The Payments Industry in the Middle East: Current State and Future Prospects

Key Drivers of Cross-Border Transactions

As the payments industry in the Middle East continues to evolve, several key drivers are emerging that will shape the future of cross-border transactions. According to a survey of 100 senior payments practitioners in the region, the following factors are expected to play a significant role:

Creation of regional hubs or trade agreements: 57% of respondents predict that creating regional hubs or trade agreements will be a key driver of cross-border transactions.
Offering of cross-border solutions by regional ecosystem players: 43% of respondents believe that offering cross-border solutions by regional ecosystem players will also play a significant role.
Adoption of cryptocurrency: A smaller but still significant proportion (10%) of respondents expect the adoption of cryptocurrency to be a key driver of cross-border transactions.

Consolidation Expected in the Industry

The survey suggests that industry consolidation is expected to occur over the next five years. Two-thirds of respondents predict that this will happen, with integration across the value chain being the most likely prospect. This could involve purchase of merchant acquirers by networks or other forms of vertical integration.

Opportunities for Growth and Innovation

There are numerous opportunities for growth and innovation in the payments industry in the Middle East:

Nonbank payments providers: 60% of respondents believe that nonbank payments providers will win in the future.
Banks should digitize customer journeys: 83% of respondents agree that banks should digitize customer journeys to remain relevant.
Acquire or invest in fintechs: 73% of respondents recommend that banks acquire or invest in fintechs to stay ahead.
Launch new products like e-wallets: 47% of respondents suggest that banks consider launching new products like e-wallets.
Fintechs, telecom companies, and others: Regulatory changes will allow new players to enter the payments business, creating opportunities for fintechs, telecom companies, and other attackers to capture market share.

The Imperative for Banks

To remain relevant in a rapidly changing industry, banks must:

Digitize customer journeys: 83% of respondents agree that this is essential.
Acquire or invest in fintechs: 73% of respondents recommend doing so to stay ahead.
Launch new products like e-wallets: 47% of respondents suggest considering new product launches.
Partner with large ecosystem players or conglomerates: 47% of respondents recommend partnering with larger entities.
Carve out the payments business: 37% of respondents suggest carving out the payments business to focus on core operations.

The Opportunity for Fintechs, Telecom Companies, and Others

Regulatory changes will allow new players to enter the payments business, creating opportunities for fintechs, telecom companies, and other attackers to capture market share. However, these new entrants must:

Build trust in their services: This is crucial for success in the highly competitive payments industry.
Design solutions to address specific pain points: New entrants must identify target use cases and design solutions that meet the specific needs of those customers.

Overall, the Middle East is on the cusp of a payments revolution, with digital payments set to become central to the new normal. The competition for customers will be intense, but there are opportunities for growth and innovation in the region.