Liftoff MENAP: how digital payments are revolutionizing commerce

The Middle East, North Africa, and Pakistan (MENAP) is one of the world's most vibrant and dynamic regions. Across every market, a digital revolution is underway as governments encourage innovation to transform their financial infrastructures. And consumers are responding by adopting digital commerce and payments at an unprecedented rate.

These powerful themes run throughout our second annual study into the payments and commerce trends across the MENAP region. Our survey of 13,000 consumers builds on last year's research, allowing us to monitor year-on-year shifts in behavior and provide businesses with real-time insight into the trends that matter.

MENAP's digital commerce boom continues

In 2020, we saw consumers across the region rapidly embrace digital commerce due to the COVID-19 pandemic. And in 2021, that trend has accelerated. Consumers tell us they're using digital commerce more than last year and for a wider variety of goods and services. This includes everyday items such as meals, groceries and household goods.

The momentum behind the region's shift to digital commerce looks set to strengthen as we move into 2022. Our research finds that 83% of consumers plan to maintain or increase their current level of ecommerce spending. Should this happen, MENAP will continue to be the world's fastest-growing ecommerce market, worth over $49 billion according to Visa.

The rise and rise of buy now, pay later and digital wallets

Consumers are increasingly abandoning legacy payment methods, such as cash-on-delivery and bank transfers, for digital payment methods as they become more comfortable shopping online. Keeping up with these fast-changing consumer preferences and habits is critical for businesses to remain competitive and capture more revenue.

The data yielded in our research reflects what we've seen on the ground in the past year, especially concerning the growth in the use of buy now, pay later (BNPL).  MENAP has become a quiet leader in the BNPL space, with 24% of consumers in the region saying they've used BNPL in the past year. This is due mainly to the payment method addressing the long-standing trust deficit around prepayment and serving as a suitable digital alternative to cash-on-delivery.

The growing use of digital wallets is another trend of note. These empower the unbanked and underbanked in the region, significantly widening the total addressable market for businesses. And we can expect to see the demand for local digital wallets grow in the coming years as national regulatory initiatives increase competition for financial services.

Reimagining the digital (and physical) storefront

The pervasiveness of digital commerce is creating opportunities for businesses to reimagine where and how they interact and win customers. For instance, MENAP's consumers increasingly cite marketplaces, apps or social media as their preferred shopping channel. Our data finds that MENAP now outstrips most Asia Pacific countries for social commerce preference. Being able to offer the right payment options in-channel will be critical to tap the opportunities available.

We're also witnessing exciting developments in the way businesses are rethinking their physical spaces. We're seeing an increase in businesses offering Click and Collect services to provide increased flexibility and convenience when consumers order online.

Other brands are ramping up their omnichannel approaches to cater to consumers’ ongoing search for personalization, convenience and human-centric customer service. Consequently, retailers are  increasingly connecting with customers via channels like WhatsApp, ushering in a new era of ‘conversational commerce.’

Trust at the checkout is a differentiating factor

As digital payment volumes across the region have increased, so have instances of online fraud. Consequently, consumers are conscious of the risks associated with digital commerce and prioritize paying securely over speed.

We find that 81% of consumers regularly check the security encryption of a payment page or apps before entering payment details and completing a purchase. And 28% percent always check this for every purchase they make.

Simultaneously, an already high rate of reported false declines in 2020’s survey has gone up in 2021. Last year 20% of consumers in MENA reported having suffered at least one false decline over the previous 12 months. This year that number has increased to 22%.

Both factors highlight that those businesses who are laser-focused on optimizing their payments to strike the right balance between security and performance have the opportunity to earn the trust of consumers and carve out a competitive advantage.

Digital payments are a gateway to MENAP's continued growth and economic prosperity

Data shows that the growth of digital payments and ecommerce has enabled new cross-border activities with consumer money flowing between countries in the region, and globally, as never before.

Authorities see great potential in digital payments for enabling local countries to further contribute to global value chains. Meanwhile, consumers cite major upcoming events in the region such as the World Expo and World Cup as having the potential to permanently unlock new economic ties between the region and the rest of the world.

Consumers are also spending more with brands outside of their home market. Thirty-three percent say that buying products or services not available in their own country is the number one reason to shop online. This trend creates a tremendous opportunity for merchants to expand their presence and tap into new consumer markets.

But that's only if they can successfully navigate the fragmentation and complexities of the region's payment landscape. And the quickest and most effective path to unlocking this opportunity is working with a partner that can cut through the complexity and guide businesses to unlock growth.