Dubai: Whether it was for the football or just to take in the fine winter, tourists to the UAE in the final weeks of 2022 were decidedly in the mood to have a good time. And that meant spending well and big at the stores, restaurants, hotels, or entertainment options in the UAE and its cities have to offer.
Then, there was the FIFA World Cup going on, and that too provided its own rub-off on spending. Add to that the spending power UAE’s own resident base brought on, and it made for a good end-of-year spree.
To get a real feel of how well that spending translated, Nandan Mer, CEO of Dubai-headquartered Network International, has the numbers and the insights to provide.
Based on transactions, did the anticipated bounce happen in UAE across sectors during Q4-2022? And especially during the FIFA World Cup phase?
We did see a Q4 bounce and witnessed exceptional growth in the total value of payments processed (Total Payment Volumes) across the UAE (and Jordan). This was driven by strong domestic and international spending, underpinned by a robust economy and positive consumer sentiment in the UAE, in addition to an influx of tourism coinciding with the FIFA World Cup Qatar 2022.
Domestic TPV (which represents spending from consumers domiciled in the region) was up 21 per cent year-on-year compared to the same period last year, while international TPV was up 28 per cent during the period. More interestingly, international TPV was 34 per cent ahead of Q4-2019, pre-pandemic. These impressive figures highlight the UAE’s status as a world-class travel and tourism destination, as some visitors chose to base themselves in the UAE to attend the World Cup.
We continue to see noteworthy underlying growth in our other strategic focus areas, demonstrating the growing adoption and acceptance of digital payments in the UAE and our other markets. Online TPV grew an astonishing 40 per cent year-on-year and SME volumes 47 per cent during Q4.
Were retail, F&B and hospitality the categories that emerged obvious winners? Is this where digital payments zoomed off the charts?
Retail and hospitality were both beneficiaries during the fourth quarter, albeit we also saw strong growth across a number of other sectors, which highlights the buoyancy of the economy in general. Our data showed a substantial rise of 40 per cent in the average transaction value at hotels during the fourth quarter of 2022 compared to the same period last year, while TPV at social lounges was up 16 per cent year-on-year as people chose to spend time in locations screening matches, which was in contrast to the restaurant segment which saw lower growth.
The influx of tourists has also driven spending in other areas of the economy including in the luxury goods sector, demonstrated by the 23 per cent increase in the average transaction value for tourists in the jewellery and watches sector during the quarter.
Interestingly, when looking at tourism spending, we saw large increases in visitors from Armenia up 9x and Egypt up 6x, which we believe is linked to the UAE welcoming a higher number of tourists from those countries during the World Cup.
With any consumer spending these days, there is talk about reduced or cautious ways. Is that being reflected?
We have not seen any particular signs of a slowdown in UAE consumer spending as yet, and payment volumes saw high growth in Q4. When comparing Domestic TPV in Q4-2022 to pre-pandemic levels in 2019, we registered an incredible 38 per cent increase, which we believe underscores the strong consumer confidence and optimism in the UAE.
If not in the Gulf, in some of the other Middle East and Africa markets?
Most of our markets continue to see robust growth, for instance our Africa subsidiary, DPO Group, saw healthy TPV growth of 25 per cent after adjusting for currency fluctuations. However, South Africa is experiencing more challenging macro-economic conditions, which has impacted consumer confidence and spending.
For Network International, will expanded coverage in 23 mean more volumes from South Africa through the deals you’ve been making in those markets. Will Turkey likely be the next big market after Saudi for you?
We have a geographic footprint that spans over 50 territories with a high potential for digital payments adoption and growth. This includes the African continent where we see significant opportunities as digital payments penetration increases over the longer term. Our acquisition of DPO Group places us on a firm foundation to capture this opportunity, as we work closely with our customers and partners to develop payment solutions tailored for the unique circumstances on the continent.
In the near term, Saudi Arabia will continue to be an important lever for growth. We are currently seeing strong demand for our services, where we are on track to underpin our medium-long term revenue target of $50 million. During the fourth quarter alone, we signed two fintech processing customers bringing our number of customers in the Kingdom to six in total, and we continue to have a healthy pipeline of new customers in place.
Another growth engine for the future that we are excited about is Egypt. We have just launched direct-to-merchant payment services in Egypt and have already onboarded our first SME merchants who have begun transacting through our point-of-sale terminals. We are focused on building out and training our local sales team and have a healthy merchant pipeline in place.
Given our already large footprint and multiple growth opportunities, we have no immediate plans to enter the Turkish market.
Any plans to acquire small digital payment firms?
We regularly evaluate various opportunities and remain open to considering transactions that will enable us to scale or enhance our offering.