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Paul McMeekin - ACI

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The Middle East Presents Retailers A Growing Opportunity But Faces Two Challenges

31 August 2017  |  5616 views  |  0

In the Middle East, cash is the preferred method of transacting, however the region is edging toward a digital society. 36% of Middle East residents are digital shoppers and are expected to spend $19B2 online in 2017; with this spend figure rapidly growing to $34B in 2021. In the UAE and Saudi Arabia, nearly two thirds of the population has smartphones—fueling shopping online growth. This prevents retailers new growth opportunities.

Penetration of card-based payments is more than 100% across the region. Some countries, such as Lebanon and Egypt, see lower levels of card-based payments and a preference for cash, but this is changing with government initiatives – for example, the move in Egypt for government salaries to be on a prepaid card.

With the high levels of card adoption, smartphone usage and a rapidly growing eCommerce market, one must ask what the risks or headwinds are that are facing this seemingly robust market? I think there are two factors. The first is fraud and risky behaviors. The second is merchants not being ready for the surge in demand for online shopping.

The UAE was included in two recently published Aite Group reports. Whilst not comprising the whole region, it can serve as a good proxy for the rest of the Middle East in terms of consumer behavior and sentiment toward fraud.

65% of UAE residents believe that the retailers they shop at deploy payment security tools to prevent fraud. This number drops to 55% when asked the same question about online retailers—a big gap in the consumers mind. Online shopping feels less safe.

If a fraud attack occurs, 65% of those in the UAE will stop shopping at that online merchant. The risk is real, with almost one third of cardholders (in the UAE) indulging in risky behaviors, and this creates a serious headwind against the expected growth in online commerce.

The second factor that may slow growth in online commerce is converting online shoppers from browsers to buyers. Without effective conversion strategies, usage of the internet will continue to rise. But actual commerce will not rise proportionally. There are several simple strategies that merchants can use to improve conversion rates in the Middle East:

  • Embeddable and secure payment forms – Through tokenization, payment forms can securely handle payment data. From a consumer perspective, you do not get redirected off the site. There is less friction and less checkout abandonment.
  • Optimization – With the growing use of smartphones, it is essential that web sites are optimized for the device the consumer uses. Gone are the days of the desktops dominating eCommerce. If a consumer has to manipulate a website or payment fields to enter their payment details, they will abandon the cart.
  • Alternative Payment Methods – As merchants in the Middle East grow regionally and internationally, they must offer the right payment mix to their changing audience. Alternative payment methods are estimated to make up 55% of the online market in 2019.

Although this post might have some negative overtones, it’s actually intended to highlight a huge opportunity. The truth is there is a big fraud risk. And merchants have a lot of work to do to reduce fraud and capture their share of the market. But the opportunity is there and growing. Uber, and even Uber Eats, is growing rapidly in the region, demonstrating that if a merchant rightly address all of the factors referenced above, they will capture market share.

 

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The Middle East Presents Retailers A Growing Opportunity But Faces Two Challenges

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