United Arab Emirates
UAE Accelerates Contactless Payment Adoption
Introduction to the UAE
An overview of UAE's currency, population and key statistics.
The currency of the UAE is the dirham (AED), which was introduced in 1973. The dirham is composed of 100 fils. Coins are available in denominations of 1 dirham, 50 fils, and 25 fils. Banknotes come in denominations of 5, 10, 20, 50, 100, 200, 500, and 1,000 dirhams.
The Central Bank of UAE (CBUAE) has initiated a plan to launch a digital currency, the Digital Dirham. In collaboration with G42 Cloud and R3, the central bank held a signing ceremony to formally implement the CBUAE Central Bank Digital Currency (CBDC) Strategy in Q1 2023.
The Digital Dirham is intended to alleviate domestic and cross-border payment issues, promote financial inclusion, and facilitate the transition towards a cashless society. Additionally, the digital currency will enhance the UAE's payment infrastructure by providing supplementary channels.
According to data from the United Nations, the population of the UAE was estimated to be 9,890,402 as of mid-year 2020. As of February 4, 2021, Worldometer estimates that the population had increased to 9,961,162, with the majority (86.4%) residing in urban areas, particularly in Dubai and Abu Dhabi. The median age of the population is 32.6 years. Per the PPRO WECE Report, the UAE had an internet user population of approximately 9.1 million by the end of 2019.
Languages spoken in the UAE
The official language of the UAE is Arabic, with Modern Standard Arabic being the primary language taught in schools. The native Emirati population generally speaks a Gulf Arabic dialect similar to those in neighbouring countries.
In addition, English is widely spoken and understood throughout the UAE. Due to the significant number of expatriates residing in the country, other languages, including Persian, Hindi, Urdu, Bengali, and Chinese, are also commonly spoken.
The UAE's gross domestic product amounted to $503 billion (AED 1.84 trillion) in 2021, the fifth largest in the Middle East after Iran, Saudi Arabia, Turkey, and Israel. The economy of the UAE heavily relies on revenue from the production and export of petroleum and natural gas, particularly in Abu Dhabi.
Based on CEIC’s insight, the UAE had a gross savings rate of 45.4% as of December 2020, the same rate as the previous year. The data has varied from an all-time high of 45.4% in December 1974 to a record low of 28.5% in December 2002.
As per the PPRO WECE Report, 88% of Emiratis possess bank accounts, and 45% of these individuals own credit cards.
UAE internet & mobile phone trends
Based on World Bank data, 99% of the UAE's population had internet access in 2022. Most internet users in the UAE are in the age bracket of 16 to 64 years, based on data provided by Medialab.
According to Datareportal, the UAE had 9.73 million internet users in January 2020, representing a growth of around 1.3%, or 128,000 individuals from the previous year. This brought the internet penetration rate to 99% in January 2020. Furthermore, the PPRO WECE Report states that smartphone penetration in the UAE was 96% as of the end of 2019.
UAE e-commerce stats
Due to its high internet and smartphone penetration rates, the UAE is considered a mature e-commerce market. As of the end of 2019, the average annual revenue per paying user was $1,310, as per the PPRO WECE Report.
E-commerce transactions in the UAE were reported to have reached a total of $16 billion in 2019, with an estimated 23% annual growth rate projected between 2018 and 2022, according to Gulf News. Emirati consumers tend to purchase products from the United States, the United Kingdom, and India when making cross-border transactions.
Summary of the UAE's fiscal policy
The fiscal policy of the UAE currently focuses on expansionary policies. These policies involve high levels of government spending to boost oil production and counter the impact of the 2008 recession to achieve an annual growth rate of 3% for the country's real GDP.
The UAE cabinet approved a budget for the year 2023, with an estimated expenditure of AED 63.066 billion ($17.09 billion) and revenue of AED 63.613 billion ($17.23 billion), to support the country’s development programs. Additionally, the federal budget for 2023-2026 has been approved, with a total estimated expenditure of AED 252.3 billion ($68.33 billion) and an estimated revenue of AED 255.7 billion ($69.36 billion).
The Emirati economy faces potential risks, such as a heavy reliance on hydrocarbons for both external and fiscal revenues, dependence on foreign labour (with 85% of the population being foreign), and the concentration of the national workforce in the public sector. In addition, as the UAE serves as a major global logistics and reprocessing hub, any slowdown in the global economy and supply chain disruptions could adversely affect the UAE's non-oil sector.
How people pay in the UAE
An overview of how people in the UAE choose to make payments.
Traditional payment methods
The primary traditional payment methods used in the UAE
Cash is still popular in the UAE, particularly for small transactions. However, its use has declined recently as electronic payment methods have become more widespread. It currently only accounts for 10% of e-commerce transactions.
Visa is a global payment technology company that offers electronic payment solutions through Visa-branded credit, debit, or prepaid cards. In the UAE, 59% of the population are Visa cardholders.
Mastercard is a global payment and technology company that processes payments between retailers' banks and card-issuing banks. Mastercard is the second most popular card provider in the UAE, accounting for 37% of the population.
Alternative payment methods (APMs)
The top APMs used in the UAE
Apple Pay, a mobile payment service from Apple Inc., enables users to make in-person, online, and in-app payments. It replaces chip and PIN transactions at contactless terminals.
PayPal is a widely used online payment platform that allows customers to pay with their PayPal account balances, credit cards, or bank accounts. Shoppers use PayPal to make online purchases and send or receive money securely.
Spotii, founded in 2020, is a prominent company in the buy now, pay later (BNPL) industry that offers straightforward and equitable payment solutions to simplify the payment process. Spotii operates as a technology-based payment platform that enables people to make purchases and pay later without incurring any interest charges.
Afterpay is an Australian financial technology company that offers a BNPL service. It offers customers instalments with no interest as long as they make timely payments. The company has partnered with around 100,000 retailers globally.
UnionPay is a payment service provider headquartered in China. UnionPay has collaborated with financial institutions and banks in over 180 countries and regions to offer electronic payment and fund transfer services.
How to accept payments in the UAE
A guide to accepting payments in the UAE.
How to accept payments online in the UAE
Before accepting online payments, you need to determine which payment methods you want to accept. Then, you can choose a payment gateway provider, a service that authorises and processes online payments with their specific system.
Although there are plenty of payment gateway options in the UAE, the general process for online payments typically involves an acquirer, issuer, retailer, and cardholder in the following steps:
The cardholder initiates a payment by presenting their payment card to the retailer to purchase goods or services.
The retailer sends the payment details to their acquirer (payment processors such as Worldpay or Global Payments), who processes the payment request and sends it to the payment scheme (such as Mastercard or Visa).
The payment scheme sends the payment request to the issuer (such as a bank or licensed issuer) who issued the card to the cardholder.
The issuer checks if the cardholder has enough funds to complete the transaction and approves or declines the payment request. if the payment is approved, the issuer sends an authorisation code to the payment scheme.
The payment scheme sends the authorisation code to the acquirer, who then sends it to the retailer, completing the transaction.
How long does an international payment from the UAE take?
International bank transfers may take up to five business days to complete. However, using debit or credit cards through certain services like Western Union and MoneyGram can expedite the transfer process.
Several online services are available to send money instantly from the UAE to international destinations. HSBC, for instance, provides a global money account through its mobile app that enables users to hold, send, and convert money in 21 currencies. These transactions are instantaneous with no fees.
Merchant fees for online payments in the UAE can vary depending on the payment method and the merchant services provider used. Here are some examples of typical merchant fees for online payments in the UAE:
Credit and debit cards: Merchant fees for accepting credit and debit card payments online can be at most 2% of the transaction amount. But it varies depending on the type of card used and the merchant services provider.
PayPal: PayPal charges a fee of 3.4% + AED 1.10 for domestic transactions and 3.9% + AED 1.10 for international transactions.
Bank transfers: Bank transfer fees can vary depending on the bank used, with some banks charging a flat fee per transaction and others charging a percentage of the transaction amount.
Other fees surrounding online payments in the UAE include charges incurred by merchants, payment processors, and financial institutions involved in the payment processing chain. Below are some common fees:
Interchange fees: Interchange fees are charges paid by merchants' banks to cardholders' banks to cover the costs of processing card transactions. These fees are usually based on a percentage of the transaction value and can vary depending on the type of card used and the merchant's industry.
Payment gateway fees: Payment gateway providers charge a fee for processing transactions on their platform, which may be a percentage of the transaction value or a flat fee per transaction.
Cross-border fees: If a merchant accepts payments from customers outside the country, they may be subject to additional fees for cross-border transactions, including currency conversion fees and international processing fees.
Credit shield fees: A credit shield is a form of insurance that can assist in paying off a cardholder’s unpaid balance in the event of death, disability, critical illness, or involuntary job loss. Most banks charge a credit shield fee, also known as a monthly premium.
Security challenges of online payments in the UAE
Online payments in the UAE face several security challenges, including fraudulent transactions, data breaches, malware and phishing attacks, Payment Card Industry (PCI) compliance, and third-party risks. To address these challenges, merchants must implement strong security measures such as multi-factor authentication, encryption, and tokenisation. They must also educate their customers about the risks of malware and phishing attacks and carefully vet their third-party providers.
Banks, payment processors, and fintech companies are critical players in ensuring the security of online payments in the UAE. Here’s how each of them can help to tackle security challenges in the country:
Banks implement security measures such as fraud detection systems and two-factor authentication, monitor transactions for suspicious activity, and can freeze accounts or cards if they suspect fraud.
Payment processors facilitate the secure transmission of payment data between merchants and banks, implement secure encryption technologies, and monitor transactions for fraudulent activity.
Fintech companies offer innovative payment solutions that often emphasise security, using biometric authentication, blockchain technology, and other advanced security measures to protect online payments.
Key sectors & industries in the UAE
An overview of the UAE market.
UAE's top 10 industries by revenue
The top 10 industries by revenue in the UAE, according to Danburite Corporate, Statista, ResearchAndMarkets.com, and other various studies, are:
The UAE has dedicated substantial resources towards enhancing its infrastructure to achieve the best infrastructure in the Middle East. Dubai alone boasted over 3,200 active projects worth $245 billion in early 2017. The UAE's construction sector is expected to experience an annual growth rate of 3.7% between 2023 and 2026.
The e-commerce industry in the UAE is anticipated to generate $11.78 billion in revenue by 2023, with an expected annual growth rate of 8.57%. This growth results in a projected market volume of $16.37 billion by 2027.
Tourism is a vital contributor to the growth of the UAE. To this end, the government launched National Tourism Strategy 2031 to attract $27 billion in investments and welcome 40 million hotel guests annually. This initiative is projected to increase the tourism industry's contribution to the GDP to $122 billion from $99 billion.
Dubai's real estate industry has experienced rapid growth in recent quarters, emerging as one of the fastest-growing sectors. In 2022, the real estate industry was the second-largest contributor to headline growth, after wholesale and retail, the largest sector by size. The real estate sector recorded an average real GDP growth rate of 2.4% year-on-year in the first three quarters.
In the wake of the pandemic, the importance of the healthcare and hospitality sectors has become increasingly apparent. By 2023, the sector is expected to expand by 60% to $28 million.
A report by Boston Consulting Group predicts significant growth of the UAE's education market to $7.1 billion by 2023 from $4.4 billion in 2017. Additionally, a report by Technavio estimates that the global education market in the UAE will expand by $718 million from 2021 to 2026 at a compound annual growth rate (CAGR) of 5.03%.
In 2023, the UAE's defence market is valued at $23.2 billion, with an anticipated CAGR of over 3% between 2024 and 2028. The country's defence modernisation plans mainly concentrate on areas such as C4ISR, anti-ballistic missile systems, fighter jets, and armoured vehicles. Notable procurement initiatives include the Rafale fighter, Gowind-class, and JAIS 6×6.
Over the next five years, the food service market in the UAE is expected to have a CAGR of 7.02%. The market is divided into segments based on type – full-service restaurants, quick-service restaurants, cafés/bars, 100% home delivery, street stalls/kiosks – and by structure – independent consumer food services and chained consumer food services.
The UAE accounts for over $25 billion in global cryptocurrency transactions, having increased by 500% between July 2021 and June 2022. The UAE is becoming an appealing destination for cryptocurrency players due to its supportive regulatory framework, government backing, rise in private wealth, and higher consumer confidence than other countries.
The UAE's oil and gas market is expected to experience a CAGR of more than 2% between 2022 and 2027. However, the economic impact of the coronavirus pandemic reduced the nation's 2021 budget by 5.3% compared with 2020. The UAE also launched a $45 billion megaproject in 2018 to boost its refining capacity. This project aims to increase the country's refining capacity by 65% to 1.5 million barrels per day by 2025.
The UAE's foreign trade increased by 17% year-on-year to 2.2 trillion dirhams ($599 billion) in 2022. To diversify from hydrocarbons and become a global trade hub, the UAE has invested heavily in transport and logistics infrastructure, as well as expanded economic partnerships.
Non-oil exports grew 6% year-on-year to 366 billion dirhams in 2022, while imports surged 22% to 1.25 trillion dirhams. The country aims to increase non-oil bilateral trade with India to $100 billion over the next five years. Other key trading partners include China, Saudi Arabia, and the United States. The fastest growth in trade was with Turkey, with a 40% increase in 2022.
Regulation in the UAE
The regulatory environment of the UK.
Summary of the regulatory environment in the UAE
Entrepreneurs must comply with various laws and regulations to ensure fairness and smooth business operations in the UAE. Some of the key laws and regulations are:
Company law: This includes regulations governing companies' formation, operation, and dissolution.
Employment law: This includes regulations governing employment contracts, working conditions, and employee rights.
Virtual asset law: This includes regulations governing cryptocurrencies, non-fungible tokens (NFTs), and other virtual assets in the country.
Intellectual property law: This includes regulations governing copyrights, patents, and trademarks.
Environmental law: This includes regulations governing pollution, waste disposal, and environmental protection.
Consumer protection law: This includes regulations governing the rights of consumers, product safety, and advertising standards.
Data protection law: This includes regulations concerning the collection, use, and storage of personal data.
These regulations are enforced by various regulatory bodies and agencies, including the CBUAE, Finance Ministry, Virtual Assets Regulatory Authority, Dubai Financial Services Authority, Financial Services Regulatory Authority, Emirates Securities and Commodities Authorities, and Financial Intelligence Unit.
How card payments are regulated in the UAE
The regulation of card payments in the UAE is the responsibility of the CBUAE. In July 2021, the CBUAE introduced the Retail Payment Services and Card Schemes (RPSCS) Regulation to modernise the digital payments regulatory framework.
The RPSCS Regulation outlines the rules and requirements for obtaining and maintaining a license to offer retail payment services and operate a card scheme. The regulation categorises retail payment services into nine groups: payment account issuance, merchant acquiring, payment initiation, and payment account information services.
To summarise, the regulations cover various aspects, such as:
Licensing requirements for providing retail payment services
Obligations and rights of users and providers of payment services
Conditions for granting licenses to card schemes and participation in the wages protection system
The central bank's supervisory powers and reporting requirements for card schemes
Do I need a licence to do business in the UAE?
Yes. To operate a business in the UAE, acquiring a business licence corresponding to the business activity you intend to carry out is necessary.
The available licenses include commercial licenses for trade, professional licenses for services, and industrial licenses for manufacturing. The licensing requirements and procedures may differ based on the emirate where you want to operate and whether you plan to establish your business on the mainland or in a free zone.
Payment solutions in the UAE
An overview of how to accept payments from customers in the UAE.
Payment gateways and providers in the UAE
APEXX is a payment technology firm based in London that provides a solution to merchants in the UAE who want to accept payments from multiple providers. To cater to customers' preferences and enhance their experience, businesses may need to support various payment methods.
APEXX enables businesses to offer customers multiple payment options and manage them via a single platform. The APEXX Payment Orchestration Layer (POL) platform connects with various payment providers, including banks, acquirers, and alternative payment methods like Alipay and PayPal.
Moreover, APEXX POL employs intelligent routing to help businesses optimise their payment processing by automatically selecting the best payment provider for each transaction based on cost, currency, and risk factors. This service enables businesses to save money on transaction fees and minimise the risk of failed payments.
Businesses can use APEXX's API or pre-built plugins to integrate the APEXX POL into their current payment systems, including e-commerce websites and point-of-sale systems.
Cheapest payment solutions in the UAE
To reduce fees in their payment stacks, merchants in the UAE can implement the following strategies:
Negotiate fees: Merchants should negotiate with their payment providers for better rates, which can include transaction fees, interchange fees, and monthly fees.
Choose a suitable payment provider: Merchants should research and compare different payment providers to select the one that offers competitive rates and low fees.
Use alternative payment methods: Merchants can reduce fees by using alternative payment methods such as e-wallets or bank transfers instead of traditional card payments.
Prevent chargebacks: To avoid chargebacks and additional fees, merchants can offer clear product descriptions, prompt customer complaint resolution, and refunds when necessary.
Implement fraud prevention measures: Merchants should adopt fraud prevention measures to prevent fraudulent transactions, which can lead to chargebacks and additional fees.
Monitor payment processing fees: Merchants should keep a close eye on their payment processing fees and use payment analytics tools to track their expenses and identify areas where they can reduce costs.
Merchants can also consider using payment aggregators such as APEXX, which allow them to accept multiple payment methods through a single platform, reducing the need for multiple payment providers and lowering costs.
BNPL in UAE
A report by Research and Markets shows that the UAE's BNPL payment industry is set to grow by 22% annually to $2,531.1 million in 2023. In 2022, more than 37% of Emirati consumers used BNPL payment schemes, up from 24% in the previous year. This growth is attributed to increased e-commerce penetration and has remained strong over the past four quarters.
Merchants can integrate with different BNPL providers in the UAE, like Afterpay and Rise, using APEXX. This enables them to provide BNPL choices to customers and handle their payment stacks effectively.