Dubai: Payment revenue pool of key GCC countries such as Saudi Arabia, UAE and Kuwait are projected to grow about 1 per cent to minus 1 per cent this year according a recent study by Boston Consulting Group (BCG).
The report ‘Global Payments 2020: Fast Forward into the Future’, sheds light on the projected outlook for key economies in three revenue growth scenarios.
Under a quick-rebound scenario, BCG’s outlook suggests that the GCC’s payment revenue pool will expand from $23 billion in 2019 to $24.3 billion in 2024, a compound annual growth rate (CAGR) of 1.1 per cent. However, this level of growth is lower than the 7 per cent that the regional industry recorded between 2014 and 2019.
In a slow-recovery scenario, the regional revenue pool would reach $23.1 billion by 2024, a CAGR of 0.1 per cent. Under a deeper-impact scenario, the revenue pool is projected to shrink by a CAGR of -0.9 per cent.
“COVID-19 related headwinds such as decreasing oil prices, a slowdown in tourism, and a substantial rise in expatriate migration have slowed overall economic growth,” said Godfrey Sullivan, Managing Director and Partner, BCG. “While payments revenue growth in the region is projected to be restricted as a result of the pandemic, we are also seeing a surge in electronic transactions, pointing towards an opportunity of growth in digital.”
The reporte noted that efforts are being made across the GCC to drive increased uptake of digital payment methods, with governments, banking institutions, and service providers enabling greater access and reducing transaction costs. Countries are open to more international contributors entering the market, and Saudi Arabia and UAE intend to implement real-time payment infrastructure within the next two years to facilitate economic growth.
Across the GCC during the crisis, higher numbers of merchants welcomed contactless payments, including those of lower value. Likewise, consumers demonstrated the same enthusiasm, even in traditionally challenging markets. Governments may be interested in accelerating the cashless agenda, as research has shown that electronic payments can increase global GDP by as much as 3 percent per year.
A fundamental consumption shift has occurred due to the pandemic, which will change the combination of payment options and, in some areas, lower the prominence of cards. Mobility-dependent sectors such as entertainment and travel have already witnessed a drop in payments, and others, including food and home entertainment, will likely record greater growth. Providers should be prepared for such change and align payment choices to accommodate different industries’ purchasing trends.
Mergers and acquisitions (M&A) payments activity has been fostered through value chain ambitions, scale objectives, and the necessity to move money quicker. Although the deal flow has predominantly revolved around payments processing and acquiring, it will likely spread to other value chain areas. GCC payment markets are still developing in comparison to others, and private equity, ecosystem participants, and local competitors seeking to build scale regionally will most probably drive M&A activity.
“BCG’s research indicates that the cashless agenda, e-commerce growth, and vibrant competitiveness in the payments category will become more and more apparent in the region,” said Mohammad Khan, Partner, BCG. “Payment leaders in the GCC have an opportunity and urgency to make bold moves that can secure their business’s long-term prosperity.”