UAE eCommerce sector to grow as digital payments boom
UAE eCommerce sector is expected to see continued growth as more UAE consumers demand online payment options and merchants increasingly recognize the need for an online presence, according to a joint study ‘The United Arab Emirates (UAE) eCommerce Landscape 2020’, by Dubai Economy and Visa.
The report reflects market activity over the last 12 months and, in particular, the impact of the COVID-19 outbreak, highlighting key trends and insights drawn from Visa’s transaction data on how and where consumers have been spending – in addition to new challenges and opportunities that the crisis has created.
With many consumers and merchants experiencing the convenience of eCommerce for the first time during the lockdown, the shift to shopping online is expected to hold long-term as consumer confidence in digital payments surge across the Middle East and North Africa (MENA) region.
The June 2020 findings of another study, Visa’s Stay Secure consumer survey in partnership with Dubai Economy and Dubai Police showed that 49% of UAE consumers surveyed have been shopping online more because of the pandemic, with three out of five (61%) now using cards or digital wallets more to make payments online instead of opting for cash on delivery. Increased trust in the safety, speed, and convenience of contactless payments, were the top reasons cited for their increased preference for online payments.
Additionally, a developed logistics infrastructure, financial account penetration and support for digital payments, increased retailers’ adoption of eCommerce platforms and government policies which support innovation and entrepreneurial activities are all drivers for eCommerce growth in the UAE. Initiatives such as the Mohammed Bin Rashid Innovation Fund Accelerator have also been launched by the UAE Ministry of Economy to further boost the sector.
This shift to paying online also means eCommerce will account for a bigger share of total UAE card payment transaction values in 2020, compared to pre-pandemic predictions; up from 19.7% to 21.9% . This figure is expected to continue upward, with eCommerce payments estimated to account for 28.2% of the total UAE card payment transactions value.
Findings from the Dubai Economy-Visa study also show that while UAE consumers still prefer to pay using credit cards (c. 35% of transactions), the use of debit cards to shop online has increased by more than 7% between 2018 and 2020, pointing to a higher degree of trust in the transaction process that is reflective of a maturing market.
Increased card on file tokenization and Click to Pay capabilities have also led to repeat purchases as well as higher frequency and ease of online shopping, fueling further growth in use of credit and debit cards as a method of payment.
“The increasing shift to digital payments is not only a strong testament to the efficiency of the infrastructure and regulatory framework in the UAE, but also an indicator of the growing confidence among consumers and businesses in the country, said Sami Al Qamzi, Director General of Dubai Economy
UAE eCommerce landscape
Based on the latest transaction data from Visa, the ‘UAE eCommerce Landscape 2020’ report also compares UAE to mature and emerging benchmark markets including the US, UK, Australia and Singapore, as well as Brazil, South Africa and Malaysia.
According to the report, in the wider Middle East, North Africa, and South Asia (MENASA) region, the UAE represents the biggest annual spend per online shopper at $1,648. Additionally, the UAE continues to maintain a healthy lead in average transaction size compared to both mature and emerging eCommerce markets. The average transaction value in the UAE was $122 in 2019-20, compared to $76 in mature markets, and $22 in emerging markets.
Correspondingly with more merchants going online and a wider selection of products available in the eCommerce space, consumer demand and online sales volumes have also multiplied.
“The digital payments ecosystem in the UAE and wider MENA region was already experiencing strong growth, but the pandemic has helped accelerate the pace of change and progress. We’ve seen a number of adoption barriers reduce as the demand for eCommerce and contactless commerce skyrocketed during the lockdown,” said Marcello Baricordi, Visa’s General Manager for Middle East and North Africa.