Alamy via Reuters
- Goal to go 70-75% cashless
- Accelerated by technology
- Privacy and cybercrime challenges
The Middle East has set ambitious targets in its bid to become a cashless society. The UAE is aiming for 75 percent of transactions to be cashless by 2026 and Saudi Arabia has set a target of 70 percent by 2030.
Late last year, the process was made simpler by the introduction of Tap to Pay on iPhone, whereby businesses can accept contactless payments using only an Apple smartphone.
With this feature, merchants can process contactless payments via credit, debit and prepaid cards, using just an iPhone.
Along with AI and blockchain technology, the region is making strides to achieve its goal, but it faces challenges such as financial fraud and making cross-border transactions more seamless.
According to Remo Giovanni Abbondandolo, general manager for the Middle East and North Africa at financial services company Checkout.com, the preference for cash on delivery in the region has halved from 41 percent to 20 percent over the past four years.
“Countries like Saudi Arabia, UAE and Kuwait have seen cash usage drop to as low as 10 percent, reflecting broader acceptance of digital payments,” he says.
Suvo Sarkar, a veteran financial services executive, emphasises the benefits of moving to a cashless economy. “Digital transactions reduce costs for businesses, especially SMEs, improve transparency and enable better governance for a sizeable blue-collar workforce,” he says.
However, challenges remain, including addressing the needs of older consumers and mitigating privacy concerns.
“Digital payments offer convenience and efficiency, but inclusivity should remain a cornerstone of this transformation,” says Malik Alyousef, co-founder and chief operating officer at Mozn, a Saudi AI company whose portfolio includes an AI-powered platform for fighting financial crime.
Alyousef notes that while the transition to digital payments is accelerating, efforts must be made to ensure accessibility for underserved populations, particularly in rural areas.
The role of technology
Advancements in technology have fundamentally transformed the payments landscape. Abbondandolo highlighted the surge in digital payment volumes, which grew by 658 percent since 2020, driven by innovations such as digital wallets, Buy Now, Pay Later (BNPL) services, and cross-border platforms.
Sarkar points to the proliferation of technologies like Apple Pay, Google Pay, and QR-code-based payments, which have become ubiquitous. “Crypto wallets and embedded finance are on the horizon, offering consumers financing and payment options directly from merchants,” he says.
Growing use of technology comes with its own set of risks. Alyousef underscores the growing importance of AI and machine learning in combating financial crime, enabling real-time detection of anomalies in transaction patterns.
“Advanced systems like predictive modelling and network analysis are uncovering hidden patterns, helping businesses prevent fraud before it occurs,” he says.
Mubadala’s investment in London-based fintech company Revolut underscored the region’s commitment to advancing digital payments. The September 2024 deal, part of a share sale valuing Revolut at $45 billion, demonstrated Abu Dhabi’s strategic push into the global fintech arena.
Similarly, UAE-based Tabby, a prominent BNPL startup, secured $54 million in a Series B funding round in March 2022. This reflects changing user needs and growing interest in non-traditional payment methods.
Fighting financial crime
While digital payments offer benefits in convenience, they have also created opportunities for cybercriminals. Sarkar warns of increasingly sophisticated scams, including AI-driven deep fakes and phishing attacks.
“Financial institutions are working hard to combat cybercrime, but it’s an uphill battle,” he says. “As AI tools proliferate, bad actors are using them to impersonate banks or consumers, leading to rising fraud losses.”
Alyousef says that fraudsters have adapted their tactics, using tools including machine learning to exploit system vulnerabilities.
“AI-driven phishing scams and automated attacks, such as account takeovers, are becoming more prevalent, increasing financial crime levels,” he says. He stresses the importance of real-time monitoring and collaboration between fintechs, governments and technology providers to mitigate these threats effectively.
Abbondandolo notes that the industry is responding with robust encryption, biometrics, tokenisation and AI-driven fraud detection systems.
“Collaboration among fintechs, governments and technology providers is further strengthening defences against emerging threats,” he says, emphasising the importance of a multi-layered security approach.
Cross-border payments
Cross-border transactions remain a key focus area in the Middle East, driven by the region’s large expatriate population. Abbondandolo explains how technologies such as blockchain are enabling faster, more secure international payments.
“Account Fund Transfers have made remittances more efficient and cost-effective, lowering barriers to entry for fintechs in new markets,” he says.
Alyousef points out that cross-border payments are becoming more seamless through innovations including tokenisation and biometric authentication, which enhance security and user experience. He adds: “As fintechs leverage these advancements, the potential for reducing costs and improving access in underserved markets grows significantly.”
The payments sector is poised for further innovation as advanced technologies become more prevalent among businesses and individuals.
“Tokenisation, biometric authentication and AI integration are reshaping remittance systems,” Abbondandolo says. “As technology continues to advance, we can expect even more seamless and personalised payment solutions.”
