Among the headline findings of the report is that the Small & Medium Enterprise (SME) sector in the United Arab Emirates has successfully moved from a stage of resilience to prosperity after the Covid-19 pandemic, with two in three SMEs expressing a positive view of the future business environment in the country. The report found an overall confidence index score of 61 among UAE SMEs – a number based on RFI Global’s analysis of macroeconomic indicators in the UAE, as well as survey responses from over 1,000 SMEs in the country collected between November-December 2023, all of which contributed to the final Index.

IMPORTANT FINDINGS

The report refers to a strong economic forecast for the UAE, with non-oil GDP expected to grow by over 4% in 2024, and overall GDP projected to grow by 5.70% this year. The RAKBANK SME Confidence Index also highlight steady recovery in factors such as hotel occupancy rates close to pre-pandemic levels, which signals a rebound in the tourism sector that is contributing to the general positive outlook among SMEs about their future revenue prospects and the business landscape in the next 12 months. However, the report also talks about the challenges faced by SMEs, including rising labour, operational and other business costs; the impending introduction of corporate tax; and the cost of capital/credit. To navigate these challenges, SMEs need continued support and attention from financial institutions, in addition to the initiatives we are already seeing from government entities, particularly the UAE.

“Small and Medium Enterprises are the backbone of every healthy economy, and this is especially true in the UAE, where SMEs make up 94% of companies and contribute over 50% to the country’s GDP.” – Raheel Ahmed, Chief Executive Officer, RAKBANK

Drawing from a wealth of macroeconomic data and business sentiment analysis, the report suggests that the issuance of new business licenses in Dubai also reflects a strong business environment. Despite challenges posed by fluctuations in Brent oil futures, the overall macroeconomic indicators suggest fertile ground for SME growth and development. While SMEs are proactively embracing innovation and expansion, showing a strong trend towards launching new products/services and bullishness towards customer demand and pricing of products/services, they also displayed one common thread – the critical role of banking support. The need for tailored financial solutions and advisory services is evident in the SME sector. In fact, one of the report’s standout findings is the high level of satisfaction with banking support among almost all the SME sectors.

“RAKBANK has a rich legacy of supporting SMEs, and the launch of our Index in partnership with RFI Global builds upon this legacy, as the UAE’s first SME-specific confidence survey.” – Dhiraj Kunwar, Managing Director, Business Banking, RAKBANK

The RAKBANK SME Confidence Index also offers an in-depth analysis of business sentiment across various industries, with a special focus on Construction & Manufacturing, Transport, Trading, Public Services, Professional Services, and Consumer & Retail Services, with all the sectors again demonstrating strong confidence

The report refers a strong economic forecast for the UAE, with non-oil GDP expected to grow by over 4% in 2024, and overall GDP projected to grow by 5.70% this year.

Integrator Media had an interview with Remo Giovanni Abbondandolo, General Manager-MENA, Checkout.com

Could you provide a brief overview of the entire ecosystem surrounding in-app payments?

The in-app payments ecosystem encompasses a network of various components, including payment gateways, digital wallets, and payment processors, that work to streamline payment transactions within mobile applications. Within this, the payment gateways act as intermediaries, securely transmitting payment information between the app and the payment processor. The payment processors validate and process transactions, ensuring they comply with regulations and security standards, while the digital wallets store users’ payment details for quick and secure payments. Successful integration of these services requires careful planning and implementation to ensure a smooth user experience and adherence to regulatory requirements, ultimately enabling businesses to deliver seamless payment experiences to their customers.

What are some factors driving the growing trust in digital payment ecosystems among consumers?

In the past few years’ ecommerce has grown faster in the MENA region than anywhere else in the world, with an estimated 209 million consumers transitioning to online shopping during the height of the pandemic. And with the pandemic’s lockdowns now behind us, the number of ecommerce shoppers in MENA only continues to grow. Latest estimates from Redseer have forecasted the total MENA ecommerce market size to be worth $100 billion by 2023. This has had a huge impact on how consumers in the region view digital payments, and on their willingness to use them. Furthermore, the increasing trust in digital payment ecosystems can be attributed to several key factors.

Firstly, the ecosystem is becoming significantly more secure due to rapid advancements in security and fraud prevention. Between 2021 and 2023, the fraud rates for online transactions during Ramadan in the region reduced by a whopping two-thirds, based on Checkout. com processing data. This improved security has instilled confidence in consumers, encouraging them to utilize digital payment methods more frequently. Secondly, the convenience offered by digital payments aligns with the heightened activity in app browsing and mobile shopping during this period. In 2023, for instance, Checkout.com saw processing volumes of online transactions during Ramadan swell in the region year-on-year by 69%, furthermore, we saw a significant uptick in funds sent by expatriates to their families and friends, both in anticipation of the Eid holidays and during the holy month, translated in a 17% increase in the UAE, and 28% in Saudi.

Can you elaborate on how the ecosystem is experiencing enhanced security due to rapid advancements in security and fraud prevention?

The digital payment ecosystem is becoming increasingly secure, thanks to advancements like robust encryption methods that protect payment information during transmission and storage, advanced authentication techniques such as biometrics and tokenization, and real-time transaction monitoring systems. Additionally, machine learning and artificial intelligence algorithms are being increasingly utilized to detect and prevent fraudulent activities. These technologies work together to create a multi-layered security approach, significantly reducing the risk of fraud and ensuring the security of digital transactions. Consequently, businesses can provide consumers with a more secure and reliable payment experience, fostering trust and loyalty.

How do in-app payments offer various opportunities for monetization to businesses operating through mobile applications?

In-app payment processing enables merchants to accept payments for goods and services directly within a mobile app, streamlining the checkout process for users to enter their payment details without leaving the app. This opens all sorts of monetization possibilities for app-based businesses, from setting up subscription payments to unlocking exclusive content. Enhancing in-app payment processing presents an untapped opportunity for merchants in the region to gain significant advantage, with benefits that encompass higher conversion rates, increased revenue, enhanced customer retention, and quicker settlement times. Simplifying the checkout process within the app reduces the likelihood of cart abandonment, leading to a smoother customer journey and ultimately boosting conversions. This not only drives revenue growth but also encourages customers to spend more time within the app, thereby improving retention rates. Additionally, offering direct account[1]to-account payment methods through in-app payments can significantly reduce settlement times compared to traditional card payments.

What are some potential drawbacks that merchants should consider when considering the implementation of in-app payments?

When considering the implementation of in-app payments, merchants should be mindful of two key drawbacks. Firstly, high commission fees can significantly impact profitability, particularly for businesses earning over $1 million in annual net app revenue on both the Apple App Store and Google Play Store, where fees can reach 30% of revenue. However, for businesses making less than $1 million, or in the case of a subscription[1]based app that’s been in service for over 12 months, the corresponding fee is 15% of the revenue, which will apply to most app developers. Secondly, the lack of flexibility in direct integration with Payment Service Providers (PSPs) may limit merchants’ ability to offer alternative payment methods beyond Apple Pay or Google Pay. Despite these challenges, the benefits of in-app payments, especially during busy seasons like Ramadan, often outweigh these drawbacks. Merchants should strive to implement in-app payment processing in a way that optimizes user experience, minimizes commission impact, and complies with app store guidelines.

Do you believe payment service companies are reshaping the landscape of financial services in the region?

Yes, I believe they are indeed reshaping the landscape of financial services in the region. The innovative approaches and technology-driven solutions being offered are revolutionizing how businesses and individuals manage transactions. With the rise of mobile payments, digital wallets, and contactless payments, payment service companies are making transactions more convenient, secure, and efficient. Looking ahead, as technology continues to advance, we can expect to see even more seamless and integrated payment solutions. This includes increased personalization, improved security measures, and further integration with emerging technologies like blockchain and AI. These developments are expected to offer new opportunities for growth and innovation, while expanding the range of services offered. As consumers increasingly embrace digital payment options, payment service companies that can adapt and evolve to meet changing needs are likely to thrive in the growing financial services landscape.

The Q&A session provides a comprehensive exploration of the digital payment industry’s transformative role, from enhancing financial inclusion to addressing data privacy concerns and predicting future trends. Eric Karobia, CEO of Whizmo offers valuable insights into the driving forces propelling the shift towards digital payments, the challenges and opportunities that lie ahead, and the essential strastegies required to fully harness the potential of digital finance and inclusion.

How do you perceive the digital payment industry’s role in enhancing access to digital technologies and fostering increased consumer spending in this region?

By introducing innovative business models that prioritize transaction volume over the holding of funds, the industry fills critical market gaps and addresses longstanding pain points for consumers and businesses alike. Mobile money wallets and near real-time remittances stand at the forefront of this financial revolution. These platforms not only offer unmatched convenience and flexibility but also play a crucial role in promoting financial inclusion among the unbanked and underserved populations. The transition from cash to digital payment methods mitigates traditional friction points associated with cash transactions—such as the inconvenience of carrying cash, reliance on ATMs, and the hassle of securing exact change. Over half of the UAE’s consumers currently use digital wallets for their transactions. Furthermore, the ability to conduct transactions remotely has been a game-changer, particularly in facilitating payments during times when physical mobility is limited.

The UAE’s mobile wallet market, which was worth $3.6 billion in 2022, is projected to grow at a compound annual growth rate (CAGR) of 12.12% until 2028. In regions like Dubai, where innovation in fintech is rapidly advancing, digital payments have become instrumental in driving economic growth and enhancing consumer spending, proving that secure mobile payments and mobile wallets are more than just convenience—they’re catalysts for broader economic participation and growth.

What are the main reasons consumers are increasingly switching to digital payment methods like mobile money for their day-to-day transactions?

Several compelling drivers are fuelling the increasing rate at which consumers are adopting digital payment methods – specifically, mobile money: Accessibility is the most obvious factor because it significantly lowers the barriers to financial services adoption, especially for marginalized populations like the unbanked. An essential role for technology in modern technological systems is situating the client or customer at the core of all solutions. Therefore, more people than ever before have the ability to use cutting-edge financial services systems and platforms due to financial inclusion. In addition, the high internet penetration rate in the UAE that reaches 100% has also incentivized the popularity of e-wallets. More fundamentally, the speed and efficiency of mobile money payments and transactions on platforms are significantly faster than the pace at which operations can be completed on traditional financial networks. Hence, it provides access to funds for immediate use and easier bill and payment settlement for consumers. All of that supported with the excellent convenience of modern smartphones has created a storm making mobile money usage almost universal.

Where do you see the future of digital payments and mobile money heading in the next 5 to 10 years?

Looking ahead at the next 5 to 10 years, the trajectory of digital payments and mobile money is set to dramatically transform the way financial transactions are conducted, especially in the Middle East. With an increasing number of consumers and businesses adopting these platforms, mobile money is expected to increasingly dominate the payments landscape, reducing reliance on physical cash. This evolution will be driven by several key factors. The UAE’s mobile wallet market is projected to reach a value of $6.8 billion by 2029. This growth will be driven by increased smartphone penetration and consumer demand for convenient payment options.

The continued push towards financial inclusion will see mobile money solutions reaching deeper into rural and remote areas, where traditional banking services have limited reach. This expansion will not only democratize access to financial services for the unbanked and underserved populations but also integrate them into the formal economy, allowing for greater economic participation and stability. Additionally, advancements in technology will enhance e-wallet usability and security, making mobile payments even more appealing to a wider audience. Already, 96% of UAE SMEs believe accepting new forms of payments is fundamental to their growth. As these trends converge, we will witness an accelerated movement towards a cashless society, where digital payments in Dubai and mobile wallets in the Middle East redefine financial interactions, providing a foundation for a more inclusive, efficient, and secure financial ecosystem.

Are users apprehensive about the integration of AI into payment software due to concerns surrounding data privacy and related issues?

The apprehension among users regarding the integration of AI into payment software is primarily fuelled by concerns related to data privacy and the security of their personal information. Despite these concerns, it’s crucial to recognize the transformative potential that AI integration holds for the digital payments industry. Regulatory reforms, particularly those that have been implemented in the UAE, are instrumental in creating a favourable environment that encourages innovation in mobile money solutions. These reforms not only facilitate the entry of new players into the market but also ensure that the ecosystem evolves in a manner that is both secure and beneficial for the users. However, the key to gaining widespread customer trust in AI-powered payment systems lies in ensuring that the technology matures enough to enable the execution of AI models directly on the device. This approach significantly reduces latency and bolsters security measures, which are critical in alleviating user concerns. For AI integration to be embraced by customers within payment systems, it’s imperative that we prioritize the development of safe digital wallet apps with enhanced e-wallet usability. By executing AI models on-device, we can offer users a seamless and secure experience, thereby fostering trust in digital payments. This strategy is particularly important in regions like Dubai and the broader Middle East, where digital payments are on the rise.

What strategies are essential for educating consumers about the benefits and use of digital payments to encourage wider adoption?

To effectively educate consumers about the myriad benefits and uses of digital payments, thereby encouraging their broader acceptance and adoption, requires a comprehensive and nuanced approach. Its essential attribute is elemental communication that clearly and engagingly outlines the core supremacy of digital payments – primarily, their convenience and lack of such difficulties related to their application as theft or necessity of precise change. It should also be underlined that for the groups overwhelmingly represented by the unbanked and marginally served populations, digital payments might be portrayed as a pathway to financial inclusion. At the same time, such groups often do not have a bank account due to a variety of barriers. However, mobile wallets in the Middle East offer a practical solution by providing an accessible platform for managing finances, making payments, and receiving funds without the need for a bank account.

Highlighting case studies or success stories of individuals who have significantly benefited from the adoption of digital payments can serve as powerful testimonials, further encouraging wider acceptance among these demographics. Ultimately, enhancing e-wallet usability and ensuring that digital payment platforms are user[1]friendly and intuitive can play a significant role in driving adoption. Simplifying the user experience for conducting online transactions, alongside providing comprehensive customer support and educational resources, can demystify digital payments for the average consumer, making the transition from cash to digital more appealing.

Digital payments have the potential to enhance financial inclusion. What steps do you think need to be taken to realize this potential fully?

Realizing the full potential of digital payments in enhancing financial inclusion requires a multifaceted approach. Firstly, it is essential to identify and address the key reasons or hurdles that have contributed to the exclusion of certain segments of the population by traditional players. This involves understanding these barriers and devising flexible business models that can effectively serve the excluded populace. Additionally, regulatory frameworks need to adapt to the evolving landscape, imbuing flexibility to enable efficient and profitable servicing of underserved customers.

By addressing these challenges and fostering an environment conducive to inclusion, digital payments can play a transformative role in expanding financial access and empowering marginalized communities. The UAE has the highest financial inclusion rate in the Middle East at 46%, striving to improve that by the day. By addressing the specific needs and concerns of the unbanked and underserved populations, and offering secure, user-friendly digital payment options, we can drive wider adoption of these technologies. This approach will not only promote financial inclusion by providing access to essential banking services for all but also lay the foundation for a robust digital economy in regions like the Middle East, where the potential for growth in digital payments remains vast.