Aug
Why Contactless Payments Are Booming in Saudi Arabia and United Arab Emirates
Key factors driving adoption—and the overall benefits of the boom.
Cash is no longer king at point of sale (POS) retail outlets throughout Saudi Arabia and United Arab Emirates (UAE). According to the Saudi Central Bank, contactless payments have a 94% penetration rate in the country1, while they are at 84% in the UAE, according to Emirates NBD.2 Below is a quick breakdown of the most common POS payment methods in Saudi Arabia:
But these countries aren’t just leaders in contactless penetration in the Middle East and North Africa (MENA) region — they also surpass the United States (with 51% penetration3) and Canada (contactless made up 37% of total payment volume4 in Canada in 2022).
Why Adoption Expanded
A unique set of circumstances in both UAE and Saudia Ariba also helped to encourage contactless adoption. These include:
Card and mobile penetration. Both markets already had strong penetration of cards: UAE had a 70% debit card penetration, while Saudi Arabia had a 72% debit card penetration. This made the jump to contactless cards easier than it might have been in a cash-dominant payments system. Having this base of cardholders allowed card issuers and payment gateways to focus on reducing long queue times in POS transactions.
Since near field communication (NFC) technology of contactless cards works well with mobile phones, the deep penetration of these phones (91% in UAE and 88% in Saudi Arabia) also contributed to the fast-paced growth and success of contactless payments, as it led technologies like tap-on-phone and virtual card-based payments to become useful for consumers.
Use in transportation. Another factor that opened the path for contactless adoption in these countries is that mass transit systems in both countries began to allow customers to pay by tapping their cards at metro stations. This familiarized consumers with the technology and allowed them to experience how convenient and quick contactless payments can be.
Solid security. With any new payment technology, fraud is always a concern for both payments companies and consumers. However, in both the UAE and Saudia Arabia, governments require having the biometric data of residents on file — with this, they can’t obtain a work visa or a national ID number. This provides security to guard against fraud. Banks also began using the biometric data of their customers. In combination, these practices normalized the use of biometric data and helped assuage security concerns about contactless, which in turn encouraged adoption by consumers.
Technological advances that benefited merchants. Tech adoption is a two-way street in that ideally, both consumers and merchants should find advantages in a new technology to adopt it. With contactless payments, the technology that permitted Tap on Phone with smartphones made it very easy for small and medium businesses (SMBs) to receive payment without using a separate device. This advance also significantly reduced the cost for merchants to accept contactless payments — while making it easy for them to do so.
The Good and Bad of Contactless Adoption for UAE and Saudi Arabia
Beyond faster-moving queues in stores and quicker transactions, contactless payments will have a broader set of effects in both countries, both favorable and less favorable (at least for some):
Growth in digital payments and the reduction of cash. The contactless payments growth in these markets significantly increases the digital payment penetration as the ease of use, convenience and transaction time reduction attract customers to get NFC-enabled debit and credit cards which are broadly accepted throughout the country. The growth of contactless payments plays a crucial role in reducing the cash payment at the POS. For example, cash’s share of POS transactions in UAE is down to just 18%, which makes it the 8th most cashless society5 in the world.
Card networks and digital wallets in a more competitive position. The growth of contactless payment improves the competitive position of card networks in the market, spurring both revenue and growth for card networks like Visa, Mastercard, American Express and local card schemes like Mada (Saudia Arabia) and Jaywan (UAE), in a context where A2A payments are trying to emerge. In addition, contactless wallets, such as Samsung Pay, Apple Pay, Google Pay, Careem Pay and Payit, have grown with the increase in contactless payment penetration in KSA and UAE.
Will contactless crowd out A2A wallets at the POS? High card penetration and fast contactless penetration is an ideal combination to keep staged wallets such as Careem Pay and PayIt, at bay. These wallets, aspiring to be superapps, enable users to save cards on file as well as store a balance, and are useful for P2P payments, bill payments, top-ups and e-commerce, but have not managed to penetrate in-store purchases, even though they may offer a more attractive MDR to merchants.
Currently, just 18% of POS payments are made in cash, and this represents a last competitive frontier for wallets, who will go after small merchants that today do not accept digital payments. The question is, which will be a more competitive offering: fast, seamless contactless payments, potentially using Tap on Phone (no POS device, or a less expensive commission enabled by an A2A wallet?
What’s Next for Contactless Evolution?
Contactless payments have enormous potential to be adopted worldwide but have yet to achieve a high penetration rate in many countries in MENA, South Asia, Australia, and the US. Competitors invested in the card industry in these countries should learn from the evolution and success of contactless payments in UAE and Saudi Arabia to integrate the consumer lifestyle and behavior with contactless payment technologies. Higher smartphone and internet penetration is a critical point that can support the financial sector, central banks, and government to encourage contactless payment in their regions.
Fully biometric payments without the need for any card or device may be the future of contactless payments in the UAE. Payment service providers and card issuers can integrate their services with biometric features of smartphones — including facial recognition and fingerprint sensors — to develop a more advanced and convenient contactless payment mechanism to ensure optimal customer convenience, security of funds, cost reduction and to achieve the goal of a cashless economy worldwide.
Next Steps
Contact us to understand the payments market in Saudia Arabia, United Arab Emirates and other markets in the Middle East and North Africa. Our market data can uncover opportunities for your company, give you a clear picture of the competitive landscape, minimize your risk and help your company either enter these markets effectively or increase your market share in them.
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Sources
- “Saudi Central Bank Says Country’s Contactless Payments Adoption Is 94%,” PYMNTS, October 3, 2021. ↩︎
- “The rise of contactless payments in the UAE,” Arabian Business, April 11, 2021. ↩︎
- “More than half of Americans now use contactless payments,” CNBC, updated June 27, 2024. ↩︎
- Canadian Payment Methods and Trends Report 2023, Payments Canada, page 32 ↩︎
- “UAE eighth in global ranking of most cashless economies,” The National, July 7, 2021 ↩︎
