The growth of ecommerce in the Gulf Cooperation Council (GCC) coupled with the high rate of internet usage and smartphone penetration, has led to a massive revolution in the payments space, which is now being further boosted by QR code and P2P payments.
This revolution can be seen in the growth of the digital payments market in the region.
The digital payments market in the GCC is expected to grow from $86.78 billion in 2022 to be valued at $203.37 billion by 2029. At a strong CAGR of 12.93%, according to research published by Blue Weave Consulting.
“Deepening smartphone penetration, the proliferation of new FinTech solutions and a growing shift from cash to digital payments” are the main factors behind this current and expected growth.
This growing trend is best summarised by Barclays, the global corporate and investment bank: “Experiencing the benefits of a wide mix of global best practice, the region has become an interesting space for innovation in the advancement of domestic and regional payment systems.”
The shift to P2P payments
Instant payments, especially P2P payments, are one of the top contributors to this digital payments revolution in the GCC.
With P2P payments, consumers can send money to one another as well as request money from others. P2P payments have also facilitated consumer-to-business payments.
P2P payments are convenient since they can be done from mobile phones and they don’t require the recipient’s bank details. All users need to send money is a phone number and email address of the recipient.
Furthermore, P2P payments, by removing intermediaries, ensure that payments are processed instantly. In just a few seconds, users can send money to another. Also, since both users are on the same P2P payments app, these transactions are often free.
Therefore, in addition to global P2P payments platforms supporting money transfers to the MENA region, new fintech firms are now creating P2P payments solutions especially designed for local markets.
Research sponsored by Amazon Payment Services has confirmed the rise in instant payments and P2P transfers in the MENA region, a growth they attribute to “fintech firms capitalising on missed opportunities by banks.”
Similarly, they affirmed that “P2P transfers are the most popular subset of instant payments and witnessed the fastest growth both regionally and globally.” This growth, they believe, has had a “remarkable impact on low- and middle-income segments of the population.”
QR code technology and P2P payments
The use of QR codes is another technology contributing to the growing digital payments revolution.
QR code payments provide many advantages. They are fast, secure, simple, and cost effective. Businesses use them to remove friction in the customer purchase journey, making the process as seamless as possible.
Globally, the QR code payment industry was valued at $9.98 billion in 2022, with expectations that it will grow by 16.9% CAGR between 2023 and 2030.
The GCC has not slept on this development. A 2021 survey by McKinsey and Co showed that QR codes were expected to be the second most dominant payment method in the region for the succeeding five years (2021-2026), behind contactless payments.
However, instead of seeing QR codes as an entirely separate technology, Kem, the first instant payments app in Kuwait, has decided to incorporate it into P2P payments.
On this app, users can send payment requests to other users via QR codes and those users can make payments just by scanning those codes. This technology has made P2P payments even more convenient.
The technology is even more useful for businesses. In addition to sending QR codes to consumers on the app, they can also display their QR codes in-store so that users can scan the codes at the point of sale and make instant payments.
The future of instant payments in the GCC
If the growth of instant payments, especially P2P payments, has been led by fintech firms, as Amazon has revealed, then we can expect that its future will also depend on the innovations that these firms can muster.
“An expanding FinTech ecosystem, traditional banks’ digital focus and an evolving market infrastructure for domestic and pan-regional payments will significantly transform the payments ecosystem within the region,” said Barclays.
In 2021, the MENA region represented only 5% of the global P2P payments market. According to Precedence Research. Though there has been much growth since then, it shows that there are still massive opportunities for improvements.
“The payments revolution is already in full swing,” said Gulf Business. “As we have seen, governments want it because it drives economic growth, and FSI (financial services industry) players want it because it will help them to build new revenue streams. And as it happens, the necessary technology for implementing it already exists.”
“All that is left for the FSI stakeholder,” they concluded “is to decide when and how they will move.”
A company like Kem, who just raised $1 million in a pre-seed round led by Maqamees Holdings, is committed to using the latest AI and machine learning technologies to enhance digital p2p payments in the GCC.
As firms like this continue to tread the innovative path, we can expect digital payments to become more convenient, faster, and affordable.
