Across the world, nations are engaged in a race to move to a cashless economy. At first glance, the UAE looks to be a long way off with 75 per cent of all transactions still made using cash, but the pace of contactless payment adoption has accelerated in recent months as people follow physical distancing measures to prevent the spread of coronavirus.
The act of running to the store for groceries, medicine and other necessities has changed dramatically. Shoppers around the world have had to adjust to social distancing measures and other new challenges when buying everyday supplies for their families and loved ones. This shift in consumer behaviour is particularly clear at checkout, as people express a desire for contactless and voice concerns over cleanliness and safety at the point of sale, according to a Mastercard study in April.
Eighty-two per cent of UAE consumers prefer to pay in a contactless manner due to safety and hygiene concerns amid the coronavirus pandemic.
Seventy-one per cent of UAE respondents and 79 per cent of those polled worldwide said they now use contactless payments, according to a survey of 17,000 consumers in 19 countries.
“Contactless is already quite prevalent in the UAE, though conditions resulting from this pandemic are advancing consumer adoption further,” says Girish Nanda, General Manager, UAE and Oman, Mastercard. “UAE shoppers are increasingly recognising contactless as a safer, more hygienic, faster way to pay, especially since control over physical proximity is critical at that moment.”
The UAE already ranks foremost among regional economies rapidly moving away from cash. Accessibility of financial services, level of technology available and the extent of consumer participation in the formal economy are key determinants in a country’s readiness to move to a cashless society, and the UAE fares extremely well on all these counts.
The UAE government has been spearheading the shift to contactless for years, championing simple, safe and faster ways to pay. More than 92 per cent of people in the UAE use smartphones, presenting a substantial opportunity for contactless payments to thrive.
Proactive government policies have been crucial in building a digital culture in the UAE and eliminating many of the barriers to becoming a cashless society.
Digital commerce and cashless payments were identified as top government priorities in UAE Vision 2021. The government has implemented a number of initiatives to support it, such as the wage protection system, which ensures that 4.7 million migrant workers get paid electronically every month. The cashless journey is also being supported by financial institutions in the country.
“The UAE government has been spearheading the shift to contactless for years, championing simple, safe and faster ways to pay,” says Subroto Som, Head of Retail Banking Group at Mashreq Bank. “More than 92 per cent of people in the UAE use smartphones, presenting a substantial opportunity for contactless payments to thrive.”
According to McKinsey, this is particularly notable in the mobile payments sector, which is set to grow in the UAE at a rate of 30 per cent year-on-year.
“Against this background, we expect to see more people using this mode of payment. Contactless and digital payment methods require less physical interaction and are more secure,” says Som.
Globally, contactless transactions grew 40 per cent in the first quarter year-on-year, according to Mastercard.
The growth in contactless payments comes as e-commerce transactions in the UAE are forecast to total $16 billion (Dh59b) in 2019 and grow 23 per cent annually between 2018 and 2022, according to a joint study by Dubai Economy and Visa.
“Contactless and other digital payment solutions such as digital wallets offer consumers safer, cleaner, faster ways to pay, as well as control over human-to-human interaction at this critical time. What we are seeing at Mashreq is that people are embracing these safe and hygienic solutions as their preferred form of payment every day,” says Som.
At a tipping point
While countries worldwide are at different stages of contactless deployment and usage for everyday shopping, Mastercard’s insights on grocery and pharmacy trends – two areas where many day-to-day essentials are being purchased – showed that nearly all regions experienced significant spikes in February and March 2020.
Further, reinforcing changing behaviours and consumer checkout preferences, Mastercard said the number of contactless payments in the UAE, as a proportion of all face-to-face card payments, was over 100 per cent higher in the first quarter compared to the same period last year.