In the Middle East and North Africa, Generation Z (Gen Z) members are showing preference for digital payments methods over cash, identifying cards and mobile wallets as their favored and most used payment methods, a new study conducted by Sixth Factor Consulting and sponsored by Amazon Payment Services shows.
The research, which polled over 1,800 respondents born between 1997 and 2012 across the United Arab Emirates (UAE), Saudi Arabia (KSA) and Egypt, revealed that more than half of Gen Z respondents surveyed said that they preferred paying digitally, praising cards for their convenience, ease-of-use and visibility, and e-wallets for the speedy and seamless experience they provide.
MENA Gen Z shows openness to emerging payment methods
Overall, results show that this demographic prefers payment methods that are convenient, seamless, flexible, and which fit with their busy and digitally-enabled lifestyles. These methods include buy now, pay later (BNPL) arrangements, peer-to-peer (P2P) transfers, in-app payments, and omnichannel payments.
Gen Z respondents indicated appreciating BNPL arrangements and instalment plans for their flexibility and ease-of-use, especially when paying for expensive items. Zero interest and no need for paperwork or credit verification as well as lightening the pressure on the pocket were identified as the main reasons driving up interest for the payment method.
Openness to use BNPL in the future was the highest in the UAE (54%), followed by KSA (52%) and Egypt (44%), the study found.
Awareness of P2P transfers was also found to be high across MENA with the majority of respondents stating that they had used a P2P transfer app at least once. Awareness was the highest in Egypt where the Instant Payment Network has been available since 2022, allowing consumers to transfer funds instantly to anyone with a phone number or an email address.
Most MENA Gen Z consumers are also aware of in-app payments, but respondents said the payment method was competing with other commonly-used payments methods. That said, respondents showed interest in super-apps for their convenience.
In addition to BNPL arrangements, P2P transfers and in-app payments, respondents also cited some familiarity with omnichannel payments when the term was explained. Younger buyers were particularly enthusiastic about new ways of shopping, and said they evaluated brands and retailers based on the seamlessness of their experience.
Disparities across the region
Results of the study reveal some variations within MENA. UAE Gen Z consumers, for example, showed a strong preference for card payments alongside a low prevalence of cash payments. In Saudi Arabia, on the other hand, there was a degree of preference for using cash, though card payments were also popular.
The preferences also vary within countries. In Egypt, for example, the study found that respondents in the Alexandria region had a notably higher preference for cash usage at 63%, compared to respondents in Cairo whose preference for cash usage was found to be 48%.
Wealth and affluence were found to also have an influence on the payment methods used. In Saudi Arabia, the more affluent the respondent, the more likely they were to use payment cards, the study found. In Egypt, meanwhile, affluent respondents were more likely to use a broad range of payment methods, including e-wallets.
Although members of Gen Z currently do not hold the greatest buying power, the report says that this demographic should not be overlooked by businesses because they will eventually graduate into the workforce and build their spending power. In this process, they’ll bring their unique views with them, including their unique expectations of the companies that they buy from.
Additionally, younger demographics make up a large chunk of the region’s population, the report stresses. In MENA, Gen Z, Millennials and Gen X consumers represent a staggering 75% of the population, a much larger share than the global average of 67%. In Egypt, Gen Z consumers constitute 23.9% of the population, a share that stands at 22.1% in KSA and 15.8% in the UAE.
A thriving MENA fintech sector
Results of the Sixth Factor Consulting/Amazon Payment Services study are consistent with findings from other research studies which reveal rising usage of and openness to digital payments.
According to Mastercard’s New Payments Index 2022, 95% of consumers in MENA were considering emerging payment methods including wearables, digital wallets and currencies, as well as QR code and contactless payments last year.
The study also found that 85% of people in MENA had used at least one emerging payment method in the previous year, such as tappable smartphone, mobile wallets or BNPL.
Soaring use of digital payments in MENA comes at a time the region is experiencing a significant boom in the fintech sector. MENA was home to more than 800 fintech startups worth US$15.5 billion in 2022, data from Dealroom show. By September 2023, that number rose to over 1,000 companies worth a combined US$23.5 billion.
Fintech has also consistently attracted most of the region’s startup venture capital (VC) investment. In H1 2023, the sector remained the highest funded sector across emerging venture markets, securing a total of US$418 million, according to Magnitt’s H1 2023 MENA Venture Investment Summary.
Featured image credit: edited from freepik
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