A growing number of consumers are choosing to make purchases using cards, having been weaned off cash transactions.
International payment network majors MasterCard and Visa have both reported growth in purchase volume. In the first quarter this year, MasterCard saw its net income climb 12 per cent to $766 million (Dh2.81 billion), from $682 million in the same period last year. Visa has reported that worldwide spending on its payment cards rose 8.8 per cent as cross-border volume, a measure of spending by cardholders outside their home countries, climbed 10 per cent.
The UAE is among the leaders on this front. Buoyed by consumer confidence, the credit, debit and prepaid cards sector in the UAE is seeing rapid growth, which enables stakeholders to invest more in technology and security features.
“Both here in the Middle East and North Africa as well as around the world the biggest shift is the continuing move from cash to credit and debit cards,” says Marcello Baricordi, General Manager, Visa UAE.
“The enormous growth of the retail sector in the Middle East and the increasing number of merchants who accept credit cards have also been a significant driver of growth.”
According to the UAE Central Bank, in 2012 the number of credit and debit cards increased by 296,000 to reach 10.4 million.
“The rise in credit and debit cards recorded a 2.3 per cent increase in 2012 compared to 2011, with the biggest increase in the third quarter, when banks issued more than 243,000 cards,” the bank says in a statement.
New players
According to a Euromonitor report, the circulation of prepaid cards in the UAE has quadrupled over the past five years to reach 1.2 million at the end of last year, reflecting spend of Dh2.44 billion.
It is in response to this growing market that Network International, a payments solutions provider, has launched the Mercury payment network across the UAE, with variants that include payroll, gift and travel cards. The company is working to claim its share of the market dominated by Visa and Mastercard. Japanese firm JCB International also has a presence via offerings such as the joint venture with Majid Al Futtaim Finance’s Najm card.
Better business
Banks and merchants are able to see first-hand returns on any technological investments. Niranj Sangal, Group CEO, OMA Emirates, a company that provides the industry with technology solutions, says, “In Carrefour UAE, there is a transaction every 16 seconds. In other markets, such as Germany, for example, it may take a whole day to complete about 1,100 transactions. In the UAE it takes about [five] hours.
“In these stores, you will notice that a transaction takes about six seconds, compared to a standard terminal where it may take about 22 seconds.”
The region is poised to enjoy the advantages of being in the spotlight. With MasterCard, for instance, while growth has slowed in the US, its biggest market, purchase volume growth in Asia-Pacific, the Middle East and Africa rose 19.1 per cent in the first quarter.
Visa cardholders spent $4.7 billion on their cards while visiting the UAE in 2012, a 17.1 per cent increase compared to the previous year, according to data issued by Visa Inc.
Growth everywhere
“Credit cards are seeing significant growth across every sector,” says Baricordi. “Here in the UAE, we have witnessed major growth in the tourism sector and for major events such as the Dubai Shopping Festival (DSF). In the tourism sector we have seen a 25.2 per cent increase in spending on shopping, 19.6 on hotels and apartments and 27.6 per cent on restaurant expenditures. International spending during DSF for Visa cardholders saw major growth of 19 per cent year-on-year.”
The results collated by the company’s VisaVue Travel data service in its latest Tourism Outlook UAE report also indicate that the total number of transactions increased by 20 per cent.
Increased card use is based on consumer confidence in the economy. “Consumer confidence levels in the UAE have been steadily increasing in our most recent indices, reflecting a positive outlook for key sectors and confidence in the UAE’s plans and vision for the coming years,” says Eyad Al Kourdi, Country Manager — UAE, MasterCard.
