Dubai: Payment revenues from key GCC countries such as Saudi Arabia, the UAE and Kuwait are expected to grow about 1 percent to minus 1 percent this year, according to a recent study by Boston Consulting Group (BCG).
The report ‘Global Payments 2020: Fast Forward into the Future’ sheds light on the expected outlook for key economies in three revenue growth scenarios.
According to a rapid rebound scenario, BCG’s prospects suggest that the GCC’s payment revenue pool will expand from $ 23 billion in 2019 to $ 24.3 billion in 2024, a compound annual growth rate (CAGR) of 1.1 percent. However, this growth level is lower than the 7 percent that the local industry recorded between 2014 and 2019.
In a slow recovery scenario, the local revenue pool would reach $ 23.1 billion by 2024, a CAGR of 0.1 percent. Under a deeper impact scenario, the revenue pool will shrink by a CAGR of -0.9 percent.
“COVID-19-related winds, such as falling oil prices, a slowdown in tourism, and a significant increase in foreign migration, have slowed overall economic growth,” said Godfrey Sullivan, managing director and partner, BCG. “Although the growth in payments in the region is expected to be limited due to the pandemic, we are also seeing an increase in electronic transactions, which indicates a possibility of growth in digital.”
The reporter noted that efforts are being made in the GCC to make greater use of digital payment methods, with governments, banking institutions and service providers enabling greater access and lowering transaction costs. Countries are open to more international contributors entering the market, and Saudi Arabia and the UAE plan to implement real-time payment infrastructure within the next two years to facilitate economic growth.
Across the GCC during the crisis, a larger number of merchants welcomed contactless payments, including payments with lower value. Similarly, consumers have shown the same enthusiasm, even in traditionally challenging markets. Governments may be interested in accelerating the cashless agenda, as research has shown that electronic payments can increase global GDP by as much as 3 percent per year.
A fundamental shift in consumption has taken place as a result of the pandemic, which will change the combination of payment options and in some areas lower the prominence of cards. Mobility-dependent sectors such as entertainment and travel have already seen a decline in payments, and others, including food and home entertainment, are likely to grow more. Suppliers must be prepared for such changes and bring the payment choices in line with the purchasing trends of different industries.
Mergers and acquisitions (M&A) payment activities are promoted by value chain ambitions, economies of scale and the need to move money faster. Although the transaction flow mainly revolves around payment processing and acquisition, it is likely to spread to other value chain areas. GCC payment markets are still evolving compared to others, and private equity, ecosystem participants and local competitors looking to build regionally are likely to drive M&A activities.
“BCG’s research suggests that the cashless agenda, growth in e-commerce and vibrant competitiveness in the payments category will become increasingly apparent in the region,” said Mohammad Khan, Partner, BCG. “GCC payment leaders have the opportunity and urgency to take bold steps to ensure their business’ long-term prosperity.”
Source: Gulf News