What's behind the Middle East's boom in digital payments?

Real-time payments through instant bank transfers and mobile payment apps are revolutionizing the banking industry, making payment processing more rapid, convenient and secure than ever before.

They’re having a similarly transformative effect on society at large, especially in the Middle East, which is the fastest-growing real-time payments market globally. In 2022, real-time time payments in the region stood at $675 million; by 2027, they’re expected to reach $2.6 billion. So what’s driving this digital revolution — and what might the implications might be?

The Middle East is one of the most youthful regions in the world: more than half of the population is aged under 25, and the median age stands at 22 compared to 28 globally. These young people have grown up as digital natives, immersed in technologies that make their lives easier. They are often early adopters of new products and services — especially when they are offered by brands that share their values and do good. Bahrain, for example, is a country with a youthful population of early adopters. The country has a mobile penetration rate of 137% as of 2023, and the highest internet penetration rate in the world, with almost its entire population connected to the internet.

It’s thanks to this young, tech-savvy population that demand for better, more seamless forms of digital payments has taken off in the region. Companies that have listened to what these young people want have seen user numbers rise rapidly. Bahrain-based BenefitPay app, which allows users to pay and send funds through their smartphones quickly and securely, provides one such example from Bahrain. The platform registered 345.4 million transaction volumes in 2023 — a 37% increase on the previous year.

Widespread smartphone adoption is another significant driver of the growth in real-time payments in the region, particularly in the GCC, where smartphone penetration rate is projected to rise from 76% in 2022 to 92% by 2030.

Increasing mobile adoption means digital payments are easier than ever. It’s no surprise, then, that countries in the region are experiencing a surge in the use of mobile payments in a region that has historically been dependent on cash transactions. Mobile payment services make consumers' lives simpler and easier: people can use apps like BenefitPay to transfer money, pay for purchases, pay bills and access other services in one place.

Global payment apps like Apple Pay and Google Pay are widely accepted across the GCC, while regional solutions such as Saudi Arabia’s STCPay and UAE-based Careem Pay, offer customers tailored solutions for mobile payments in a fast-growing market. The mobile payments market in the Middle East and Africa is predicted to register a compound annual growth rate of 30.1% from 2022 to 2027.

Even before COVID-19, the e-commerce sector in the Middle East was thriving, but the pandemic led to a further boom in the region: In 2021, 80% of young Arabs were shopping online frequently, compared to 71% in 2019. The usage of “buy now, pay later” service providers has also burgeoned, allowing customers the chance to pay for goods using interest-free installments. Tabby and Tamara boast in the region of 10 million users each across KSA, Kuwait, UAE and Bahrain and are valued at $1.5 billion and $1 billion, respectively.

This shift online has also led to a rapid move towards digital payments. In the UAE, home to one of the region’s biggest e-commerce success stories, Souq.com., 64% of nationals expect the country to become fully cashless by 2030.

While the growth of digital payments in the Middle East has been driven by consumer demand, the willingness of governments in the region to create the right type of enabling environment has also had a big impact.

Commercial 5G network services, which were available in the region as early as 2019, have helped accelerate the uptake of digital payments, as have increasing internet speeds. As of this year, four of the ten countries with the fastest internet speeds in the world are in the GCC: Qatar, UAE, Kuwait and Bahrain. Bahrain was also one of the first countries globally to roll out a commercial 5G network These types of government-led investments in network infrastructure have proven to be a key driver in the rise of digital payments.

Collaborations between the public and private sector have also gone a long way to creating an environment in which digital payments have been adopted so widely. For example, “electronic know your customer service” systems allow companies to turn what was once a lengthy, manual and expensive process — but an important one, without which financial transactions could not happen — into something efficient and seamless.

Governments in the region are prioritizing digital transformation as a key driver of their future growth and prosperity. Saudi Vision 2030, Egypt Vision 2030 and the UAE’s digital strategy are all examples of this in action. The Saudi Arabian Monetary Authority has successfully worked to promote digital payments in the country. In 2022, there was 62% rise in digital payments, with 8 billion transactions recorded, equivalent to over $426 billion.

The Middle East’s innovative approaches to digital payments are boosting economic growth and improving financial inclusion by catering to underserved markets.

For example, through services such as IBAN-based payments in real-time, digital payment apps are helping micro, small and medium enterprises reduce their reliance on cash while avoiding the need to invest in cost-prohibitive digital infrastructure. And features like e-remittances are making it easier and safer for migrant workers, who still face barriers to accessing traditional banking services, to send their money back home.

The Middle East is at the forefront of the digital payments revolution, driven by a young, tech-savvy population, increasing mobile adoption and an e-commerce boom. As government investment and willingness to collaborate with the private sector have shown, the region is not just seizing the opportunity — it’s actively shaping the landscape.