Analysis of the current situation and future opportunities in the Middle East payments industry

I. Current status of the Middle East payments market

In recent years, the payments industry in the Middle East has shown rapid growth and has become a bright spot region for the development of the global digital economy. The region's payments ecosystem is undergoing a rapid transformation process from cash-dominated to digital payments.

Gulf Cooperation Council (GCC) StatesAs a regional economic engine, it is particularly strong in mobile payments and e-commerce growth. National initiatives such as Saudi Arabia's Vision 2030 programme and the UAE's Cashless Strategy are driving this shift. According to data, the Middle East will see e-transactions grow by more than 25% year-on-year in 2022, well above the global average.

Traditional bank transfers and credit cards are still the mainstream non-cash payment methods, but localised digital wallets such as Saudi Pay (Saudi Arabia), BenefitPay (Bahrain) and Fawry (Egypt) are rapidly emerging. Meanwhile, international players such as Apple Pay and Google Pay are also actively laying out this market.

II.Key Factors Driving the Middle East Payments Industry

(i) Policy support and improved regulatory environment

Several Middle Eastern governments have incorporated fintech development into their national strategies:

• Saudi ArabiaSupporting innovation through specialised fintech funds
• UAEEstablishment of the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM)
• Central Bank of BahrainLaunch of the most comprehensive regulatory sandbox mechanism

(ii) Young population and high technology acceptance

1. Population above 60% is under 30 years old
2. Smartphone penetration rate exceeds 80%
3. High usage of Instagram, Snapchat and others sets the stage for social e-commerce

(iii) Explosive growth of e-commerce

The epidemic has accelerated the development of online shopping habits:

• Competition between Noon.com and Amazon.sa is fierce
• Souq maintains regional dominance
• Shein and other cross-border platforms see surge in users

III. Major challenges and pain points currently faced

Despite the promise, several structural barriers remain in the Middle East payments industry:

1. Insufficient cross-regional connectivity

   • GCC internal clearing system not yet fully integrated
   • Lack of harmonisation of technical standards across countries leads to high costs of cross-border friction

2. Inclusive financial services gap

   • The proportion of "unbanked" (unbanked) people is about 35%
   • Limited access to formal finance for SMEs

3. Increased pressure for security compliance

   • AML/CFT regulatory requirements are becoming increasingly stringent
   • GDPR-type data protection regulations are on the way

4. Long consumer trust building cycle
   Awareness and acceptance of new payments still need a nurturing period

5. Infrastructure imbalances highlighted
   Significant differences in digitisation levels between urban and rural areas

IV. Analysis of key areas of opportunity for the next five years

Based on the research and judgement of the industry trend, the following sub-directions contain huge business value:

(i) B2B Supply Chain Finance Solutions

1. "Buy Now Pay Later" (BNPL for Business)
2. API Embedded Enterprise Treasury Management Tool
3. AI-driven dynamic credit assessment models

(ii) "Super App" (Super App) + Embedded Finance

Case in point: Careem expands from taxi to Pay line of business

(iii) Sharia-compliant FinTech product design principles:

1.Prohibition of interest(Riba-free): use of profit-sharing (Mudarabah), cost-plus (Murabaha)
2.risk sharing:: Avoiding excessive security requirements
3.Physical asset endorsement:: Each transaction needs to correspond to real goods or services

Leading practices include:

• Wahed Invest (Islamic robo-advisor)

V. Trends in Payment Technology Innovation and Digital Transformation

(i) Popularisation of real-time payment systems (RTPS)

Countries in the Middle East are accelerating the construction of national-level instant payment networks:

• abbr. for Saudi ArabiaThe Sarie system has been processing in seconds.
• UAEAani Instant Money Transfer Service Coverage of 90% Bank Accounts
• Egypt's InstaPay surpasses 2 million daily transactions

These infrastructures provide the basis for the following innovations:

1. Accurate distribution of government welfare payments
2. P2P micro-lending platform operations
3. Real-time enterprise payroll settlement

(ii) Progress of the CBDC (Central Bank Digital Currency) trial

Experiments show that CBDC can be elevated:

• Efficiency of cross-border remittances(Cost reduction 40%-60%)
• Monetary policy transmission accuracy
• Anti-Money Laundering Monitoring Capabilities

VI. Recommendations for regional differentiation and development strategies

Companies should adopt customised programmes for the characteristics of their main markets:

(i) The Gulf Cooperation Council (GCC) premium market strategy

1. product positioning: Focus on the comprehensive wealth management needs of high net worth clients
2. technical input: Biometrics (e.g. iris payment at Dubai Airport), AR/VR virtual branching
3. Mode of cooperation: Joint Venture with Sovereign Funds to Gain Licence Advantage

Typical Case: STC Pay Quickly Acquires Customers by Issuing Co-branded Cards with Visa

(ii) Path to breakthrough in emerging markets in North Africa

1.Agent Banking Network + Mobile Money Convergence(Refer to the Egyptian Fawry model):

• POS terminals sink to community nodes such as grocery shops and pharmacies
• "Last-mile" cash access services
  2.Utility Bill Aggregation Platform: electricity/water/tuition fees and other immediate need scenarios cut through

Key Data:

• M-Pesa proves viability by gaining 3 million customers in 6 months in Egypt