With over 800 fintech start-ups worth USD 15.5 billion, the UAE is emerging as a global fintech hub and leading the way in digital banking.Transformation is being driven by a digitally competent SME sector constituting 94% of companies in the private sector and contributing 40% of the country’s GDP.The nation also has a strong base for the adoption of technology and digital payments, with Millennials making up a substantial 47% of society.
Younger Demographics Reshaping the Payments Landscape
SMEs are the largest employers in the UAE, providing 86% of jobs in the country. These businesses, including many micro-enterprises launched by young entrepreneurs, have a strong appetite for new technologies and digital solutions. A younger generation of leaders is proving itself to be highly open to digital payments integration, due to an increased understanding of the importance of cashless transactions.
Equally, Millennials constitute a major part of the UAE’s consumer population driving online purchases today and influencing the way businesses are adapting their services to match the needs of modern-day consumer profiles.
Many who live in the nation's thriving cities have promising careers, strong purchasing power, and an aptitude for technology. The big question is: How fast can SMEs achieve optimal digitalisation with the tools on hand as consumers shift their mode of purchasing?
Sale of Goods and Services Online to Drive Digital Payments Growth
The UAE’S digital payments penetration is primarily driven by the sale of goods and services online, with a compound annual growth rate of 20.1% between 2021-2023. Well-established players, as well as newer entrants, contribute to a thriving landscape of companies taking advantage of decreased online operational costs, competitive prices and efficient deliveries to scale their operations.
BNPL Gains Significant Momentum in the UAE
The UAE is seeing the active adoption of BNPL across several categories. Service providers are expanding their products by providing virtual cards that offer BNPL services in stores.There are a growing number of partnerships taking place between instalment providers (banks or fintechs) and merchants, marketplaces, and service providers to offer instant instalment options in the UAE.New integrated systems are also being developed to offer Gen Z and Millennials more control over the way they pay. For instance, fashion retailers are now offering BNPL as part of an integrated and seamless experience for customers.
Gen Z Consumer Trends Signpost Long-Term Trends in Payments
Gen Z consumer trends are shaping the habits of tomorrow for which many companies are planning and adapting for today. For instance, over half (51%) of the UAE’s Gen Z population already use digital/mobile wallets for daily payments. According to a survey carried about by SixthFactor, most feel the pressure to keep up with the latest trends, including digital payments. Respondents also showed confidence in both the security and reliability of these payment methods.This group also shows increased willingness to try BNPL options from reputable companies, signalling further growth for this market in years to come.
The UAE Leads Digital Banking and Fintech in the Region
The UAE is leading a major fintech boom in MENA, driven by the shift in consumer behaviour, government directives, and businesses seeing the value in online transactions.New partnerships are emerging between banks and fintech companies leading to collaboration and innovation in the digital payments sector.