Digital Wallets have become an entry point for consumers to engage with financial services and they create new opportunities to target the underserved banking population according to a Whitepaper, authored by Omdia (www.Omdia.com) and commissioned by CR2 (www.CR2.com), and offers recommendations on how incumbent banks can embrace digital wallets to engage with new and existing customers. It illustrates key examples of digital wallet providers, both within the Middle East, Africa and beyond, and highlights the reasons behind their success.
The adoption of digital wallets in the Middle East and Africa has been growing steadily over the last number of years and this has been accelerated as a result of the COVID-19 pandemic. With merchants now prioritising online and in-store payments, there is now an increase in acceptance of new payment tools such as digital wallets.
The Whitepaper shows that as smartphones become more widely available, consumers throughout the Middle East and Africa are embracing digital payments and are subsequently using digital wallets. For example, in Kenya smartphone penetration, which is now at 60%, will rise to over 80% by 2025. This has opened the door for telcos, such as Safaricom in Kenya, to create Super Apps that can offer services beyond money management to include everyday services such as restaurant bookings, food delivery and taxi hailing. Some banks have recognised this threat from non-traditional rivals and have used digital wallets as the catalyst to acquire new customers.
One of the key take-aways of the Whitepaper is that in-country regulatory initiatives are increasing competition for financial services with financial and telco firms launching digital wallets as a first step to gaining banking licenses. This has resulted in banks facing increased competition from non-traditional rivals. In western Africa for example, both Orange and MTN have been issued banking licences and in Saudi Arabia 16 licences have been issued to fintech firms for payments services. This highlights the need for retail banks to adopt broader digital banking platforms that support customer-to-bank interactions for direct and emerging channels such as digital wallets, and offer customers new products and services that go beyond banking through, for example, Super Apps.
The Whitepaper shows how the COVID-19 pandemic has accelerated the shift to digital payments with unprecedented adoption rates across the Middle East and Africa. This acceleration illustrates the importance for merchants to acquire supporting third-party wallets and other digital payments methods to meet their customers demands. Digital wallets can take advantage of virtual card issuing, a feature that is included as part of CR2’s integrated wallet and card management system, to allow onboarding of customers for payments without incurring physical production and distribution costs. With new payment methods emerging, such as ‘Buy now, pay later’, account-to-account payments, and crypto-currencies and central bank digital currencies will require a common platform to flourish and digital wallets fit the bill perfectly.
Digital wallets have become an entry point for consumers to engage with financial services, and they create new opportunities to target the underserved banking population. This can lead to the creation of a marketplace through the development of Super Apps which will provide banks with opportunities to offer new products and services. By teaming up with a strong digital banking platform provider, banks can respond to these challenges quickly and effectively, providing their customers with ground-breaking technology and innovative features.