Gateway to growth: How MENAP merchants can use payments to grow revenues and cut costs
The trends towards ecommerce, remote working, digital entertainment and online education are likely to continue as we recover from COVID-19. People have crossed barriers to entry and adopted new ways of doing old things for the long term.
Our data shows that 53% of consumers are doing more of their shopping online now compared to when the pandemic began. That’s up from 45% last summer. This 8% percent uplift equates to 209 million more people who have transitioned to online shopping since the start of the pandemic.
While the digitalization of commerce and payments is encouraging, there’s a world of difference between enabling digital and optimizing for it. From our experience working with the biggest brands across the region, there are three key areas businesses can focus on to use payments that will facilitate growth, lead to savings and provide a competitive advantage.
1. Optimize acceptance and minimize false declines to grow revenues
22% of consumers in the region reported having suffered at least one false decline in the last 12 months, our research shows. That’s when a transaction is rejected wrongly by one of the players in the payment value chain. This compared to 14% in Europe and 12% in Asia Pacific.
This data shows many businesses in the region have room to improve their authorization rates. It also indicates that many businesses fail to maximize revenue and waste millions of dollars in marketing spend by losing customers at the final hurdle.
A major cause of false declines is the fraud scoring system businesses and others in the payments value chain deploy. It's also about the quality of the data used to inform these systems. So businesses must consider whether they're using the right tools, feeding them with the right data, and achieving the results they’re expecting.
Benchmarking against peer groups, industry sector, geography and customer profile helps contextualize performance. It’ll also surface what those with solid performance are doing, allowing businesses to make tweaks to logics and processes to minimize false declines and drive continuous improvement.
It’s a complex topic, of course. A big part of the challenge is capturing the correct data at the right level of detail. And not all payment providers can offer a holistic view of payments data across schemes, currencies, payment methods and so forth.
“Checkout.com provides a single repository for all our data. If we need to pull a report for a certain payment method, brand or market, it’s a single click away. With this access to data and the expert support from Checkout.com, we've optimized our payments performance, recognizing a 15% uplift in our approval rate."
Red Bamba, Digital Payments Manager, Alshaya
2. Cut the costs and complexities of cash handling
The role of cash in the MENAP region has changed. Consumers are now more wary of the hygiene concerns around handling cash. While the sudden shift from physical to digital retail showed consumers there are more convenient ways to pay.
These trends, tied with the active government and regulatory support for the digital economy, mean that now's the moment for businesses to step away from cash and fully embrace digital payments as core to their business. Doing so will not only allow them to reduce costs and minimize the risks associated with handling cash. It'll also open new opportunities to reach new consumers and innovate their business models.
Yet, making the move to accept digital payments in MENAP isn't straightforward. The region's fragmentation means preferred payment methods vary from market to market. So do how consumers use them.
Businesses, therefore, need to understand that there are important reasons behind how customers choose to pay. And offer the preferred digital payment options that help convert browsers into buyers.
These include local card schemes, such as mada in Saudi Arabia, QPAY in Qatar and Knet in Kuwait. There's also a range of local mobile wallets like BenefitPay in Bahrain, where consumers pay online via QR codes. And let's not forget the unique offline ways to pay for online purchases that are present in the region, such as with Fawry in Egypt.
Buy-now-pay-later (BNPL) is another way consumers are bridging the gap between cash and digital payments. That's because it replicates the experience of receiving the product or service before paying for it, leading BNPL to win the trust of traditionally cash-centric customers. The installment payment option also encourages the psychological shift away from cash on delivery in several retail sectors, fashion and homeware in particular.
We’ve seen people switching from credit cards to BNPL in large numbers. As Abdulmajeed Alsukhan, CEO and Co-Founder of Tamara observes, “BNPL is winning trust with traditionally cash-centric customers in the region, providing a natural bridge from the experience of paying in cash to paying via a digital method.” One-in-four consumers in MENAP have used BNPL in the last year. But more importantly, nearly one-in-three said they intended to do so, meaning around half could be BNPL users by 2023, meaning it's a payment method that every business would be wise to consider.
3. Unlock growth opportunities
MENAP is the fastest growing ecommerce region globally and is anticipated to be worth $49 billion by 2022. Most of this growth is cross-border. Indeed, 33% of consumers say that the convenience, value and choice of buying products or services not available in their own country is the number one reason they shop online.
Offering the preferred payment methods in every country is the obvious way businesses can win market share overseas. But there are other steps they can take to tailor the experience, such as displaying the checkout in local languages to ensuring consumers can buy in their local currency.
It also helps to offer different payment types based on their device to speed up the checkout process. For example, defaulting to Apple Pay or Google Pay on mobile devices.
Even better, if the business can use data provided to them by their Payment Service Provider (PSP) to go one step further and show customers the optimal payment method based on the type of consumer, basket size, the likelihood of success and so forth.
Expanding into new markets isn't the only growth opportunity afforded to businesses that embrace digital payments. There are new sales channels also waiting to be unlocked. For instance, more consumers in MENAP are looking to buy directly through social media — especially in Jordan, Pakistan and Egypt.
This is a tremendous opportunity for businesses to reach whole new consumers. Yet it requires a nuanced and tailored payments strategy to ensure that consumers get the seamless end-to-end experience they desire.
"There are many layers of complexity. But if you have a payments partner like Checkout.com, you’re able to create a competitive advantage."
Hassan Mahbub, Head of Strategy, Careem Pay
Finding a growth partner
There’s a huge opportunity to improve acceptance and decline rates, cut cash-handling costs, and expand cross-border to maximize existing revenue streams and switch on new ones. Yet few merchants can realize this without the support of an expert payments partner. See how Checkout.com is empowering businesses.