In the United Arab Emirates (UAE), the COVID-19 pandemic has been a catalyst of change in the payment industry landscape, a new reality that’s here to stay, recent research shows.

Over the past two years, the total value of digital payment transactions in the UAE have more than doubled to reach US$18.5 billion in 2020, according to fintech giant Stripe, which announced its entry into the Middle East market in April 2021, launching its Dubai office.

Two-thirds of UAE residents expect the country to become fully cashless by 2030, a 2020 poll by Standard Chartered showed.

The rise in the digital payments transactions brings with it new security concerns. In the GCC specially Qatar, Saudi and UAE, one of the biggest threats are fraud transactions and identity theft

With the UAE entering a new era in digital banking and payments, we look today at four key emerging trends shaping the future of the industry, encompassing evolving consumer expectations, booming digital payment usage and regulatory changes.

COVID-19 shifts consumer preferences

The COVID-19 pandemic has dramatically changed consumer preferences and spending habits. In the UAE, consumers are rapidly embracing online shopping, new and flexible digital experiences, and contactless tap-and-go payments, the Mastercard New Payments Index shows.

Released in May 2021, the study found that 66% of UAE consumers have tried a new payment method they would not have tried under normal circumstances during the pandemic, and 97% will consider using at least one emerging payment method, such as cryptocurrencies, biometrics, contactless or QR code, in the next year.

Post-pandemic, consumer preferences for clean and convenient payment method will remain, the research found, with 56% of UAE consumers expecting to use more payment technologies like QR codes in the next year, which they perceive as being cleaner (68%) and more convenient (69%) for in-person payments.

Changing consumer preferences are also reflected in their expectations from businesses. In fact, 62% of UAE consumers say they would avoid businesses that do not accept electronic payments of any kind.

Ramy Fouda, Director Of Sales And Business Development, MEA at Netcetera emphasized on the importance of striking a balance between security and innovation.

“While businesses are pushing for more innovations to capture the hearts of the consumers, more risks arise in the form of security. Organisations are in a continuous race between technology and frauds to secure their consumers and that is why banks spend a lot of time assessing new products in the security space,”

he added.

Contactless payments surge in popularity

Supported by policy reforms and innovation from key players, and propelled by the global pandemic, mobile wallets and other contactless payment methods have recorded strong growth in the UAE.

Emirates NBD, Dubai’s largest bank and a front-runner in digital banking, said in April that it saw contactless payment transactions, which include contactless card and mobile wallet-based payments, rise by 59% year-on-year in 2020.

Mobile wallet-based payments using Apple Pay, Samsung Pay and Google Pay more than doubled during the period, while tap-and go card payments increased by about half.

The share of contactless payments of the total value transacted also doubled, indicating rising comfort with using these payment methods for larger ticket purchases, the bank said.

Moving forward, 66% of the UAE consumers surveyed by Mastercard said they were likely to use digital wallets next year. 57% indicated that they felt safer storing their card information in one place such as a digital wallet.

Biometric payments viewed as more secure

With cybercrime and scams on the rise, perceptions of safety and convenience are front and center for UAE consumers.

55% of UAE consumers surveyed by Mastercard plan to use biometric verification methods like gait or walk assessments and fingerprint authorization. In fact, 68% feel safer using biometrics to verify a purchase than entering a pin, the research found.

These changing consumer preferences comes on the back of accelerated development on biometric technology and applications from incumbents and payment leaders. Recently, Abu Dhabi Islamic Bank (ADIB) partnered with Visa to introduce the UAE’s first biometric authentication solution for e-commerce transactions.

The Visa Consumer Authentication Service aims to enhance user experience, while mitigating security and fraud risks. This is done by replacing traditional verification methods, such as the one-time password (OTP) sent by SMS or email, with biometric authentication using fingerprint and facial biometrics.

ADIB, an early adopter of biometric technology, was the first bank in the UAE to introduce biometric ATM readers.

In the Middle East, Swiss software company Netcetera provides a number of secure and easy to integrate solutions. For instance, the company provides a 3-D Secure (3DS) solution for both issuers and acquirers. The 3DS protocol is a predominant authentication tool for the ecommerce ecosystem, providing a layer of security to online card payments, and preventing fraud.

For card issuers and banks, Netcetera’s multi-client enabled 3DS service provides a sophisticated Access Control Server, capable of supporting 3DS 1.0 and 2.0. The solution enables three authentication methods, namely, out-of-band authentication, one-time passcodes, and risk-based authentication (RBA). The service also has an online card registration portal, where cardholders can register and manage their cards.

Ramy said,

“Using machine learning in the RBA solutions to create frictionless flows and using biometrics like face recognition in authenticating transactions easily will encourage the consumers to effortlessly do more transactions either as card present scenario in the case of contactless mobile payments which is much easier than using a plastic card or in the case of ecommerce replacing the classic OTP and all the hassles related to this.”

On the other hand, payment service providers, acquirers and merchants can avail the company’s licensable suite of 3DS acquiring products. These include a Merchant Plug-In (3DS MPI), as well as an in-house 3DS Server and Software Development Kit (3DS SDK).

Netcetera also offers a range of digital payments solutions under its ToPay Digital Payment Service Hub. Alongside cloud payment, scheme tokenisation and click-to-pay solutions, the company provides an advanced mobile wallet solution. The secure mobile wallet-as-a-service solution can be configured flexibly, and is fully brandable.

To top it all off, Netcetera also offers an Identity and Access Management (IAM) security layer on top of its 3DS and mobile wallet offerings. Called Netcetera Auth, it implements user authentication across several industry and regulatory standards.

Cryptocurrency gains ground

The 2020/2021 cryptocurrency market bull run has led to renewed interest in the emerging asset class not only as an investment opportunity, but also as a payment method.

In the UAE, 63% of the respondents surveyed by Mastercard said they are more open to using crypto than they were a year ago and 50% are planning to use crypto in the next year, indicating that consumers interested in being able to spend their crypto assets for everyday purchases.

During a webinar earlier this month, experts said that while cryptocurrency remains a relatively new concept and a nascent market in the UAE, recent regulatory developments suggest that it’s just a matter of time before digital currencies and blockchain technology enter the mainstream.

The Dubai Financial Services Authority (DFSA), the regulator of the financial free zone, is currently drawing up a framework for regulating digital assets, including cryptocurrencies, while the Abu Dhabi Global Market (ADGM) launched its crypto asset regulatory framework in 2018.

Last year, the UAE Central Bank issued its new regulation on Stored Value Facilities, stating that both crypto assets and virtual assets may be used as a stored value when purchasing other goods and services.

“Digital currencies will come to the inevitable point of existence sooner or later and they will be part of the payments ecosystem. Now we can see such news all over the world and in Dubai According to a Khaleej Times report, soon such cryptocurrencies will be part of your mobile wallet which will force providers like Netcetera to open their technology domain beyond provisioning plastic cards to the mobile wallet,”

Ramy concluded.