The Middle East is experiencing a digital spring. Across the region, there is a digital awakening that has transformed the way we use mobile devices. Consumers, able to shop using smartphones, will expect telecom operators, financial institutions and retailers to modernise their systems to keep up with mobile commerce, or m-commerce.

The foundations have been laid, at least from a consumer acceptance perspective. Almost half of all UAE residents have a smartphone and the country has twice as many mobile phone subscribers as inhabitants. Similarly, the smartphone penetration rate in Saudi Arabia is set to double to 50 per cent within the next four years.

With mobile user rates comparable to Western market levels, and increasing high-speed connectivity, the region's m-commerce has ample room to develop. According to a recent study by Informa, the value of m-commerce in the Middle East and Africa could reach $4.9 billion (Dh17.99 billion) by 2015.

Technology is more than keeping pace with consumers' desire to shop from their mobiles. Unlike yesterday's SMS and voice-enabled handsets, today's smartphones carry m-commerce apps along with mobile social networking, gaming, and entertainment — activities that also generate sales.

M-commerce is also being supported by enabling technologies such as Near Field Communication (NFC). This technology makes electronic payments easy by allowing users to simply tap or swipe their mobile device at the point-of-sale to complete a transaction.

Support of telecom firms

For technologies such as NFC to deliver flawless service to customers, telecom operators need to build alliances. A prime example is the partnership between Starbucks, Barclaycard, and Orange in the UK. Thanks to ‘Quick Tap,' an NFC service launched by Orange and Barclaycard, Orange subscribers can pay for Starbucks purchases by tapping their smartphones on a terminal that deducts the payment.

Regional operators such as Avea in Turkey are already using NFC. Avea has NFC-enabled SIM cards that allow access to mobile payment services for its entire customer base in collaboration with Garanti Bank.

In the GCC, utilities use m-commerce because it is efficient, secure, and builds a closer customer relationship. For example, two years ago, the Dubai Electricity and Water Authority launched an iPhone app. Customers can now monitor and pay their bills on their iPhone, and can submit complaints.

Consumers will need Middle East telecom operators to take similar approaches. Telecom operators have an important advantage — the long-standing relationships with customers. This customer focus is a capability that can be augmented to support m-commerce.

Telecom operators will retain customers if they can make smartphones as safe and reliable a payment mechanism as cash or credit cards.

There is another advantage that telecom operators cannot overlook — the Middle East's favourable regulatory environment. Telecom operators have the opportunity to work hand-in-hand with regulators to shape the right collaborative model with financial institutions.

Broad alliances

Such collaborative business models should be broad and involve commercial and technology partnerships with financial institutions, retailers, card issuers, and device manufacturers. These partnerships would involve telecom operators leveraging the financial partner's transaction infrastructure to gain access to the payment network and to earn revenues from issuing fees on each transaction generated by a mobile device.

A leading example of such collaboration is the US-based ISIS consortium, whose members include Google, AT&T, Motorola, MasterCard, and Visa. The companies cooperate on such matters as commercial agreements and technological standards, along with end-user devices and interfaces. In the Middle East, such cross-business cooperation has an additional advantage because it expands the reach of the financial sector. Thanks to m-commerce, financial institutions would capture transaction fees from consumers outside of their customer base.

An important group for financial institutions is those people who neither have a bank account nor a credit card. Many of these people do, however, have prepaid mobile telephones, devices through which they can in future participate in electronic payments.

M-commerce will turn out to be win-win for all involved.


The writers are with Booz & Company, the specialist consultancy.