Ecommerce driving Middle East digital economy: Payfort

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Ecommerce is the furnace driving growth in the Middle East’s online economy but local online airline bookings are by far the highest value market, according to Payfort’s 2016 State of Payments report.

In the years to 2020, it will be the travel, events and entertainment sectors pushing forward the digital economies of the region’s three biggest countries, Egypt, Saudi Arabia and the UAE.

In the report, which will be officially released online at the Ecommerce Middle East Show in Dubai at the end of the month, the largest growth in market size came in ecommerce, in both dollar and percentage terms. It covered the UAE, Saudi Arabia, Egypt, Kuwait, Lebanon, Qatar and Jordan.

Online airline booking, ecommerce, travel and entertainment market growth between 2014 and 2015. (Images via Rachel Williamson)

The report found that having a cash on delivery option “influenced” 51 percent of Arab shoppers and that a huge 91 percent of Egyptians who shop online chose the cash on delivery model – giving a good indication of the battle that lies ahead for ecommerce businesses in that country.

But when Arab shoppers do pay online, they’re fairly trusting. Over 80 percent said they were confident their personal and payment information is safe. On the other hand, 71 percent say fears over privacy issues have prevented them from making a purchase at some point.

“The Middle East is still finding its comfort level for digital forms of payment. With a large portion of the population still without bank accounts it is likely that a portion of the population will remain inaccessible for some time,” the report said.

Shopping from mobile devices is taking off.


Egypt, as the biggest Middle Eastern country, is both leading the way and still well behind. 

It’s where the biggest improvements in refund rates were seen, along with Jordan and Saudi Arabia, “indicating consumers are more certain about their purchases whereas in Lebanon their purchases may be more impulsive”.

Yet although its 90 million people makes it the largest source of online buyers – 18 million compared to Saudi’s 12 million – as a proportion of the population that number is well behind all other countries in the study. Further, men account for 78 percent of all transactions online; in the rest of the region it’s a bit more equitable, with UAE women leading the way making 40 percent of all transactions.

Saudi Arabia

But Saudi is the one to watch in terms of size of growth. Led by the travel sector and then ecommerce, its online economy is forecast to grow 242 percent between 2015 and 2020 – $22 billion. 

It’s well behind the UAE’s expected $27 billion figure, but coming from a much lower base. Egypt is forecast to be worth $14 billion, growing more than the UAE whose own growth got a boost from the rise in the entertainment sector – which is also coming off a very low base: it will rise 400 percent but from 120 million to 600 million.

Payfort expectsthe four online industries it measured to grow steadily, based on growth rates between 2014 and 2015.


Payfort identified five challenges to online payments in the Middle East.

  • The implementation of 3D Secure technology for credit cards was a difficult choice for merchants, who risked abandoned sales as it interrupts the payment process, or more fraudulent transactions if they didn’t adopt it. Payfort suggested merchants put higher risk transactions through this process, rather than all.
  • Credit card penetration in the region is patchy, with some areas such as Kuwait having a 97 percent adoption rate while Lebanon is only at 15 percent. This meant many merchants still have to deal with cash and the associated problems. “Educating consumers on credit card payments and lobbying payment gateways to innovate on their behalf should be a top priority of all ecommerce businesses,” the report said.
  • Simpler payment solutions such as contactless cards and Amazon’s One-Click also mean higher risks of identity theft and fraud. “Business that can afford the investment to develop secure databases will likely stand to benefit from features like 'One Click Checkout’,” the report said.
  • Mobile payment was getting mixed responses from merchants, but the report said those prepared to stay on top of technology developments and even run a mobile system in parallel to its traditional system would reap dividends later.
  • Trust in sellers is still a problem in the Middle East but being upfront about pricing could fix this. “Each day thousands of transactions are lost due to abandoned shopping carts. With such a huge problem at hand you may be wondering what leads customers to desert their shopping experience. The answer is hidden costs.”

Payfort identified one-stop-shops, as Amazon, Souq and Alibaba are trying to be, as the future of ecommerce, with secure databases providing a streamlined sales process, price protection systems as Wamda covered here last year, same day shipping which Mo Ali Yusuf said in December would become a key differentiator, and free returns.


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