Analysis of Electronic Payment Policies and Regulations in the Middle East

introductory

With the rapid development of the digital economy, the popularity of electronic payments has increased significantly in the Middle East. Governments have introduced policies and regulations to promote the development of fintech and safeguard transaction security. In this article, we will analyse the e-payment policies and regulatory frameworks of major Middle Eastern countries to help enterprises and investors understand compliance requirements and seize market opportunities.

1. Overview of the Middle East electronic payments market

In recent years, e-commerce and mobile payments in the Middle East (especially in the Gulf Cooperation Council GCC countries) have grown rapidly. According to Statista data, the Middle East e-commerce market has surpassed $50bn in 2023 and is expected to continue to grow in double digits in the coming years. This trend is driving the need for governments to regulate electronic payments.

2. Analysis of e-payment policies and regulations in major countries

(1) Saudi Arabia: strict regulatory system led by SAMA

The Saudi Arabian Monetary Authority (SAMA) is the main regulatory body responsible for the country's fintech and payments industry. Its key policies and measures include:

• Payment Service Providers Regulations: Require all companies offering services such as digital wallets, cross-border money transfers, etc. to be licensed by SAMA.
• Open Banking Strategy:: SAMA promotes open API standards to foster fintech innovation, allowing third-party service providers to access banking systems to offer value-added services.
• Anti-Money Laundering (AML) Compliance: Strictly enforcing international anti-money laundering standards (FATF) and requiring businesses to implement KYC (customer identification) mechanisms.

(2) UAE: Innovation Orientation in the Dubai International Financial Centre (DIFC)

The UAE, as a regional fintech hub, has two core economic zones - Dubai and Abu Dhabi - with separate regulatory models:

• Dubai Financial Services Authority (DFSA): Firms within the DIFC are required to follow the Crypto Assets and Digital Securities Rules set out by the DFSA, covering compliance requirements for stablecoins and blockchain payments.
• Abu Dhabi Global Market (ADGM)ADGM launches 'FinTech Regulatory Sandbox' to allow start-ups to test new payment solutions in a controlled environment.

(3) Qatar: Central Bank strengthens data localisation requirements

Qatar Central Bank (QCB) has updated its Electronic Payment System Framework in recent years, with highlights including:

• Compel foreign companies to set up data centres in the territory to store user transaction information.
• Restrictions on non-licensed organisations engaging in cross-border remittance business.

3. GCC common norms: the impact of the Unified Digital Economy Agreement (UDEA)

2022 GCC member states sign the agreement to coordinate digital economy development goals within the region:
✔️ promotes the interconnection of cross-border instantaneous settlement systems;
✔️ establishes harmonised consumer protection standards;
✔️ Strengthening mechanisms for anti-fraud collaboration among member States;

4. challenge and recommendations for business responses

Despite the promising future, companies need to be aware of the following risk points.

In addition, it is recommended that.
✅Consult local law firms in advance to complete an access assessment.
✅ Reduce operational risk by choosing a partner with a full licence.

concluding remarks

In general, the Gulf countries are balancing incentives for innovation with risk prevention through flexible and stringent legislation. Only a deep understanding of these rules can lead to sustainable growth in this market.

If you would like to discuss a particular jurisdiction in more detail, please contact our team of professional consultants for a customised report!

5. Future trends and opportunities in the Middle East electronic payments market

The electronic payments industry in the Middle East is poised for a new wave of change as digital transformation accelerates. Here are the key trends to watch out for in the coming years:

(1) Exploration of Central Bank Digital Currency (CBDC)

Several Middle Eastern countries are actively researching or piloting central bank digital currencies (CBDCs) to improve payment efficiency and reduce reliance on the traditional banking system:

• Saudi Arabia & UAE "Aber Project": The two central banks are jointly testing cross-border CBDC settlements aimed at reducing the cost of remittances and increasing the speed of transactions.
• Bahrain Digital Dinar Programme: The Central Bank of Bahrain is working with fintech companies to explore retail CBDC scenarios.

Enterprises should pay close attention to policy trends in each country and layout their compliance technology architecture in advance to adapt to possible regulatory changes.

(2) Explosive growth of the BNPL (buy now pay later) model

Buy Now Pay Later (BNPL) is rapidly gaining popularity in the Middle East, fuelled by a young population and the e-commerce boom, but it is also facing stricter regulatory scrutiny:

• UAE Securities and Commodities Authority (SCA) New RegulationsRequire BNPL providers to obtain a credit licence;
• Saudi Arabia's SAMA to introduce guidelines for instalment services, may set maximum interest rate limits to protect consumer interests;

It is recommended that the relevant enterprises optimise their risk control models and take the initiative to cooperate with the regulators in the filing and review process.

6. Strategic Recommendations for Chinese Companies Entering the Middle East Payment Market

Chinese fintech companies that want to successfully expand in the region need to focus on the following areas.

(a) Localisation Partner Options

✔️ gives preference to acquirers that already hold a local licence (e.g. Network International, PayTabs).
✔️ strategic investment relationships with incubators backed by sovereign wealth funds (e.g. Future District Fund in Dubai).

(b) Adaptation of technology

🔹 Arabic UI/UX must support right-to-left (RTL) display mode.
🔹 The system needs to be compatible with the special settlement logic of Islamic finance prohibiting interest (riba).

Case in point: In 2023, a Chinese cross-border payment platform was fined $850,000 by the ADGM for failing to adjust the timing of automatic debit during Ramadan, prompting massive complaints.

7. Reference to key data indicators

A quick comparison of regulatory intensity and business costs in major markets can be made using the following table.

Note: The above data is as of 2024Q1, and the specific implementation may vary from case to case.

Concluding remarks and call for action

The regulatory environment for e-payments in the Middle East is evolving dynamically, and policy harmonisation among GCC countries will continue to grow. Recommendations for companies interested in establishing a presence in the Middle East.
1️⃣ Immediately initiate legal due diligence in the target country;
2️⃣ Attend official events such as FinTech Summit Dubai to get the latest policy interpretations;

For a customised Roadmap to Middle East Payment Licence Application, feel free to scan the QR code below to contact our team of experts for one-on-one advice!