Dubai: Prepaid cards have become mainstream in the region and will continue to grow strongly due to the government initiatives and an increase in m-commerce and consumer spending, a top executive from Visa said.
“We have witnessed a strong growth in the adoption of prepaid cards with more and more cardholders switching to electronic payments,” Paul McCrea, Visa’s Head of Products for Central and Eastern Europe, Middle East and Africa, said at the seventh annual Prepaid Summit: Middle East and Africa 2016.
“We see a clear shift towards digital economy. Half of the digital transactions in the region are done through online,” he said.
In the GCC region, prepaid cards witnessed total volume growth of 24 per cent in 2015 compared with 2014, while e-Commerce volume jumped 37 per cent. He said that Visa has been committed to leading the development of new prepaid payment technologies through a variety of programmes, including partnerships with the UAE Armed Forces (GHQ) and NBAD to launch a reloadable prepaid programme aimed at displacing cash payments at UAE embassies across the globe.
Other such programmes include the Riyad Bank Visa Virtual Prepaid card and the National Bank of Kuwait (NBK) Shabab Visa Prepaid Card. “Innovations such as these are particularly significant since the increasing adoption of prepaid modes of payment plays a key role in the Middle East and Africa region’s objective of becoming one of the first cashless societies in the world,” he said.
Prepaid cards are no longer the last resort for the unbanked, he said and added that they are solving all kinds of problems across all kinds of sectors, allowing users to spend what they load without the risk of debt and fraud exposure.
“What is driving today’s environment? New technologies are increasing the interplay among payments-linked industries and empowering consumers and merchants,” he said.
According to a recent Visa-commissioned Moody’s Analytics report, countries with the largest increases in card usage experienced the biggest contributions to growth. For example, big increases in GDP were recorded in Hungary (0.25 per cent), the UAE (0.23 per cent), Chile (0.23 per cent), Ireland (0.2 per cent), Poland (0.19 per cent) and Australia (0.19 per cent).
Moreover, higher card usage contributed an additional $296 billion to consumption between 2011 and 2015, or a 0.1 per cent cumulative increase in global GDP during the sample time period. That equals about a $74 billion contribution to GDP each year.
McCrea said that prepaid cards make up an important segment of electronic payments and suggesting in the four year period up to 2015 electronic payments in the UAE enhanced the GDP by $3.7 billion. This stands a $3.4 billion in Saudi Arabia and $3.1 billion in South Africa.
“The Middle East and Africa region is experiencing rapid growth in the prepaid sector, with the UAE, Saudi Arabia and South Africa leading the way. This has been driven by top-down support for electronic payroll and subsidy systems rather than cash-based systems, alongside a rapid surge in the use of the internet and mobile devices,” he said.
He said that it is an “exciting time” to be involved in a sector that is able to seamlessly sync consumer payment ability across financial, retail, government and leisure spend, as well as contribute to increased production, consumption, and employment creation.
