Are We Going Cashless After Covid?
Covid-19 is accelerating the rise of the cashless economy. The UAE, already respected in global remittances, has the opportunity to lead.
By Xische Editorial, June 14, 2020
Source: angelbi88/Envato
The Covid-19 pandemic is accelerating trends that existed long before the outbreak. The technology enabling remote work, for example, is being put to use. Millions of people are now working from home. The same acceleration can be seen in less obvious areas. Consider contactless payments and financial technology. Since March, there has been an explosion of interest in all things cashless. That’s a golden opportunity for the Gulf.
Over the last decade, smartphones have fueled growth in financial technology and inclusion across emerging markets. Millions of people across Africa, the Middle East, and Asia who previously had no access to formal financial markets have been able to use their smartphones for digital banking. Once a person has access to the formal financial system, a host of other products and services are available to them. The transformation is a critical part of efforts to lift people out of poverty and reform economies around the world.
With smartphones readily available and falling in price, entrepreneurs are building a host of financial services previously off-limits to millions of people. This is about more than an increase in WhatsApp and Twitter users, these smartphones are the tools for an entirely new class of customers around the world.
Every three years, the World Bank publishes a Global Findex Database tracking the state of financial services. From Finland to Angola, analysts survey how people use financial services to gather insights on financial inclusion and identify barriers to access. More people than ever before have some sort of financial services account. Since 2014, 515 million more people have opened a formal account. That means 3.8 billion people around the world now have access to financial products while the global unbanked population hovers around 1.7 billion.
Mobile money is a bright spot. Increased access to smartphones and improved mobile infrastructure have helped mobile money accounts grow since 2014. The UAE is a hub for financial inclusion efforts including digital banking. Dubai-based startups are some of the world’s best when it comes to remittances and mobile money, which are a key part of this digital transformation. UAE companies are also creating apps and platforms that are changing the sector. The Covid-19 pandemic is a chance to accelerate efforts and ensure the UAE remains one of the world’s leaders in financial technology.
Last year, Abu Dhabi made waves with its splash into mobile money and fintech. We wrote at the time that trust remains a premium in this sector and the UAE has well-earned trust. The traditional titans of the remittance trade such as Western Union levy high fees to move money because they can guarantee that it will arrive at its final destination. Technology is finally coming to disrupt this model by providing better service at a lower price.
Blockchain technology and cryptocurrencies could further transform the mobile money space, especially in the realm of remittances. The overall takeaway, however, is that mobile money has created an entirely new customer base with remarkably little infrastructure investment. By 2050, some 2.2billion people could be added to the global population, and more than half of that growth will occur in Africa. With such rapid population growth forecast within this new customer base, the opportunities are boundless.
The changes are taking place at home as well. If you look around the streets of Abu Dhabi and Dubai, you can’t miss the growth of cashless services. From Abu Dhabi taxis accepting contactless payments to the growth of Apple Pay in the country, the UAE is a testbed for the latest innovations. A recent paper produced by Mastercard found that early adoption and the use of digital technology allow for higher productivity levels through more efficient use of capital and labor. Financial technology is a ripe sector for the UAE and other Gulf economies. Using the Covid-19 pandemic as a motivator, the UAE can entrench its quantitative advantage in the sector for decades to come.
