Cashless payment
66% of UAE users increased their use of at least one digital payment method in the last year, including digital cards. Image Credit: Gulf News

Dubai: A large majority (88 per cent) of the people in the UAE have used at least one emerging payment method in 2021, according to Mastercard’s New Payments Index 2022.

“Adoption of a broader range of digital payment methods is accelerating in the UAE and the technology fueling the future of payments is already here,” said Mastercard. “In addition to being aware of solutions like cryptocurrency, digital cards, biometric payments, BNPL (Buy Now Pay Later) and open banking, consumers in the UAE are increasingly and actively using these solutions in their everyday lives.”

Of those using a payment method, around 39 per cent used a tappable smartphone mobile wallet, 29 per cent used BNPL, 20 per cent used cryptocurrency and 18 per cent used a payment-enabled wearable tech device. Consumers are also making purchases in increasingly diverse ways, including through voice assistants and social media apps.

Cash on the decline

While traditional payment methods still have traction, 29 per cent of consumers in the UAE indicated they used less cash in the past year. By contrast, 66 per cent of UAE users increased their use of at least one digital payment method in the last year, including digital cards, SMS payments, digital money transfer apps and instant payment services.

While crypto use was low, 40 per cent of cryptocurrency users in the UAE say they have used it more in the last year.

These behaviors are expected to continue, with comfort and security key to growing adoption, said Mastercard.

The index confirmed security is top of mind when deciding what payment methods to use, globally and in the UAE (36 per cent). Security and rewards are main considerations in the country, followed by promotions and ease of use. Highlighting sustainability as a key driver in the region, more than a third of UAE consumers said they also consider social and environmental benefits.

“It is exciting to see the increased adoption of emerging payment methods and consumers’ eagerness to reap the benefits of the digital economy in the UAE and across the region,” said JK Khalil, Cluster General Manager, MENA East, Mastercard.

Budgeting tool

The survey found that there is high awareness of BNPL as a budgeting tool.

Many UAE consumers have heard of BNPL with 87 per cent saying they are familiar with the concept, and almost half (46 per cent) are already comfortable using it today. Consumers want the flexibility and convenience of BNPL, but with the sense of security associated with a trusted provider like a bank or payment network.

Those that have used BNPL find it useful for emergency and big-ticket purchases, as well as increased purchasing power. Consumers also find BNPL useful for unique use cases, including as a budgeting and financial planning tool.

Blockchain knowledge

Broad mainstream awareness of cryptocurrency (95 per cent) and NFTs (non-fungible tokens) (86 per cent) exist, though depth of understanding about both currencies and the underlying technology is lacking, with three in four (74 per cent) UAE consumers agreeing they would use cryptocurrency more if they understood it better.

Consumers are looking for more education, security, and flexibility to manage crypto assets. Still, about two thirds (66 per cent) of consumers in the UAE agree NFTs and other digital assets could be good investments. Two in three UAE consumers (67 per cent) have undertaken at least one crypto-related activity in the past year, such as opening a crypto wallet, buying, trading, or holding crypto as an investment.

Most consumers are open to future cryptocurrency engagement, with potential opportunities ranging from holding an investment to redeeming rewards, using crypto as means of payment, to purchasing an NFT using a credit or debit card.

Direct payments

Most consumers are open to direct account-to-account payment options, by linking their account to a merchant site for future purchases. Around 83 per cent of UAE consumers using account-to-account payments have maintained or increased their usage in the last year.

Seven in ten consumers agree they are interested in a bill payment option that allows them to change the date they pay their monthly bills, mostly due to an irregular income. Bill payment options that allow them to pay over a period using a buy now, pay later solution (71 per cent) was also of interest, as well as automatic payments for their household bills (70 per cent).

Consumers are relying on digital finance options for their everyday financial tasks, with the benefits of open banking like speed, convenience, and transparency. Eight in ten (81 per cent) know about open banking, and are using it to pay their bills, do their banking, secure or refinance loans, and make BNPL payments.

Over half (55 per cent) of UAE consumers feel safe using apps to send money to people or businesses from their phone. Five in ten (50 per cent) are willing to share financial data information with apps to have access to payment tools that help them manage their money.

Gen Z in lead

Younger generations have gone more digital in their purchasing and payments behavior, and their engagement in and usage of emerging digital payments engagement is accelerating at a faster rate than older audiences. They are also more open to exploring emerging payment approaches like crypto or buying virtual products in the metaverse.

Across the UAE, Gen Z is least likely to use cash or make in-person purchases and payments. They are proactively seeking out new payment methods, and nearly two thirds of Gen Z (64 per cent) in the country are likely to have obtained a new digital payment alternative (e.g. digital wallet, click-to-pay account) compared to only 22 per cent of Baby Boomers.