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Paving The Way For Non-Cash Payments In The GCC
Published Jul 22, 2010
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A.T. Kearney, one of the world’s leading management consulting firms in the financial industry, says GCC banks have made great progress offering non cash payment solutions, but says there is potential for more growth in the sector.
Non-cash payments such as credit cards, bank transfers and cheques have risen over the past years across the GCC. Credit cards in particular have seen increased usage. For example in the UAE alone credit card payments showed an impressive 24 percent growth per annum over the past 5 years, compared to single digit growth in Europe.
According to A.T. Kearney, international benchmarks highlight that GCC financial institutions have the opportunity to continue to rapidly grow non-cash payments in the region. By way of comparison, the number of credit cards per capita in the UK is three times higher than that of KSA. Moreover, there are still gaps in the payment solutions which are available in the GCC for example there is no direct debit in UAE.
“The vast majority of all transactions are still made in cash”, said Dr. Alexander von Pock, Principal of the Financial Institutions Group at A.T. Kearney Middle East, and added, “While cards could play a key role in cash displacement and represent a major business opportunity for regional financial institutions, there are a number of issues that prevent card holders in the GCC from using their cards more often.”
According to A.T. Kearney one of the issues faced is a lack of acceptance. For example there is a very low Point-Of-Sales (POS) penetration in KSA with significant acceptance gaps in particular sectors and low acceptance in cities outside of Riyadh and Jeddah. Additionally the prevalent practice of surcharging in many GCC countries limits the further use of credit card payments for instance, surcharging is widely practiced for utilities payments in the UAE.
“To exploit the growth opportunities in the non-cash payment market it will be of essence to solve these issues and in tandem consider local applications for global innovative payment solutions” commented Dr. von Pock.
Worldwide innovation is seen as the key enabler of growth by A.T. Kearney. Already the innovative payments methods are showing the way ahead. There have been a number of innovations, such as contactless, biometrics or mobile phone terminals, as well as new product solutions such as multifunctional cards or credit on cards. According to A.T. Kearney, the next generation of payment innovation should start from user benefit, not technology, as the technical details of how a payment is made matter little to customers. Rather, a set of payment user requirements needs to be met, including convenience, privacy, flexibility and control.
“We see several potential innovation and growth opportunities in the GCC”, explained Dr. von Pock, “most of them linked to increased card penetration and acceptance. By way of example, RTA’s nol card could be perfectly married with a credit card following the model of Barclaycard’s OnePulse card in the UK.”
Other areas of innovation and growth include mobile banking and supermarket banking, according to A.T. Kearney. The challenge is to find an ecosystem that is tailored to the needs of all parties involved, but A.T. Kearney believes that regional financial institutions are well positioned to partner up with players from other industries such as retailers and telecom providers to provide and grow acceptance and penetration of non cash payments and financial services.
Posted by
VMD - [Virtual Marketing Department]
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