Mohammed Ali Yusuf, MENAP Regional Manager, Checkout.com, explains which markets that are historically dominated by cash payments present a significant growth opportunity for the digital payments industry in the Middle East and Africa (MEA) region.
Local relationships and locally savvy partners are crucial for global payment firms venturing into the Middle East, North Africa and Pakistan (MENAP) region.
First, payment methods vary per country and local payment methods often reign supreme. For example, over 40% of KSA payments are processed through local MADA cards and over 80% in Kuwait are processed through the country’s KNET gateway. Access to such networks is crucial for any business seeking to earn a customer’s trust and business.
Moreover, MENAP is a payments landscape that demands the ability to operate with multiple currencies within and cross-borders. Merchants are also understandably risk-averse in their payments partnerships and are looking to go with tried and tested players who are genuinely familiar with local laws, regulations and culture.
Legacy providers within the region’s payments ecosystem abound and any international player coming in without inside help would find this landscape very difficult to navigate.
The diversity of the customer base here also has an impact on purchasing decisions. Granular data shows that co-existing nationalities and expat communities across the GCC have distinct online purchasing behaviours and habits. The demographic nuances of the MENAP consumer base, at the very grassroots level, which differ by wealth, religion, nationality or expat status (as well as gender and age), all have a bearing on how the customer pays and shops online.
Data
With such complexity of integration, regulation and a diverse local potential customer base, robust transaction data is critical. Without data, the considerable amount of effort taken to establish a presence and invest in payments in the region can quickly be wasted.
Merchants in MENAP need to feel confident that they have straightforward and efficient access to quality data that flows seamlessly into their in-house systems and provides actionable insights that can inform corporate strategy across silos. Checkout.com’s research shows that 41% of merchants say they are not receiving actionable data and analytics on their payments.
An example of this data is the authorisation rates for each payment method performs in each market. Checkout.com data shows that beyond insufficient funds, common decline reasons in the region come down to format error or failed 3DS authentication.
Of the consumers surveyed in MENAP, 21% say they have experienced a false decline at least once. This compares with 14% of a same-sized sample from across the UK, France, Germany and the US. Yet only 33% of MENAP consumers are willing to retry following a false decline, which compares with an overall total of 52% across the UK, France, Germany and the US who would be willing to do so.
It is precisely this kind of data that Checkout.com research reveals is sorely lacking for many merchants, which they need to reduce liabilities for chargebacks and fraud. Without it, merchants seeking to expand in the region have no understanding of ‘what good looks like’.
Choosing the right partner
But one must choose their partners carefully. A partner with in-depth knowledge in one country may not have equal expertise within another and this fragmented approach can make broader regional growth and integration a challenge. The right partner can also help simplify the onboarding and integration process for merchants looking to succeed in each country across the region at speed.
In addition, merchants and their service partners must-have an intimate and detailed understanding of how each payment method performs in terms of authorisation rates in every country. For payment technology providers, it is advisable to see local partners not just as another vendor but as a strategic business partner. They will be instrumental to launch in the MENAP market successfully.
Getting the partnerships right is key to potentially unlocking a lucrative market with e-commerce and digital payments set to accelerate in the coming years.
The Checkout.com Connected Payments in MENAP report (September 2020) revealed that the region, historically dominated by cash payments, presents a significant growth opportunity for the digital payments industry as the region’s online shoppers now prefer using digital payments rather than paying by cash on delivery. The report shows that across eight countries, 47% of consumers say they expect to shop online more frequently in 2021. The report further reveals that a majority (53%) of the region’s consumers most often pay for their online purchases using digital payments rather than cash on delivery (36%) or bank transfers (10%). Digital payments are by far the most preferred payment method with online shoppers in the GCC, including Bahrain (74%), Qatar (66%), the UAE (64%), Kuwait (59%) and Saudi Arabia (54%).
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