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Digital ecosystem in the Middle East region

June 18, 2019

The total number of mobile subscriptions in the Middle East increased by 8m in 2018 to reach 304.5m. And in this time, the total number of internet users in the region increased by 18m to 182m.1 And it is telling that the growth across both parameters outpaced global growth figures. These advances further the digital economy advantages in a region that already boasts a higher than global average in mobile phone penetration, an expanding middle class and a high degree of smartphone adoption.

The e-commerce sector, in particular, is on track to register particularly strong growth. Cumulatively, the MENA region accounts for four million unique online shoppers – travel is the most popular e-commerce category followed by electronics and fashion. In only three years, a tenfold growth is expected in this segment – from US$20bn in 2017 to US$200bn in 2020.2

Yet, back in 2016, only 15% of businesses had an online commerce presence. And 90% of online purchases made in the Middle East were from foreign companies. These numbers demonstrate the massive room for a digital catch-up, especially given the region has one of the highest internet penetration rates in the world – 60% as compared to the global average of 51.7%.3 In the Middle East alone, internet penetration stands at 71% as of 2019.4 This demonstrates a degree of disconnect – that in a region with generally high levels of per capita income and a high degree of smartphone and mobile internet penetration, the region’s businesses are still unprepared for change in spending habits that is inevitable.

Another defining trend for retail businesses in the region is the dominance of m-commerce over e-commerce, which clearly shows the populations’ comfort with apps.5 Amazon’s acquisition of UAE’s largest multi-commerce website Souq.com for US$580m6 is testament to the growing importance of m-commerce in the region.7The mobile payments platform in the region is also seeing tremendous interest with many companies beginning to offer diverse services. A few examples in the UAE include the Etisalat Wallet (a mobile wallet launched in 2016), NBD Pay (an NFC-based mobile contactless payment service also launched in 2016) and the Emirates Digital Wallet (launched in 2017 by a consortium of 16 UAE banks to provide mobile payment services). One Pay and Quickpay, meanwhile, provide bill payment services from mobile apps in Kuwait. Separately, Mastercard entered into a partnership with Kuwait Finance to launch a wallet in 2017.8

Google Pay was launched in the UAE in November 2018, providing a fillip to contactless payments among Android phone users. The region is also seeing its share of innovative partnerships emanating from macro trends from outside of the region. For example, the continued rapid growth in the number of Chinese tourists has resulted in Network International, a payments solution provider in the UAE, partnering with China’s Alipay to allow the Chinese to make mobile payments when they visit the UAE. This will not be the last such partnership.

Perhaps more importantly than anything else, there’s consumer enthusiasm for going digital across this region. Governments now need to improve their digital infrastructure and regulatory frameworks to facilitate digital adoption. Breaking common ground can yield significant benefits as well. In fact, if the Middle East can establish a unified digital market by 2025 – potentially of 160m digital users – it could contribute 3.8% annually to the region’s GDP.

To read the complete report, click here

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