UAE Payments Revenue Pool Projected to hit $19.8 Billion by 2027, Despite a Global Slowdown in Growth Rates Compared to Previous Years

Amid global challenges such as the pandemic and economic fluctuations, the UAE payments industry has demonstrated resilience. Between 2018 and 2022, the total revenue for the UAE payments industry grew at a Compound Annual Growth Rate (CAGR) of 9.7%, reaching a revenue pool of $12.8 Billion by the end of 2022. In contrast, the global payments industry registered an annual growth rate of 8.3% to reach $1.6 Trillion by the end of 2022. According to the latest report from Boston Consulting Group (BCG), titled ‘Global Payments Report 2023’, slower growth is on the horizon globally.

BCG's in-depth analysis of the UAE payments sector expects that the overall revenue growth will increase in the next 5 years (2023-2027) to a CAGR of 3.6% pushing the revenue pool to $19.8 Billion. In comparison, the global payment revenues are projected to grow by $2.2 Trillion by 2027 at a CAGR of 6.2%.  The report provides an in-depth market analysis, exploring challenges and opportunities for acquirers, issuers, and other key players in the UAE payments ecosystem.

Mohammad Khan, Managing Director & Partner, BCG, said: "The UAE is experiencing a defining moment for those in merchant services, issuers, transaction banks, and payment infrastructure. While our research shows a slower growth seen globally, the UAE payments revenue pool is expected to grow in the years ahead. This is largely in part to the UAE being an early adopter of technological advances powered by GenAI which is being utilized across organizational processes. This evolution will improve customer pathways and offer specialized solutions, resulting in heightened service quality and profit growth."  

A Changing Tide in the UAE Payments Industry

The preceding development in the UAE payments sector can be attributed to a combination of factors, including the transition from cash to non-cash transactions.

From 2023 to 2027, the UAE's transactions are forecasted to grow at a CAGR of 10.9%. This growth is spurred by the country's shift from cash to digital transactions. Key drivers include technological advancements in payment systems and supportive government initiatives. Additionally, the UAE's economic expansion and changing consumer preferences towards digital payments are leading to continuous growth.

The UAE payments industry is grappling with multiple disruptions, from technological advancements to new market entrants. These include the rapid growth of real-time payments, the introduction of value-added services, and the commoditization of basic payment processing. Over 5,000 fintech’s globally are now making their mark in the payments arena, collectively accounting for a significant portion of the industry's revenue. In this evolving scenario, UAE-based companies must strategize effectively to maintain their competitive edge.

A Future Defined by Innovation
As the global payments ecosystem undergoes changes, UAE-based payment providers are uniquely positioned to redefine their roles and services. Digital currencies, for instance, are no longer mere concepts. Local central banks are delving into the feasibility of digital currencies, contemplating their future role in the financial ecosystem.

Navigating the Future of Payments in the UAE

The report highlights four pivotal areas that are shaping the strategic direction of UAE's payments industry:

• Operational Resilience: Ensuring robust operational performance is crucial. While global trends show varying results, UAE-based entities must prioritize operational resilience and cost optimization. This approach will not only enhance operational outcomes but also align business and financial strategies to maximize shareholder returns.

• Generative AI: The advent of GenAI offers transformative possibilities for the payments sector. Early adopters in the UAE are already witnessing its benefits. By identifying and leveraging high-impact GenAI use cases, companies can achieve significant productivity gains. The long-term vision should focus on integrating GenAI across organizational processes, emphasizing key customer touchpoints.

• Risk Management and Compliance: The regulatory landscape in the UAE is evolving. Companies are advised to undertake comprehensive risk and compliance assessments, addressing any gaps proactively. Establishing a target operating model will ensure long-term resilience and elevate risk management standards.

• Mergers and Acquisitions: The investment dynamics in the UAE's fintech sector reflect global trends. With a shift in focus from large-scale deals to capability-centric acquisitions, companies must revisit their partnership strategies. This approach will enable them to identify and capitalize on current Mergers and Acquisitions (M&A) opportunities, ensuring long-term growth and success.

Lukasz Rey Managing Director and Partner, Head of Middle East Financial Institutions Practice, BCG said: "In analyzing the UAE's payments sector, the significance of GenAI is growing, particularly in its ability to enhance compliance measures as it becomes more integrated into core organizational processes. Additionally, smart partnering and M&A are proving to be valuable in building capabilities in this domain.”