|
|
 |
|
Viewing report
|
|
|
|
Prepaid in the Middle East: Ready for Take-Off
VRL Financial News Publishing, Nov 2010
The United Arab Emirates (UAE), the Kingdom of Saudi Arabia (KSA) and Egypt all have attractive demographics, high standards of living, a sizeable expatriate population and a high unbanked migrant population. This presents huge opportunities for prepaid solutions in the socio-economic spectrum across the region.
This report assesses the opportunities for growth in the Middle Eastern prepaid market and investigates the potential prepaid presents for Shariah compliant organisations.
Within the context of North African and Middle Eastern retail financial products, prepaid cards are set for exponential growth. Some $18 billion in gross dollar value is predicted to flow from prepaid cards in the UAE alone over the next five years, with similar prepaid growth expected in the KSA.
The consensus among industry stakeholders is that regional growth of the prepaid card sector will be driven by the UAE, followed by the KSA and Egypt. Though the latter is not technically in the Middle East, its size and strategic importance mean that it is viewed as such by card issuers and technology providers.
Education is vital for success, and there is much to learn about the card markets of the UAE, KSA and Egypt, a fact confirmed by each of the experts interviewed for this report. At all levels, from the customer, to processors, programme managers, technology providers and issuers, greater knowledge of these markets is required.
This report contains new data and expert insight into the prepaid market in the Middle East, providing everything you need to build a business case for expanding into the region, improve your current offering in the region, or simply keep up with the competition.
Purchase this report to:
- Harness the potential of prepaid cards in the Middle East
- Understand specific market dynamics
- Stay up to date with regulations
- Think outside the unbanked segment
- Understand the audience
Summary
“The UAE, Saudi Arabia and Egypt are each at a stage where there is a good runway for takeoff of prepaid cards. There are a number of factors converging which help in making prepaid products ready for launch here.”
Jonathan Reynolds, senior manager, prepaid product, Visa Central Europe, Middle East and Africa (CEMEA), September 2010
“Prepaid is the smart way of growing card businesses now, and I think bankers who are really active are starting to think about it… our clients that were previously only focused on credit are moving into prepaid. They believe they can capture transit customers, and if they can add some benefit into these products, then they can grow this exponentially”
Samer Soliman, head of processing – business development, Network International, September 2010
Within the context of retail financial products within the Middle East and North Africa, prepaid cards are set for exponential growth in the region. Some $18 billion in gross dollar value is predicted to flow from prepaid cards in the United Arab Emirates (UAE) alone over the next five years, with similar prepaid growth expected in the Kingdom of Saudi Arabia (KSA).
The consensus view among industry stakeholders is that regional growth of the prepaid card sector will be driven by the UAE, followed by KSA and Egypt though the latter is not technically in the ME, its size and strategic importance mean that it is viewed as such by card issuers and technology providers.
Some headline findings from a recent regional study conducted by TNS Global include:
- More than 50 percent, 75 percent and 70 percent of respondents in UAE, KSA and Egypt respectively were interested in prepaid salary cards.
- More than 40 percent, 70 percent and 35 percent in UAE, KSA and Egypt respectively were interested in prepaid cards for internet purchases.
UAE’s early revenue diversification drive, which fuelled its growth as a regional financial hub, combined with its progressive regulatory environment, laid the groundwork for debit and credit card growth. This has seen the development of a strong banking environment, including a large, modern network of ATMs and POS terminals and widespread understanding of banking practices – all ideal conditions for growth of prepaid card programs.
According to the UAE Central Bank, there were more 3,600 ATMs nationally in 2009. This amounts to approximately 850 ATMs per one million people, a favourable comparison with the European Union’s figure of 870 per one million people.
There is also exciting potential for prepaid card growth in KSA. Though the Kingdom’s less rapid rate of change in diversifying its economy and opening its regulatory environment means it currently lags UAE, this is quickly changing. Giving some indication of its potential, KSA’s 2010 GDP was US$376 billion, its population 27 million and plans for a $385 billion expansion plan over next five years. In 2008, its 9,500 ATMs handled more than $61 billion in transactions.
High standards of living (2008 GDP estimated at $43,000 per capita in UAE), sizeable skilled expatriate populations (85 percent in UAE, 40 percent in KSA), combined with huge proportions of unbanked migrant workers (39 percent UAE, 29 percent KSA, 47 percent Egypt) open up opportunities for prepaid cards across the socio-economic spectrum.
Other opportunities common to the two Cooperative Council for the Arab State of the Gulf (GCC) member countries are driven by:
- Attractive demographics – ideal for growth of youth-targeted prepaid cards (average of 32 percent of Middle East population aged 15-29)
- Strong Islamic finance sectors (UAE accounted for 20 percent of $19 billion global Sukuk issuance in 2009; 40 percent of KSA banks are Islamic institutions)
- Tourism - traditional western-style tourism in UAE, religious tourism in KSA and concerted effort to grow traditional tourism here.
Islamic finance is an area of both convergence and divergence between the UAE, KSA and Egypt. As shown in the following report, prepaid card programs are an ideal fit with Sharia finance principles. Both UAE and KSA have strong Islamic finance sectors, though a higher proportion of institutions in the Kingdom are Islamic than in UAE. How Sharia institutions respond to imminent regulatory changes allowing prepaid cards to access the Saudi Payment Network will be an important milestone in this regard.
Government regulations in these monarchical nations are crucial, representing ‘make or break’ challenges that require continual monitoring and will favour fast movers. The comparison of current prepaid card environments in the UAE and KSA demonstrates this.
Egypt’s slower uptake of electronic payments means growth in prepaid is a longer term proposition, but the Central Bank of Egypt’s ongoing and renewed emphasis on electronic banking infrastructure will open up significant opportunities in the years ahead.
High levels of unemployment – hence large banked and underbanked populations - presents some similar prepaid card opportunities to those in UAE and KSA, such as payroll cards. The humanitarian potential for prepaid cards here is among the most compelling, in terms of sheer volume and potential uptake, revolving as it does around government subsidies and staple foods.
Given it is the land of the pyramids and a holiday hotspot, tourism and travel also holds strong potential for growth of prepaid card programs in Egypt.
Different markets, unified potential
Though there are subtle and overt differences across each market, there are a number of common factors distinguishing prepaid card potential across the region.
Irrespective of whether banks or other issuers drive prepaid programs, those who understand the following will likely lead the market:
- Leverage the innovation potential of prepaid cards
- Understand specific market dynamics
- Stay close to regulators
- Think outside the unbanked segment
- Understand the audience
External factors also play a large part in the prepaid growth story – in this region just as they do elsewhere. For instance, as attitudes toward credit products shift, both mass and niche market opportunities for new products emerge.
Prepaid cards are part of this – solution-driven products whose diverse range of applications are limited only by issuers’ imaginations. How stakeholders from both within and outside this market recognise and respond to these opportunities are key.
Education is perhaps the most fundamental element of success, and there is much to learn about the card markets of UAE, KSA and Egypt, a fact confirmed by each of the experts interviewed for this report. At all levels, from customer, to processors, program managers, technology providers and issuers, greater knowledge of these markets is required.
|
|
|
|
