Dubai: The Middle East and Africa region will see a strong revival in ecommerce and digital payments in the last quarter of this year and the trend is expected to keep up the pace in years ahead, Simon Haslam, CEO of Network International Holdings plc, told Gulf News in an interview.
The London-listed company’s performance was impacted in the first half of the year by Covid-19-related lockdowns, and the associated reductions in domestic and tourism-related consumer spending. Network reported a small loss of $150,000 for H1 2020.
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“We did experience some short-term disruption in business due to COVID-19 in the second quarter of this year. But we have a much more solid outlook on the full year,” said Haslam.
Despite the first half setback, the company sees a rebound already taking shape in its business. In the UAE, Network sees a quicker recovery, thanks to the government’s timely and comprehensive response that helped it to beat back the virus much ahead of several other economies.
The company’s data shows trends in merchant signups pointing to faster than expected recovery with the pace of POS [point of sales] merchant signings returning to pre-COVID levels; and online gateway signings continue at an accelerated pace, with about 950 new merchants on-boarded during 2020.
“We have seen a significant growth in online payments. E-commerce volumes, excluding government and airlines were up 45 per cent year on year in the second quarter, with growth rates continuing to remain high through July, at 61 per cent year on year,” said Haslam.
He believes that the digital payment sector is witnessing a massive change because of the COVID-19 crisis. The social distancing mandated by the virus outbreak has seen rapid growth in the switch from cash to digital and contactless payment solutions.
“It’s fair to say that whenever and however the current crisis ends, we have reached a ‘tipping point’. Digital awareness and activity were changing before COVID-19. Lockdown, and the continuing effects of the pandemic, have simply given it increased momentum,” Haslam said.
Malls are here to stay
The UAE’s and region’s mall culture is here to stay despite the interruptions caused by COVID.
“Clearly there is a big change happening in the mode of payments in shopping outlets and there has been an increase in online purchases. That does not necessarily mean people are going to abandon malls especially in a country that has extreme weather conditions and air-conditioned malls come with retail, food, entertainment and sporting activities,” he said.
While the physical-virtual space is changing rapidly, Haslam believes the shopping centers still have their place. “We will see more collaborations, as evidenced by Emaar Malls partnering with noon.com to open The Dubai Mall ‘virtual store’,” said Haslam.
Acquisitions and growth strategy
Network recently announced the acquisition of DPO Group (DPO), an online commerce platform in Africa, - for approximately $288 million.
“DPO is a clear growth accelerator for Network. A leading, high-growth online commerce platform in Africa, our fastest growing region,” said Haslam.
DPO’s business is supported by highly attractive fundamentals, including e-commerce and mobile money exposure, and 100 per cent presence in the fastest growing payments market in the world.
This is not the first time Network has taken the M&A route to expand its market share in the region. In 2016, the company acquired Emerging Markets Payments (EMP) from private equity investor, Actis.
EMP came with an extensive footprint in the Middle East and Africa (MEA), serving more than 35,000 retailers and 130 banks and processing over nine million accounts.
While admitting M&A indeed has been an accelerator for strategic expansion, Haslam said the company’s focus is on medium/long term value creation in the next one to two years rather than making more acquisitions.
“When assessing such a transaction it is important to look at what it does for our product and customer offering and the value this will create for shareholders,” he said.
“Our Saudi Arabia plans have been delayed by a few months because of COVID related travel restrictions. We are making excellent progress and remain confident in the industry fundamentals and will catch up the time lost,” he said.
Acquisition of DPO is expected to further consolidate Network’s presence in Africa and strengthen its position across the entire payments value chain.
DPO is present in 19 countries across Africa with South Africa, Kenya and Tanzania representing major markets. Africa is expected to represent about 40 per cent of Network International’s total revenue by 2024 compared to 27 per cent reported in 2019.
“Africa is a vast and diverse continent, representing the world’s most underpenetrated, nascent and fast growing payments markets, where we have seen recent signs of an acceleration in those trends,” said Haslam.