The rise of cashless payments is driven by the convenience and security they offer to both retailers and consumers compared to traditional methods. Government support plays a crucial role in this shift: India's demonetization led to a surge in cashless transactions, while the UAE government is promoting a nationwide move to cashless payments through extensive e-government initiatives. With a goal to achieve a cashless economy by 2020, the UAE is pursuing an ambitious plan, given that 75% of the country's transactions are currently cash-based. However, the groundwork is being laid to turn this vision into reality.

While the government plays a crucial role in promoting digital payment adoption, online payment service providers must also innovate to make cashless transactions a seamless part of consumers' lives. The payments industry needs to actively guide consumers through this transition, rather than just adapting to changing habits. By collaborating closely with online retailers, payment providers can offer a competitive edge. For instance, the distinction between online cashless transactions and real-world payments using online channels is increasingly fading.

‍

Cashless payments are no longer just an e-commerce consideration, and bricks and mortar operations are now also exploring how to bring the convenience of cashless payments to their customers; on the other side of the coin, online payment service providers are working with online retailers to explore innovative ways of reducing the burden of cash-on-delivery payments for e-commerce transactions (currently accounting for upwards of 75 percent of transactions). Piece by piece, traditional consumer reliance on cash is being replaced with an expectation of innovation and convenience at all points of sale, not just purchasing on websites.

There are few other places in the world where the populace is so demographically ready to adopt cashless payments, an activity which, whether online or at a physical point of sale, are primarily carried out on smartphones. At Telr, we see more than three quarters of transactions conducted on mobiles – and the UAE has a world-beating level of smartphone penetration, running at 78 percent according to research from McKinsey.

Hand-in-hand with this is the use of social media, and here again the UAE leads with a staggering 8.7m Facebook users. Taken together, these demographic indicators – the country’s youthful, urban, tech-friendly population, the abundance of smartphones, and the depth of social media use – combined with the UAE’s modern infrastructure and government push towards a digital economy, make for an environment that is ripe for cashless transactions to rapidly become the default.

This would never happen if there weren’t clear benefits for all parties. For the individual, being able to pay online with a card, or offline with a smartphone, is simple and efficient. As we’ve seen, digital payment channels bring a wide array of payment options to the consumer, who benefit directly from this degree of choice. For businesses, conducting transactions online provides real-time transparency and removes the burden of operating with cash.

At the end of the day, it is a self-perpetuating positive cycle – cashless transactions make shopping simpler, and consumers become more spontaneous as their comfort with these payment channels increase. This will prompt greater interest in cashless payment methods by retailers, and the online payment service providers will continue to innovate to meet their customers’ demand. The UAE’s 2020 goal looks more achievable by the day.

‍

Have questions? We are here to help! contact us or call us at +966 56 06 24 773