Dubai is home to a rapidly developing financial technology sector and several major e-commerce firms, but despite this, the domestic economy remains dominated by cash. As such, the use of electronic payments (e-payments) and e-commerce is underdeveloped, particularly in comparison to other developed markets. However, government and private sector-led initiatives are being developed to boost electronic transactions, to increase efficiency and transparency in the wider economy.
E-Payments
“The UAE and the wider region are behind with e-payments compared to more developed economies,” Ibrahim Selim Ergoz, general manager for the UAE, Qatar and Pakistan at Visa Middle East, told OBG, estimating that cash still accounts for around 75% of transactions, and that Dubai has just 50,000 point-of-sale (POS) electronic terminals. “Cheques are used for numerous, large and frequent transactions, such as paying school fees,” he said. However, he added that the proportion of e-payments is rising, driven by factors like tourists’ use of payment cards and high mobile phone penetration rates. “The government is also playing a key role by trying to move towards cashless payments for most transactions, which is important for catalysing the development of e-payments,” he explained.
E-Commerce
Ergoz told OBG that e-commerce is developing more rapidly than POS electronic transaction, both domestically and internationally. Dubai is also home to Souq.com, the Middle East’s major online retailer, which in March 2017 global e-commerce leader Amazon announced plans to acquire. Nevertheless, he said activity in the sector remains limited compared to Western markets. The development of e-commerce has been held up by factors such as an incomplete national post code system, which complicates deliveries. Physical retail also makes up a major portion of the economy, reducing incentives for larger local players to develop e-commerce. Observers say the local market also tends to prefer physical retail. “Amazon’s acquisition of Souq. com has been a shot in the arm for the development of the segment, but the retail experience is still very important to people living here, and it is going to take time to build an e-commerce sector,” Taha Khalifa, regional director for Intel in MENA, told OBG, citing the low penetration of credit cards in the Arab world as another obstacle to be overcome.
Development Initiatives
However, government institutions, regulators and financial sector players are working to develop both e-payment and e-commerce in the emirate. Regarding online shopping, Emirates NBD, the largest Dubai-headquartered bank, launched an e-commerce platform called SkyShopper in May 2017. The service allows customers to buy from multiple online retailers from the one platform.
Emcredit, a company created by the Dubai Department of Economic Development (DED), announced plans in June 2017 to launch a mobile payment solution called emPay. Noor Bank, an Islamic bank based in the emirate, signed a memorandum of understanding with Emcredit to use the platform. The DED is encouraging companies that use its services, such as applicants for licences, to make payments to it using such platforms. “Mobile and e-payments are not as extensive as we would like them to be, in particular among small and medium-sized enterprises, and we are working with various government departments and banks to push for more cashless transactions as it helps with transparency,” Alexandar Williams, director of the business development department at the DED, told OBG.
Financial authorities are also working towards expanding digital payment opportunities. The Central Bank of the UAE in December 2016 issued new regulations for digital payment services. “The central bank is playing a key role in enhancing the formal infrastructure of the payments industry. Direct debit should be introduced in 2017, which should make the market much more efficient from a transactional standpoint,” Sultan Almahmoud, deputy CEO of foreign exchange provider Wall Street Exchange Centre, told OBG.
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