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The corrosion of cash across MENAP

What does the corrosion of cash across the Middle East, North Africa and Pakistan mean for merchants?

The rise of the ecommerce market across the Middle East, North Africa and Pakistan (MENAP) has gone hand-in-hand with changing attitudes to cash. One explanation is obvious. Consumers who shop online don’t need cash. But this suggests ecommerce is the only driving force. The picture is more nuanced. 

For starters, digital payments don’t just happen online. Bricks and mortar retailers also take cards and alternative payment methods. And even when sales happen online, cash still plays a part, with cash-on-delivery accounting for three-quarters of purchases in many countries.

Then there’s a cultural angle. To ‘pull’ people to digital payments, you must first break their reliance on cash. Centuries of conformity make that hard enough. It’s even harder in regions like MENAP where volatility is common in many markets. And people retreat to the liquidity of cash in times of uncertainty — or so the theory goes.

And then there’s opportunity; or the lack of it. Until recently, a digital payment needed a bank. And according to the MENA Financial Inclusion Report 2020, there are 301 million adults in the region without access to banking.


No surprise then that cash is still a major player across MENAP. In the UAE, often touted as a leader in the charge towards a cashless society, consumers made 40% of their transactions with cash in 2019 .

But times are changing. That same report estimates that almost one in three transactions won’t involve cash in just four years. And the European Payments Council suggests that the Middle East and Africa will see 139 billion individual non-cash transactions processed in 2022 — 90 billion more than five years ago. In global comparisons, only emerging Asia outstrips that growth. 

Three factors are fuelling this trend away from cash. 

1. COVID-19

If digital payment adoption needed a catalyst, it came in the form of COVID-19. The pandemic has had two big consequences. 

The physical one is the restriction of movement and traditional retail. Shopping has moved online as a necessity. 

The second is psychological. Busy shops and crowded markets now come with a health warning, as does handling cash. This has extended to cash-on-delivery transactions. 

Our research found 45% of consumers across MENAP have been shopping online more frequently since the COVID-19 pandemic started. This has spurred something little short of a payments revolution.

2. The digital shopper

For the digital generation, cash is an anathema. It’s hard to store, easy to lose, and inconvenient to use. But for older people, this physicality is what gives cash its value. Thus the concept of invisible money is more of an exercise in trust than anything else. 

And headlines suggesting that online payment fraud could top $200bn in the next five years do nothing to allay their fears. But it seems security is winning the day — 81% of consumers across MENAP say they now trust the safety and security of online payments.

If security is winning over older consumers, convenience is pushing younger shoppers deeper online and further away from cash. In-app purchases are the new frontier. Why log into your laptop (and have to find it first) when you can shop directly through your mobile and social media channels? 

Almost half (45%) of online consumers across MENAP prefer to purchase products or services via an app. This is not merely cannibalizing non-cash payments. Every improvement in the online shopping experience increases people’s propensity to also pay online versus paying cash-on-delivery. 

According to Sunil John, Middle East President at public relations firm BCW, 61% of young shoppers in GCC states now pay for online purchases with cards, up from 45% in 2018.

3. Innovators and regulators

Digitally comfortable consumers are one thing. But a cashless society needs more than just the appetite of the people. It requires innovators to create the infrastructure and experiences and for governments to incentivize them. On both fronts, MENAP countries are breaking new ground. 

Businesses across the region are continuing to remove friction from their online payment experiences, making it easier for their customers to forgo cash. And not just in the traditional ecommerce sector. Careem, a vehicle-hire company; Cafu, an app that brings petrol and diesel to your car; and Farmbox, a food delivery service, are just some brands that have enabled ‘set and forget’ payment mechanisms on their website. 

Governments are getting in on the act too. In Saudia Arabia, Mada — the card payments network established by the Ministry of Finance — now extends to 160,000 retail Point of Sale across the country, accounting for 40% of all payments. 

KNET, the comparative network in Kuwait, now pulls in 80% of all consumer transactions, including payments covering 50 government institutions . Innovation continues at speed — in 2019, it launched KFAST, which enables users to store their card details, and has recently launched a new payment gateway for merchants. 

Elsewhere Saudi Arabia and the UAE have said they are preparing to launch real-time payments infrastructures soon.

Don’t believe (all) the hype

All the evidence points to the sustained demise of cash across MENAP. But trends are not set in stone. Merchants in, or interested in, the region should note two things. 

Firstly, it’s not uniform. Arjun Singh, the former Group Head for Cards and Payments at Al-Futtaim Group, says there are nuances in each market: “They’re all different in terms of population size, nationality mix, adoption of electronic formats of payments, income demographics, strategies being adopted by Bank and NBFCs (non-banking financial company) and of course, the regulation, to name only a few.” 

Secondly, for all its faults, cash is certain. A cash payment succeeds the moment the cash is exchanged. The same isn't always true for digital payments. Just over one in five consumers across the region (21%) have suffered from at least one failed payment. Though that figure is only slightly higher than more mature payment markets in Europe and the US, the worry for MENAP merchants is the reluctance of their shoppers to retry the purchase — only 33% compared with 52%. 

One reason may be a lack of data telling merchants and consumers why a payment has failed and what actions to take. The majority of merchants (60%) don’t receive meaningful data on payment declines. Emre Talay at Delivery Hero says that these ‘growing pains’ in online payments must be fixed before people ditch cash for good, and is “one area where PSPs can create a difference by engaging with the issuer banks to improve the acceptance rates here.”

Profiting from cashless

It follows that merchants that work with the right PSPs will have a much brighter future as more payments go cashless. Access to payment data is one benefit, but by no means the only one. 

An ever-improving customer experience, tight security, an ability to easily integrate with other business systems, and the coverage to scale at speed should also be part of the checklist. 

Merchants should also focus on the local knowledge that a PSP brings. As we have explained, ‘cashlessness’ is not one-paced and nor are its drivers. Having feet on the ground is the way to understand these variations in customer preference and compliance obligations truly. PSPs that can provide this sort of deep partnership hold the key to businesses turning ‘the cashless society’ from an anthropological concept to a competitive advantage.

The shift to digital payments in the Middle East, North Africa and Pakistan is happening now. Find out how leading merchants in the region are adapting to the changes and unlocking new opportunities to expand their business.   

About the Author

Mo is an international fintech and ecommerce leader, with a passion for the power of financial technology to improve the lives of individuals, communities and businesses in every corner of the world. Mo is a Vice President at In his role, Mo is responsible for driving growth across the region.

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