Middle East consumers and businesses have never had a more comprehensive range of payment options. The push by regional governments to transform into cashless economies has propelled the region’s digital payments ecosystem forward, stirring up wave after wave of payment innovations.
It is critical for banks, businesses and merchants to keep track of all these advancements. After all, customers are now spoilt for choice and with the competition just a click away, their loyalties are held only to those providers who uncompromisingly deliver on their expectations.
With that in mind, let’s explore the payment trends that we can expect to play out in the year ahead and understand the opportunities that each presents.
Digitisation of cards
Payment processing will continue to be a complex landscape in 2024. We see the digitisation of cards continuing to grow and evolve: more mobile payments, more tokens, more merchant-initiated transactions, and, on the acceptance side, more SoftPOS.
This offers opportunities for businesses to attract customers from competitors and boost revenue but will also bring with it unique challenges. The societal shift to digital channels requires the payments industry to deliver more convenient solutions for consumers while maintaining security and accessibility. The industry has responded swiftly, introducing solutions such as mobile wallets (like e& money or Payit), buy now pay later (BNPL), and the expansion of real-time payments like Aani in the UAE and Sarie in Saudi Arabia.
If businesses want to capitalise on the new ways of making a sale, they must carefully balance friction, usability and consent in the payment experience. Not only does the payment method need to be the right one for the consumer, but the business processes need to streamline the settlement and management of the payments.
To remain successful, businesses must adapt and take a comprehensive approach to anticipating their customers’ needs. Functionality, like a single view of shoppers across all channels and interactive payment dashboards with metrics, analytics, notifications and actionable insights, is critical to business growth.
Embedded payments capabilities
Straight through digital business-to-business (B2B) payments will gain real traction through the year as corporations look to improve their back-office efficiency in response to increased pressure from investors. Whilst open platforms have underpinned this success on the B2C side, embedded finance also offers huge potential for the B2B world.
Embedded finance requires integrating financial services like lending, payment processing, and insurance into business processes without being visibly redirected to financial institutions. The global market is expected to reach $384.8 billion by 2029, according to KBV Research. That’s a 30% compound annual growth rate (CAGR) in the forecasted period. As such, in 2024, we see an opportunity for B2B businesses to embrace embedded payment capabilities that have helped B2C companies thrive. By using their success as a template and switching to digitised processes, B2B businesses can seize the opportunity to sell more products and services and streamline their operations.
Real-time payments
With the launch of Aani in the UAE last year, in 2024, we’re set to see a positive shift as real-time payments build momentum within the cross-border payments space. Innovations to overcome the current lack of transparency and control around where money is within the system will continue to emerge, enabled by the much richer data landscape that comes with the shift to ISO20022—especially where this data aids Know Your Customer (KYC) and Anti-money Laundering (AML) compliance.
The B2B space benefits the most from modern cross-border payments because it accounts for 80% of all cross-border transactions. Still, the much greater transaction values involved require hardened security to ensure transactions are reliable and losses from fraudulent activity are prevented. Inevitably, B2B payments will attract greater friction regarding authentication and consent.
Organisations must consider the new industry trends with cross-border payments alongside new banking standards and practical applications of current and upcoming developments. In the new world of borderless transactions, investing time and technology in improving the cross-border payment experience will be critical to frictionless payments, growth, liquidity management and risk mitigation.
Account-to-account payments
Our view for 2024 is that while the digitisation of cards will continue to grow, account-to-account (A2A) will become an increasingly realistic alternative in more markets, as demonstrated by Visa’s recent partnership with ABHI and Yellow Pepper to introduce A2A payments to the UAE. Even though technically account-to-account payments have been around for a long time in the form of bank transfers, standing orders and direct debits, open banking and real-time payments are set to shake things up and become a credible rival to card payments as regulators realise their value in providing competition to card payments and merchants are attracted by the improved economics.
As A2A payment volumes grow (digital payments are projected to grow at a CAGR of 15.39% from 2022-2026 in MENA), banks and payment providers must take the necessary measures to mitigate fraud. Operational risk and architectural factors must be considered to ensure safe transactions.
Whether businesses plan to build their solutions or integrate with a partner, they will need to consider practical concerns such as liquidity and fraud and the readiness of their systems architecture for real-time payments. The rewards for those who get it right will be significant, allowing them to respond to the 24/7 digital economy with reduced costs.
Opportunities ahead
Whether invoicing customers, paying suppliers, clearing employee payroll or much more—payments lie at the heart of every business. The advancements outlined above are set to unlock new customer benefits and conveniences. Organisations that recognise this potential will have the opportunity to enhance customer satisfaction and potentially create new revenue streams.
