The volume of online payments in the Arab world could increase nearly three times by the year 2020 to reach more than $69 billion of transactions per annum, a report said.

The region saw a 23 per cent increase in online payments during 2015, led by strong growth in Saudi Arabia and the United Arab Emirates, showing 40 per cent and 24 per cent year-on-year growth respectively, added the “State of Payments in the Arab World” report from Payfort, the leading online payment service provider in the Arab world.

Focusing on the seven key markets which Payfort operates in (Egypt, Jordan, Kuwait, Lebanon, Qatar, Saudi Arabia and the UAE), the report tracks online payment transactions in the airline, travel, ecommerce (online shopping) and entertainment sectors.

“Our research team has been very focused on how to make this annual report as useful as possible for businesses in the region,” Omar Soudodi, managing director of Payfort. “So, in addition to exploring current trends and future predictions, this year’s report aims to shed some light on some of the real issues that impact merchants on a day-to-day basis and present actionable insights and possible solutions for the future.”

The new report shows strong growth in online shopping across different sectors, with transactions in the airline sector increasing by 18 per cent from 2014 to 2015, in the travel sector by 39 per cent, in the ecommerce sector by 31 per cent and in the entertainment sector by 34 per cent.

The region’s largest markets Egypt, Saudi Arabia and the UAE led most sectors in terms of volume and year-on-year growth, with the exception of the entertainment sector, where the UAE had about ten times the volume of online shopping transactions in 2015, compared to its nearest country competitor.

The acceptance ratio across the region, indicating consumer acceptance to pay online, continues to grow. Egypt, Jordan, Kuwait, Qatar, Saudi Arabia and the UAE all now have more than 50 per cent acceptance for online payments, with Saudi Arabia and the UAE having the highest percentages, at 58 per cent and 71 per cent respectively.

Airline bookings and business-to-business marketplaces saw the highest acceptance rates in Saudi Arabia and the UAE, with ecommerce proving most popular in Egypt, travel services in Kuwait and Jordan, travel and entertainment in Lebanon and airlines, entertainment and B2B marketplaces being most accepted in the State of Qatar.

The State of Payments 2016 report features an extensive section on consumer buying habits in the region, to include key influences for shoppers, buying behaviours and consumer preferences for products and services. With more than 61 per cent of the population in the countries surveyed buying online, understanding differences in consumer behaviour between different markets and demographic groups has become vital for businesses relying in online transactions.

“As competition grows and online consumers become more sophisticated, understanding the unique demographics and habits of Middle East consumers becomes all the more important for online businesses,” said Soudodi. “This year’s State of Payments report will provide businesses with a broad range of useful information on Middle East consumers.”

The UAE continues to lead the region in terms of adoption with 71 per cent of the country shopping online, whilst Jordan lags further behind since only 50 per cent of its population are online. However, the report shows that there are some clear differences between consumer habits and preferences country-to-country. For example, the top two product categories bought online in the UAE are flight tickets and clothes, whilst in Egypt these are mobile phones and utility bills, in Kuwait and Saudi Arabia the top two items purchased are flight tickets and utility bills.

The role the Internet plays in consumer shopping remains varied, with 17 per cent of shoppers stating that they complete their entire shopping journey online and 67 per cent relying on online research. Nine out of ten consumers surveyed said that they check product reviews online before making an online purchase.

Meanwhile, trying to encourage consumers to use online payment options can have its challenges and many of these stem from consumer resistance to new payment methods and technologies. Cash-on-delivery remains the preferred method of payment for 51 per cent of Arab shoppers: a percentage that soars to 70 per cent in the case of online shoppers in Egypt.

“Despite the enormous growth in the number of consumers buying online, there are still many challenges for Middle East businesses,” said Soudodi. “Fear of electronic payments, fear of fraud, fear of new technology and a lack of trust in online services all remain significant obstacles for consumer marketing in the region. Meanwhile, the consumers that are paying online demand faster and easier checkouts, while simultaneously expecting increased security. Rising expectations put a lot of pressure on merchants.”

Credit card adoption across the region varies greatly between countries, with Kuwait and the UAE having the highest penetrations of 97 per cent and 89 per cent respectively. Qatar and Saudi Arabia have about 45 per cent adoption and Lebanon just 15 per cent credit card penetration. Amongst those consumers that pay online, most consumers registered a significant level of confidence in payment security and confidentiality, although much less confidence in online privacy.

“PayFort is focused on helping businesses in the region take their online sales and payment options to the next level, by making it easier, faster and more secure for them to offer their customers a choice of online payment options,” said Soudodi. “By integrating new technologies, new payment channels and advances in fraud prevention and risk management, PayFort allows merchants to offer customers the latest payment options, while focusing on their core business.”

“We hope that State of Payments in the Arab World 2016, our third and most extensive research report to-date, will prove to be a valuable source of information and inspiration for the region’s merchants during the year to come,” continued Soudodi. “We expect the report to be as valuable to new online players as it is to the more experienced online businesses in the region.” – TradeArabia News Service