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Apple Pay to Open New Era for Digital Payments in the UAE

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While American consumers will get their first taste of Apple's new e-wallet service in October 2014, SMEs in the United Arab Emirates (UAE) will be keeping a close watch as Apple Pay heads towards the US market. Leading Middle East and North Africa in e-commerce, the UAE Government is implementing Smart Initiatives and reorganising its banking and mobile sectors’ strategies in order to maximise opportunities offered by contactless technology. More recently, the eBay-PayPal split is expected to benefit further Apple’s new digital wallet as eBay is likely to start accepting Apple Pay as a possible replacement for PayPal.


Source: Apple Inc


UAE leads e-commerce in the Middle East

The UAE is the clear leader in the e-commerce industry in the Middle East, with 50% of consumers going online to shop in 2013, followed by Saudi Arabia and Qatar with 47% and 45%, respectively. Benefiting from a young, tech-savvy population, the UAE has the highest internet smartphone ownership rates, estimated by Euromonitor International at about 70%.

UAE e-commerce is forecast to reach US$10 billion in value terms by 2018. The Middle East’s e-commerce and m-commerce are expected to witness strong growth in the next five years, as consumers increasingly opt for faceless transactions.  According to Euromonitor International estimates, online sales in the Gulf Cooperation Council countries are expected to reach US$15 billion by 2015. The market experienced growth of about 30% between 2011 and 2012, from US$7 billion in 2011 to US$9 billion in 2012. Moreover, mobile sales represented about 10% of the Middle East’s e-commerce in 2013, and are expected to double to 20% in transactions terms by 2015.

Apple Pay to boost digital wallet in UAE markets

Consumers in the UAE will be able, from this year, to make payments with Apple’s (soon-to-be-launched digital wallet) Apple Pay, according to MasterCard and Visa. The solution Apple Pay, which will be integrated into the iPhone 6 and the new Apple Watch, has been developed by Apple in collaboration with MasterCard, Visa and American Express. While iPhone 6 and 6 Plus were launched in the UAE on 27 September 2014, Apple has not yet revealed when the Apple Pay programme will reach the Emirates. However, MasterCard is planning to launch its digital enabling service, MasterPass, in the UAE later this year. The MasterCard Digital Enablement Service (integrated with payments made through Apple Pay) is already available in the US, Canada, the UK and Australia.

Apple Pay is expected to boost e-transactions volume and value in the UAE through offering practicality and speed by allowing users to pay for their purchases by swiping their iPhones (or Apple Watches) at points of sale in the country. The feature will be rolled out in the US in October 2014, and, in the first stage, will be available in 220,000 stores or outlets, such as McDonald’s, Walgreens or Bloomingdales. According to Apple, Apple Pay is a secure technology, since card numbers will not be stored on the device itself or on Apple’s servers. Euromonitor International estimates that the UAE has about 4,000 terminals used for contactless payments and retailers in the country are already showing strong interest in supporting Apple Pay as soon as it is launched. However, the adoption of contactless payments in the UAE is still at an early stage of development and represents strong development potential. Contactless payments in the UAE are, indeed, in the process of building consumer awareness and acceptance.

Ahead of Apple Pay’s arrival, UAE Banks Federation (UBF) launched the implementation of the Mobile Wallet project in June 2014. The project incorporates the facility for smartphones to be used for cashless purchasing in UAE retail and to store or transfer money. The Mobile Wallet is the financial component of the Smart Government initiative and is supported by the whole banking sector in the country, it is therefore expected to impact on UAE consumers’ lives in many ways in the long term. The UAE’s digital payments landscape is growing at a fast pace and consumers in the UAE are keen on paying electronically. Moreover, an increasing number of applications enabling contactless technology are developing rapidly among merchants and online.

iPhone 6 expected to generate strong demand for the e-wallet in the forecast period

The strong demand for iPhone 6 in the UAE is expected to boost digital wallet payments in the medium-to-long term. SMEs operating in e-commerce in the UAE are confident of the payment technology taking off in the coming years and, in the first stage, will monitor US market performance in order to estimate their own customers’ acceptance of the e-wallet (the e-wallet solution will be rolled out in the US in October 2014).

The payment mode is still at an early stage of development in the UAE and increasing consumer adoption will include promoting how secure and easy to use this payment option can be. The fact that key payment networks such as Visa, MasterCard and American Express are compatible with the solution is expected to boost the consumer base of e-wallet payment by the time the technology is released in the UAE. The tap-to-pay technology, which it will also be possible to use for apps and online payments, combining practicality, ease of use and rapidity, is expected to convert a large part of the population. Moreover, the fact that consumers only share their payment details once with Apple and never directly with merchants is very likely to assist the increase in the e-wallet’s usage in the UAE in the forecast period.

One of the key objectives of the Smart Government initiative is to provide financial services to the unbanked segment of the population. At a later stage of the project, the Mobile Wallet is also expected be available to visitors. Initiatives such as Smart Government are expected to further stimulate the adoption of cashless payment solutions, not only in the UAE, but in the wider Middle East region. Beyond those initiatives, consumer education is key to the acceptance of electronic payment solutions. The constant introduction of new technologies is also fundamental in the shift from cash to cashless. E-payment initiatives to support the country’s social and economic goals are expected to increasingly be integrated into the Gulf region’s government initiatives, such as in the UAE and Saudi Arabia. As mobile money and contactless payments are growing at a strong pace in the UAE, banks and mobile operators will increasingly invest in the technology and larger nationwide deployment is expected to be seen in the forecast period.


Join us for a twitter chat on mobile payments trends on October 28th.


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