In the face of worldwide challenges, including the pandemic and economic uncertainties, the UAE payments industry has showcased remarkable resilience. From 2018 to 2022, the sector experienced a Compound Annual Growth Rate (CAGR) of 9.7%, culminating in a revenue pool of $12.8 billion by the close of 2022. This growth outpaced the global payments industry, which achieved an 8.3% annual growth rate, reaching $1.6 trillion by the end of 2022. The latest report from Boston Consulting Group (BCG), titled ‘Global Payments Report 2023,’ suggests a global slowdown in growth rates.
BCG’s comprehensive analysis of the UAE payments landscape forecasts a steady increase in overall revenue growth over the next five years (2023-2027), with a CAGR of 3.6%, propelling the revenue pool to $19.8 billion. In comparison, global payment revenues are expected to grow by $2.2 trillion by 2027, at a CAGR of 6.2%. The report provides an extensive market analysis, delving into challenges and opportunities for acquirers, issuers, and other key players in the UAE payments ecosystem.
Mohammad Khan, Managing Director & Partner at BCG.
“The UAE is at a pivotal moment for merchant services, issuers, transaction banks, and payment infrastructure. Despite global growth deceleration, our research indicates that the UAE payments revenue pool is poised for expansion, driven by early adoption of technological advances powered by GenAI. This evolution promises improved customer pathways and specialized solutions, ultimately enhancing service quality and profitability.”
A Shift in the UAE Payments Landscape
The positive trajectory of the UAE payments sector can be attributed to several factors, including a shift from cash to non-cash transactions. Between 2023 and 2027, transactions in the UAE are expected to grow at a CAGR of 10.9%, fueled by the country’s embrace of digital transactions. Key drivers include advancements in payment systems, government support, economic expansion, and changing consumer preferences favoring digital payments.
The UAE payments industry is grappling with multiple disruptions, from technological advancements to the emergence of new market entrants. These include the rapid growth of real-time payments, the introduction of value-added services, and the commoditization of basic payment processing. Over 5,000 global fintech companies are now making their mark in the payments arena, collectively contributing significantly to the industry’s revenue. In this evolving scenario, UAE-based companies must strategize effectively to maintain their competitive edge.
Embracing an Innovative Future
As the global payments ecosystem undergoes transformations, UAE-based payment providers are uniquely positioned to redefine their roles and services. Digital currencies, once conceptual, are now actively being explored by local central banks for their potential role in the financial ecosystem.
Charting the Future of UAE Payments
The report outlines four critical areas shaping the strategic direction of the UAE’s payments industry:
1. Operational Resilience: Prioritizing robust operational performance and cost optimization is crucial for UAE-based entities. This approach enhances operational outcomes and aligns business and financial strategies to maximize shareholder returns.
2. Generative AI: The introduction of GenAI presents transformative possibilities for the payments sector. Early adopters in the UAE are already witnessing its benefits. By identifying high-impact GenAI use cases, companies can achieve significant productivity gains. The long-term vision should focus on integrating GenAI across organizational processes, emphasizing key customer touchpoints.
3. Risk Management and Compliance: The evolving regulatory landscape in the UAE necessitates comprehensive risk and compliance assessments. Addressing any gaps proactively and establishing a target operating model will ensure long-term resilience and elevate risk management standards.
4. Mergers and Acquisitions: The investment dynamics in the UAE’s fintech sector mirror global trends. Shifting focus from large-scale deals to capability-centric acquisitions, companies must revisit their partnership strategies. This approach enables them to identify and capitalize on current Mergers and Acquisitions (M&A) opportunities, ensuring long-term growth and success.
Lukasz Rey, Managing Director and Partner, Head of Middle East Financial Institutions Practice at BCG.
“In analyzing the UAE’s payments sector, the significance of GenAI is growing, particularly in its ability to enhance compliance measures as it becomes more integrated into core organizational processes. “
Additionally, smart partnering and M&A are proving valuable in building capabilities in this domain.
