventional banking and business has passed. We had to change fundamentally how we think and process because of fintechs.

“They are much more faster and much more aggressive than people like us. As a listed company we think 10 times before because we act. They take action before they think. Their ability to take risk is massive.

“The more you partner with these guys the more products are going to be available – maybe a portfolio of 100 products with 100 partners.”