It’s one of the largest and most diverse regions on the planet. Nearly 2,000 native languages are spoken. Europe, the Middle East, and Africa is a designation that eludes simple categorization.
It is also, however, a market that is characterised by a singular, driving force: convenience. Across EMEA, payment preferences are changing to accommodate the need for ease of payment – according to the Global Payments Report.
As businesses adjust to mobile-connected consumers and traditional banks respond to regulatory initiatives that stimulate competition from FinTech innovators, EMEA is being transformed to meet the needs of an evolving consumer. Especially online.
This year, digital and mobile wallets are absorbing e-commerce spend at a rapid rate, jumping from 21% in 2018 to 25% in 2019 and projected to reach 29% by 2023. Bank transfers are expected to earn an even greater share of e-commerce spend over the next five years, owing largely to PSD2 and its drive to spur innovation and competition.
Another disruptor, “buy now pay later” services like Klarna, Affirm, and Afterpay are making an impact on online payments. Catering to growing consumer desires, particularly from Gen Z and Millennials, they offer flexible financing on a situational basis without the longer-term commitment and expense of traditional credit cards.
The report projects these payments to account for 9% of e-commerce spend by 2023, triple the rate reported in 2018. Gains by these payment innovations comes at the expense of credit cards, debit cards, and charge/deferred debit cards but traditional card-based payments aren’t going away anytime soon.
The report acknowledges that many digital/mobile wallet transactions are linked to underlying credit and debit accounts. And the forecast of strong mid-teens market share attests to the persistent value of these methods, even while they face ongoing competitive pressures.
Debit cards remain at the top of POS payment methods in EMEA. The gap between debit and its nearest competitors will only grow, we expect, with debit increasing from 38% to 46% of POS spend within the next five years – all while use of cash at the POS rapidly declines across the region, dropping from 44% in 2019 to just 28% by 2023 according to the data.
The projections also suggest that POS cash spend will move to debit cards, credit cards, and digital/mobile wallets. The report predicts digital/mobile wallets will more than double their share of POS spend from 4% in 2019 to 9% by 2023.
Charge and deferred debit cards will maintain strength at the POS through 2023, driven by heavy use in France and Denmark. In Africa, entrenched challenges include a large unbanked population and a lack of infrastructure to support digital payments.
Transactions are mostly made at POS with cash: in Nigeria, over 98% of all transactions are at the POS, and 91% of those transactions are paid in cash.
Ongoing regulatory efforts throughout the continent seek to promote financial inclusion to deliver electronic payments to underserved populations.
Lastly, the report finds the payment landscape in the Middle East is at a crossroads. Despite increasing movement toward electronic payments, few clear winners have emerged to date.
Consider the case of the UAE where credit cards, debit cards, digital/mobile wallets, cash on delivery, and bank transfers all command double-digit shares of a highly fragmented e-commerce spend.
Regulatory efforts are progressing from Saudi Arabia to the UAE promoting financial inclusion through the development of the electronic payment infrastructure. The EMEA is positioned for change.
In as little as the next five years, expect to see substantial shifts in e-commerce spend – digital and mobile wallets will continue to grab market share, as will bank transfers and buy now pay later options.
The projections are that the gradual decline in use of cash at the POS will be absorbed by a range of credit, debit, and mobile/digital wallets, particularly throughout Europe and the Middle East.
PSD2 and Open Banking will also be a catalyst for additional change, which will have long-term effects on payment methods both online and in-store.
Broad as the EMEA may be, consumers from Norway to South Africa, Albania to Zimbabwe all share a desire for simpler, supported payment options.