The UAE: RTP and BNPL take centre stage as e-commerce rises

New data from The Global Payments Report 2023 by Worldpay from FIS reveals rapid changes in how consumers in the United Arab Emirates (UAE) are paying for goods and services.

For some time, the UAE has been one of the most dynamic markets in the Middle East, with a strong preference for mobile e-commerce and buoyant growth in sales both in-store and online.

While these trends continue, new developments in payments methods such as Real-time Payments (RTP) and Buy Now Pay Later (BNPL) services are further boosting growth in the emirates.

E-commerce on the move

As the UAE market continues to grow over the next three years, Worldpay from FIS project that e-commerce will play an increasingly important role compared to in-store purchases.

While in-store purchases are predicted to grow at a compound annual growth rate (CAGR) of 5% to 2026, e-commerce looks set to grow at three times that rate (15%) to reach $43 billion in sales in three years’ time.

“E-commerce grew three times faster than in-store sales in 2022.”

Taken as a percentage of all purchases, The Global Payments Report see e-commerce rising from just over a fifth of total volume (23%) to almost one in three of all dollars spent (30%).

Within online purchasing, mobile commerce will continue to extend its dominance, rising from 61% of total e-commerce to 67%.

When it comes to online payment methods, digital wallets crept up on cards’ traditional dominance, rising from 23% to 24% of all purchases made online last year in the UAE.

BNPL: The early stages of rapid growth

The UAE is a regional centre for the development of Buy Now Pay Later (BNPL) services. Domestic BNPL providers such as Cashew, PostPay, Spotii and Tabby are now competing with regional leaders such as Saudia Arabia’s Tamara.

“BNPL doubled its share of online transaction value in the UAE last year.”

For e-commerce purchases, BNPL doubled its share of total transaction value between 2021 and 2022 from 1% to 2%: Worldpay from FIS project that BNPL will continue to grow as a payment method for online transactions, rising by 37% CAGR through 2026.

Real-time Payments: volumes up by half

Two different real-time payment (RTP) schemes exist in the UAE: the Immediate Payment Instruction (IPI) scheme, launched in 2019, and the Instant Payments Platform (IPP) launched in Q1 2023. In 2021, IPI processed 21.1 million transactions worth AED 51.7 billion (approx. $14 billion), up almost half (47%) over 2020.

While IPI is for person-to-business (P2B) payments only, the IPP will include both person-to-person (P2P) and business-to-business (B2B) transactions, as well as Direct Debits from account and payment via QR-code.

Planned for phased implementation throughout 2023, participation in this scheme by the UAE banks will be mandatory.

“Volumes on one of the two RTP schemes in the UAE grew by almost half between 2021 and 2022.”

Looking across both online and in-person transactions, cards remain the majority payment method in the UAE, with credit cards accounting for 41% of online spending and 40% of point of sale (POS) spending.

Digital wallets took second spot for online sales, while cash (18%) was the second most popular option in-person, followed by debit cards (17%) and digital wallets (16%).

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