By Sahar Salama, CEO and Founder, TPAY MOBILE
The ramifications of the COVID pandemic have been felt the world over and much has been written about the subsequent effects on modern life – from wearing face masks in order to travel and being encouraged to work from home to the way we access goods and services and, indeed, how we pay for them.
While some markets were already primed for the seismic digital shift that has occurred in the last 18 months, others have been caught on the back foot and have had to very quickly play catch up. In this regard, the Middle East and Africa (MEA) region provides an interesting case study as to why traditional payment systems are not fit for purpose, and how mobile money continues to revolutionise the payments landscape in high-growth emerging markets.
For context, the MEA region presents a veritable and rich tapestry of countries, cultures, and operational processes, particularly when it comes to making and receiving payments. Across the region, there is limited access to traditional banking infrastructure, with 50% of the adult population unbanked. While this is a common trait in emerging markets, it does mean that transactions based on credit and debit cards are not a realistic prospect for many consumers. Set against the backdrop of the COVID pandemic, this became an even greater challenge.
It’s no wonder then, that in many markets across the MEA region, where large proportions of the population are cut off from traditional banking services, alternative financial products have been particularly successful. Indeed, with smartphone penetration growing apace, and with it the ability and desire to purchase goods and services through digital channels, there is an increasing need for alternative payment methods that support access and consumption without reliance on a traditional bank account.
Across the MEA region the shift towards alternative, digital payments
has shone a particular spotlight on mobile wallets and Direct Carrier Billing (DCB). Both payment methods have not only proved resilient in the wake of COVID but, importantly, served the needs of the most financially vulnerable as the pandemic raged.
The reason? Both mobile wallets and DCB allow consumers to make purchases by charging mobile payments to either their monthly mobile phone carrier bill or – particularly import for those who are unbanked – prepaid mobile credit. As such the benefits of mobile money extended far beyond consumer convenience over the last 18 months, by allowing consumers across the MEA region to access not only digital goods and services, but also educational content and healthcare that might otherwise be unavailable to them.
While it’s too early to say whether the pandemic’s impact on the declining use of cash for mobile money will be lasting or not, the early signs are promising. According to The State of Industry Report, over the past five years the value of transactions between mobile money platforms and banks grew more than fourfold, reaching $68 billion in 2020, up from just $15 billion in 2015.
As COVID-19 swept the world, traditionally cash-heavy regions such as the Middle East saw years of growth and innovation in digital payments condensed into a matter of months. For example, mobile and contactless payments proved so popular that in the UAE, two-thirds of people now expect the country to become fully cashless by 2030. Elsewhere, Sub-Saharan Africa continued to be at the forefront of mobile money adoption, with 43% of all newly registered accounts worldwide coming from the region.
So what does all this mean for those already operating in the MEA region or looking to enter it? In short, market players, such as merchants, need to recognise the shift in consumer demand and embrace these digital methods – or face being left behind.
The good news is that fintechs, such as TPAY MOBILE, continue to develop accessible, low friction and lower-cost payment options that empower a multitude of business models whilst also supporting financial access and inclusion on consumers within the region. And I firmly believe that by lowering the barrier to digital payments we will continue to not only displace credit and debit cards – but notably cash too.
What the MEA region has certainly demonstrated in the last 18 months is that where mobile wallets and DCB are already popular, we can expect the adoption and transaction trends to continue, if not accelerate. And in other markets where mobile wallets and DCB have yet to catch on, we could witness a leapfrog to the next generation of digital payment systems. Either way, the MEA region, like many others, has seen COVID accelerate digital payment trends at an unprecedented rate, which has only served to reiterate the redundancy of traditional payment systems.