GCC payment revenue growth subdued by Covid-19: report

The Covid-19 pandemic has negatively affected transactions, with GCC payments sharply lower than the 7 per cent in annual growth between 2014 and 2019, a report by BCG shows.

Under a quick-rebound scenario, BCG’s outlook suggests that the GCC’s payment revenue pool will expand from $23bn in 2019 to $24.3bn in 2024, a compound annual growth rate (CAGR) of 1.1 per cent.

In a slow-recovery scenario, the regional revenue pool would reach $23.1bn by 2024, a CAGR of just 0.1 per cent. Under a deeper-impact scenario, the revenue pool is projected to shrink by a CAGR of -0.9 per cent.

“Covid-19 related headwinds such as decreasing oil prices, a slowdown in tourism, and a substantial rise in expatriate migration have slowed overall economic growth,” said Godfrey Sullivan, managing director and partner, BCG. “While payments revenue growth in the region is projected to be restricted as a result of the pandemic, we are also seeing a surge in electronic transactions, pointing towards an opportunity of growth in digital.”

BCG predicts Covid-19 will accelerate the cash-to-noncash conversion, driven by evolving customer preferences, improved accessibility, and higher transaction limits. Across the GCC during the crisis, higher numbers of merchants welcomed contactless payments, including those of lower value. Likewise, consumers demonstrated the same enthusiasm, even in traditionally challenging markets. Governments may be interested in accelerating the cashless agenda, as research has shown that electronic payments can increase global GDP by as much as 3 per cent per year.

As it has become clear, Covid-19 will accelerate ecommerce growth. A fundamental consumption shift has occurred due to the pandemic, which will change the combination of payment options and, in some areas, lower the prominence of cards, the report says. Mobility-dependent sectors such as entertainment and travel have already witnessed a drop in payments, and others, including food and home entertainment, will likely record greater growth.

Mergers and acquisitions (M&A) payments activity has been fostered through value chain ambitions, scale objectives, and the necessity to move money quicker. Although the deal flow has predominantly revolved around payments processing and acquiring, it will likely spread to other value chain areas. GCC payment markets are still developing in comparison to others, and private equity, ecosystem participants, and local competitors seeking to build scale regionally will most probably drive M&A activity.