The UAE e-commerce sector is expected to see continued growth as more UAE consumers demand online payment options and merchants increasingly recognise the need for an online presence during the coronavirus pandemic, reveals ‘The United Arab Emirates (UAE) ecommerce Landscape 2020’, a joint study by Dubai Economy and Visa, the world’s leader in digital payments.
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 e-commerce 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.
This shift to paying online also means e-commerce 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 e-commerce 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, 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.
His Excellency Sami Al Qamzi, Director General of Dubai Economy, commented: “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. Dubai Economy has prioritised digital payments as a key enabler of the ease of business and smart transformation that will set Dubai apart as a competitive global business hub. Cashless payments and e-commerce are definitely on a faster trajectory than anticipated, and we look to translate this unprecedented growth into an opportunity for businesses of any size to establish and enhance their presence online.”
UAE E-Commerce Landscape vs Other Markets
Based on the latest transaction data from Visa, the ‘UAE E-Commerce 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 e-commerce markets. The average transaction value in the UAE was $122 in 2019-20, compared to $76 in mature markets, and $22 in emerging markets.
Marcello Baricordi, Visa’s General Manager for Middle East and North Africa, said: “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 e-commerce and contactless commerce skyrocketed during the lockdown. We call these habit forming behaviours as more consumers and merchants have now experienced the security, convenience and range of online commerce and we anticipate this trend to continue post-pandemic. Because of this, businesses that work to adapt to this new world of e-commerce and digital payments have the best chance at both recovery and thriving. All merchants regardless of size must now think beyond just adapting and focus on their medium and long term strategy. Our report, in collaboration with Dubai Economy, is designed to share our insights and help businesses spark new and innovative plans.”
While almost every business has been impacted by the pandemic in some way, small businesses have struggled the most. Helping small merchants move online so they can survive challenging market conditions must be a priority for the communities they operate in. By offering innovative payment solutions, Visa’s priority in this environment remains to help businesses thrive both online and offline.
“With the perfect set of supportive factors – from digital-friendly policies to relief measures, high internet, smartphone and social media penetration, and world-class infrastructure – there is no market better equipped than the UAE to take e-commerce and the payments ecosystem to the next level,” Baricordi concluded.