Low adoption of digital payment hinders faster growth of e-commerce in the Middle East

middle-east-webrazziThe Middle East represents a rich but surprisingly underserved region in the field of e-commerce. Whilst the share of connected population rises across the region, lack of sufficient tools for digital payment hinders faster growth in electronic retail purchases. According to a report by yStats.com, B2C e-commerce currently accounts for less than 1% of total retail sales in the region. For comparison, the figure is 1.7% in neighboring Turkey and around 6% in the US.

The potential for e-commerce is widely touted, with the report claiming “a boom in ME e-commerce is expected” of around 20% over the next few years. However, there are significant obstacles to the ME actually realising this potential, which we believe will continue to prevent this growth if not addressed. One, as the report acknowledges, is the lack of fast and widespread mechanisms of online payment. It’s mainly because connection infrastructure and availability is still very low, and needs considerable investment in order to create a boost in internet usage. This perpetuates the second obstacle of low adoption of online retail channels and digital payment tools by local businesses, currently prevalent.

At the moment, the UAE, Saudi Arabia, Qatar and Israel account for approximately half of all e-sales in the region, according to the “Middle East B2C E-Commerce Report 2014” prepared by the Hamburg-based research company. The product categories producing more revenue in online sales include consumer electronics, computers, and jewelry (including watches).

Mobile is often the most common mode of connection to the internet in the region, with high smartphone and tablet penetration. This illustrates the exciting potential for mobile commerce, even higher than desktop e-commerce, which is currently untapped. Currently, m-commerce accounts for 10% of all B2C e-commerce in the Middle East, reads the report, predicting it to double by 2015.

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