UAE eCommerce sector to continue upward trajectory as digital payments boom during COVID-19
The UAE eCommerce sector is expected to see continued growth as more UAE consumers demand online payment options and merchants increasingly recognize the need for an online presence during the coronavirus pandemic, reveals ‘The United Arab Emirates (UAE) eCommerce Landscape 2020’, a joint study by Dubai Economy and Visa, the world’s leader in digital payments.
The report reflects market activity over the last 12 months and, in particular, the impact of the COVID-19 outbreak, highlighting key trends and insights drawn from Visa’s transaction data on how and where consumers have been spending – in addition to new challenges and opportunities that the crisis has created.
With many consumers and merchants experiencing the convenience of eCommerce for the first time during the lockdown, the shift to shopping online is expected to hold long-term as consumer confidence in digital payments surge across the Middle East and North Africa (MENA) region.
The Impact of COVID-19: Acceleration of eCommerce and Digital Payments
The June 2020 findings of another study, Visa’s Stay Secure consumer survey[1] in partnership with Dubai Economy and Dubai Police showed that 49% of UAE consumers surveyed have been shopping online more because of the pandemic, with three out of five (61%) now using cards or digital wallets more to make payments online instead of opting for cash on delivery. Increased trust in the safety, speed, and convenience of contactless payments, were the top reasons cited for their increased preference for online payments.
Additionally, a developed logistics infrastructure, financial account penetration and support for digital payments, increased retailers’ adoption of eCommerce platforms and government policies which support innovation and entrepreneurial activities are all drivers for eCommerce growth in the UAE. Initiatives such as the Mohammed Bin Rashid Innovation Fund Accelerator have also been launched by the UAE Ministry of Economy to further boost the sector.
This shift to paying online also means eCommerce will account for a bigger share of total UAE card payment transaction values in 2020, compared to pre-pandemic predictions; up from 19.7% to 21.9%[2]. This figure is expected to continue upward, with eCommerce payments estimated to account for 28.2% of the total UAE card payment transactions value.
Findings from the Dubai Economy-Visa study also show that while UAE consumers still prefer to pay using credit cards (c. 35% of transactions), the use of debit cards to shop online has increased by more than 7% between 2018 and 2020, pointing to a higher degree of trust in the transaction process that is reflective of a maturing market.
Increased card on file tokenization and Click to Pay capabilities have also led to repeat purchases as well as higher frequency and ease of online shopping, fueling further growth in use of credit and debit cards as a method of payment.
His Excellency Sami Al Qamzi, Director General of Dubai Economy, commented:
“The increasing shift to digital payments is not only a strong testament to the efficiency of the infrastructure and regulatory framework in the UAE, but also an indicator of the growing confidence among consumers and businesses in the country. Dubai Economy has prioritized digital payments as a key enabler of the ease of business and smart transformation that will set Dubai apart as a competitive global business hub. We focus on offering innovative digital adoption solutions to the diverse community of businesses, entrepreneurs and consumers with whom we engage constantly, and the prevailing pandemic crisis has provided us with valuable insights on their changing preferences and requirements. Cashless payments and eCommerce are definitely on a faster trajectory than anticipated, and we look to translate this unprecedented growth into an opportunity for businesses of any size to establish and enhance their presence online. The key takeaways from the ‘UAE eCommerce Landscape’ study will lend strategic support to our future initiatives in enhancing customer happiness through innovative cashless and contactless transaction solutions.”
UAE eCommerce landscape vs other markets
Based on the latest transaction data from Visa, the ‘UAE eCommerce Landscape 2020’ report also compares UAE to mature and emerging benchmark markets including the US, UK, Australia and Singapore, as well as Brazil, South Africa and Malaysia.
According to the report, in the wider Middle East, North Africa, and South Asia (MENASA) region, the UAE represents the biggest annual spend per online shopper at $1,648. Additionally, the UAE continues to maintain a healthy lead in average transaction size compared to both mature and emerging eCommerce markets. The average transaction value in the UAE was $122 in 2019-20, compared to $76 in mature markets, and $22 in emerging markets.
Correspondingly with more merchants going online and a wider selection of products available in the eCommerce space, consumer demand and online sales volumes have also multiplied.
Marcello Baricordi, Visa’s General Manager for Middle East and North Africa, said:
“The digital payments ecosystem in the UAE and wider MENA region was already experiencing strong growth, but the pandemic has helped accelerate the pace of change and progress. We’ve seen a number of adoption barriers reduce as the demand for eCommerce and contactless commerce skyrocketed during the lockdown. We call these habit forming behaviors as more consumers and merchants have now experienced the security, convenience and range of online commerce and we anticipate this trend to continue post-pandemic. Because of this, businesses that work to adapt to this new world of eCommerce and digital payments have the best chance at both recovery and thriving. All merchants regardless of size must now think beyond just adapting and focus on their medium and long term strategy. Our report, in collaboration with Dubai Economy, is designed to share our insights and help businesses spark new and innovative plans.”
Bringing in-store experiences online will be important to retain recent online shopping converts. The ability to experience a product is a key reason for in-store shopping but there are now many tools that can help replicate the process online. The use of augmented reality technologies offers a rich buying experience enabling online shoppers to visualize the products they are interested in from the comfort and safety of their homes.
Delivering a seamless payment experience is a non-negotiable factor in the success of eCommerce. According to the report, more than half (58%) of UAE consumers surveyed by Visa in 2020 were found to have abandoned their online shopping cart because of authentication delays or failure. Solutions like Visa’s Click to Pay button help to reduce that friction. Additionally, making online payment the norm and eradicating cash on delivery will reduce the cost, complexity, and risk for online merchants.
Building and maintaining trust in online purchasing remains an ongoing activity for eCommerce businesses, and for customers new to online shopping, retaining them online even as stores reopen requires confidence and reassurance. In the UAE, Visa has been working together with the Dubai Economy and the Dubai Police to educate consumers on the safety of digital payment via card and mobile.
While almost every business has been impacted by the pandemic in some way, small businesses have struggled the most. Helping small merchants move online so they can survive challenging market conditions must be a priority for the communities they operate in. By offering innovative payment solutions, Visa’s priority in this environment remains to help businesses thrive both online and offline.
“With the perfect set of supportive factors – from digital-friendly policies to relief measures, high internet, smartphone and social media penetration, and world-class infrastructure – there is no market better equipped than the UAE to take eCommerce and the payments ecosystem to the next level,” Baricordi concluded.
To read the full ‘The United Arab Emirates (UAE) eCommerce Landscape 2020’ report click here.
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