While cash appears cost-free, the payment method’s true cost of acceptance in the Middle East and Africa (MEA) ranges from 1.3% to 3%, driven by direct and indirect costs, such as cash-in-transit (CIT) and shrinkage, as well as back-office costs like reconciliation, a new study by Boston Consulting Group (BCG) shows.

South Africa currently faces the highest costs, largely due to elevated spending on CIT. CIT refers to specialized services used by merchants to securely transport their physical cash to and from banks, such as armored vehicles, security guards, and insurance to protect against theft, robbery, or loss. Because South Africa faces high crime rates, merchants rely heavily on CIT services, which significantly increases the direct cost of handling cash compared to other countries in the region.

By contrast, the United Arab Emirates (UAE) has the lowest cost of acceptance, in part because of the declining use of cash.

Indirect costs, meanwhile, range from 0.9% to 1.2% across the MEA markets studied. These costs account for the majority of expenses in the UAE, Saudi Arabia, and Egypt, and can be divided into less than 0.2% for equipment costs relating to the cash register, safe and teller, and around 0.7% to 1% for cash shrinkage, such as handling errors, theft, and fraud.

Finally, back-office processes, which include reconciliation and cash register preparation, add a further 0.3% to 0.7% to the cost of cash acceptance.

Cost of new payment methods

The study also finds that the cost of accepting alternative payment methods, such as digital wallets and account-to-account (A2A) payments, varies by market. In markets where these options have reached scale, their acceptance costs are comparable to cash and debit cards. In South Africa, for example, cash acceptance costs 3% for in-store transactions, compared to 2.7% for digital wallets and 2.6% for debit cards.

In contrast, in Egypt and the UAE, where alternatives are less established, merchants often rely on informal, typically free, peer-to-peer (P2P) solutions. This lowers costs, but also leaves consumers with limited financial protection against fraudulent or unauthorized charges.

Meanwhile, in countries where alternative payment methods are backed by the government to drive adoption, acceptance costs are lower compared to other payment methods. In Saudi Arabia, for example, digital wallet and A2A transactions cost 0.3% versus 1% for debit cards.

The study also examines the cost of accepting credit-based payment methods. It finds that across the markets studied, buy now, pay later (BNPL) arrangements are more than twice as expensive as credit cards, mainly due to higher direct costs associated with financing and default risks.

In-store BNPL costs range from 2.4% for Egypt to 6.3% for South Africa. For online transactions, BNPL costs are 0.3% to 0.6% higher.

By comparison, credit card acceptance costs for in-store transactions are 2.1% in Egypt, 2.4% in the UAE, 2.1% in Saudi Arabia, and 2.7% in South Africa. Online credit card transactions carry an additional cost of between 0.5% and 0.8% across markets.

Cash use declines in MEA

In the MEA, cash still accounts for a relatively high share of transactions at around 35% compared to about 20% in Europe. However, this share has been decreasing sharply in recent years as the adoption of electronic payment methods grows, driven by consumer behavior and government initiatives.

Saudi Arabia, for example, aims for 70% of all transactions to be executed electronically by the end of 2025 as part of the government’s Saudi Vision 2030 strategy.

Similarly, Dubai’s Cashless Strategy targets 90% of transactions in the emirate to be cashless by 2026, potentially boosting economic growth by over AED 8 billion (US$2.2 billion) annually through fintech innovation.

At the national level, the Central Bank of the UAE has launched the Digital Dirham initiative to support the country’s push toward a cashless society, improve both domestic and cross-border payment efficiency, enhance financial inclusion, and pave the way for asset tokenization.

Fintech and digital payments are also on the rise. In MEA, many of the region’s largest and most successful fintech startups operate in the digital payments and digital wallets space.

In Egypt, Fawry is a dominant electronic payment platform with a user base of more than 52 million. The platform facilitates 5.5 millions daily transactions and has seen explosive growth in both users and financial metrics.

Across the Middle East, the most valuable fintech startups are BNPL players. Saudi Arabia-based Tabby boasts more than 14 million users, and over 40,000 partnered brands and businesses. The startup is worth US$3.3 billion, according to CB Insights. Tamara, another leading BNPL platform in Saudi Arabia and the broader Gulf Cooperation Council (GCC) region, serves more than 20 million users and partners with leading global and regional brands such as Apple, SHEIN, Jarir, noon, IKEA, and Amazon, as well as numerous small and medium businesses. The platform is valued at US$1 billion.

A BCG survey conducted as part of the report finds that electronic payments continue to gain popularity among merchants, who are increasingly adopting the payment methods preferred by consumers. Access to customers was cited as the top driver, ranked first by 37% of merchants, followed by transaction frequency at 20%, and higher transaction value at 11%.

Featured image: Edited by Fintech News Middle East, based on image by DC Studio via Freepik