The MENA region has its own dynamics in terms of e-commerce. In this article, we will be discussing some of the Middle East Online payment methods; which provides insight about consumer behavior.
Middle East Online Payment Methods
CASH ON DELIVERY
The welfare of the countries in MENA region has been boosting economic transactions. Low technological literacy among those countries forcing customers to rely on Cash on Delivery system as the major payment method. Cash on Delivery is a regionwise popular method among the Middle East Online Payment Methods. Also, the Islamic belief avoid Muslims to be a part of traditional banking structures that benefit from interests. However, Cash on Delivery model is built on trust and convenience from the point of customers, as they are able to check the products on delivery. However, for the foreign companies, Cash on Delivery generates certain problems regarding operational inefficiencies and high return rates. In 2016, the Cash on Delivery return rates has climbed to 19.6% in MENA, which is quite high compared to Turkey, and many other European countries. This obstacle has been challenged by the leading actors in MENA e-commerce in two ways: promoting online payment methods via discounts and cooperating with the banks and PayPal to expand the popularity of online payments. There are some alternatives in the region, Aramex is the most popular among them.
The second popular payment method in MENA region is the Debit Cards which allows cardholders to make online purchases via their account balances. The key difference between Debit and Credit cards, is the application of interest, where Debit cards are interest free, thus the use of Debit cards are approved by relevant religious authorised. This primary difference makes a positive contribution to Debit card penetration in MENA region, where the Debit Card penetration ratio is 77% in UAE, 75% in Bahrain, 70% in Kuwait, and 64% in Saudi Arabia. According to recent investigations, it is estimated that Debit card use will grow by 2 to 4 percent accumulatively in the following 10 years in MENA, which shows a great opportunity for online payment growth.
As we previously mentioned, Islam has certain prohibition of all sorts of interest applications that are directly related to credit card use. As of 2017, credit card ownership in MENA is quite low due to Islamic belief, however, global economic conditions positively affect the number of credit card holders in this particular region. The credit card penetration ratios have climbed 37% in UAE, 28% in Bahrain, 28% Kuwait, and 12% in Saudi Arabia. Despite the rest of the world ; Middle East Online payment methods
PayPal has updated its mobile app and website in 2015 with support of Arabic language, and in two years, the market share of PayPal in MENA e-commerce has increased to 5.2 percent. Two key advantages of PayPal, convenience and debit card integration, leverage the popularity of this particular payment method in MENA. However, there is only a limited number of banks that allow PayPal use with their debit and credit cards. In a near future, it is expected that the number of PayPal integrated debit and credit cards will increase in parallel to popularity of PayPal among customers in the market.
CASHU is a MENA originated online payment system and an early mover in e-commerce industry. The large share of its users are the youth in MENA, who are familiar with online technologies and internet. The system basically works as a prepaid method, where a user places money on his account and uses his balance to make online purchases. The popularity of CASHU is related to the lack of banking infrastructure in MENA countries such as Saudi Arabia and Lebanon, and the company benefits from lack of credit and debit card access. In the future, the popularity of CASHU is expected to reduce where internet technologies in banking system tends to be much more advanced.
Safecharge provides a complete solution for all credit card types and Paypal. After the integration process to your web / mobile portal; the company gives you opportunity to sell online.
Wire transfer is the most primitive one among 6 payment methods in MENA region, which is manually performed via e-mails or postal services by the customers. However, it is really hard to track wire transfer payments on online channels, and this method remain ineffective for most online vendors.