No surprise: The digital transformation across the regions of Central Europe, Middle East and Africa (CEMEA) has been as sweeping, in some respects, as those seen elsewhere.
But drill down a bit beneath what seems to be a universal trend, and some unique nuances emerge – differences here and there that, despite the permanent digital shift, show that businesses and providers must address the individual characteristics of markets as they embrace digital payments and, specifically, digital wallets.
By and large, digital wallets and mobile wallets have been making inroads in the region – and for Visa, partnerships with Safaricom and its M-PESA service in East Africa, STC Pay in Saudi Arabia and others are bringing virtual credentials to a global stage. Andrew Torre, regional president for Visa in central and eastern Europe, the Middle East and Africa, told Karen Webster that the roughly 90 countries in the region represent a rich diversity of population and culture, as well as the use of physical stores and digital outlets, and a combination of those channels.
Russia, after all, is different from parts of Europe, and the Middle East is different from Africa. First things first, though: the commonalities. Torre noted that across those markets, only about 10 percent of personal consumption expenditure is actually done on cards these days.
Cash Still Dominant
“Cash is dominant in all but a few of those countries,” Torre noted. Speaking to Visa’s own efforts in the CEMEA region, the payments network has been working with a broad swath of merchants and other stakeholders to anticipate and foster the shift to contactless – both on the card side and the terminal side. (Torre noted that on the terminal side, it’s been important to support tokenization). Making sure there was support for account funding transactions (AFTs) and a range of fast fund flows helped various commerce channels pivot as the pandemic hit, impacting two billion consumers and 60 million sellers in the region alone.
“Almost within a two-week period, it was like a blanket came down on the region, where almost all consumers and merchants had some form of restrictions or were locked down,” said Torre. Consumers who had not tried cards before, or who were only using them sporadically, began trying something new for the first time. Sellers, across verticals as far-flung as pharmacies to hardware outlets to grocers, also had to shift.
Visa’s own study found that in Russia, 90 percent of sellers tried something different in response to the pandemic, and 50 percent moved to eCommerce for the first time.
And in a nod to universal changes, almost 90 percent of face-to-face transactions in CEMEA are contactless today, and push payments are gaining traction in P2P. Wallets and credentials have been creating significant distribution.
Part of the challenge of building eCommerce in the region boils down to trust – in a cash-based society, merchants trust the payment, and consumers can inspect the merchandise. In helping to smooth the transition between physical and electronic commerce, Torre said Visa has been working on a number of new introductions, such as with Egypt sellers using QR codes to pay distributors.
“There’s a real incentive for the seller to digitize the consumer part, because banks can start to see their receivables, and can give them more money to avail themselves of more inventory, digitizing the value chain,” explained Torre.
In the great shift to eCommerce, “it’s been easier for the larger platforms,” he noted. “Because consumers transact a few times and realize that if it’s defective, they’ll take it back. Merchants have also had to embrace a shift away from a cash-on-delivery model.” (Higher levels of authentication and one-time passcodes have helped grow those trust levels, said Torre.)
It took the company 30 years since its first CEMEA office opened to enable the first four million sellers with digital payments; it reached another 1.8 million in just two years. Digital wallets – and the mindset of meeting the consumer where and how they want to pay – will give rise to new user experiences such as super apps (beyond Asia, where Grab and Gojek are household names).
But getting onto platforms may be the first step – Torre noted that in Dubai, for example, smaller merchants have come on board and plugged into platforms that allow them to sell directly to consumers, but they also enjoy fulfillment services that allow them to scale. Loyalty programs have also been gaining ground in several countries, helped by “flexi” cards that enable consumers to design their own benefits.
As scale grows, instant payments will change the dynamics of the digital relationship between consumers and merchants – indeed, the ecosystem at large, where countries like Saudi Arabia have gone live with instant payment schemes.
“Think about tokenization, think about remittances in and out of countries,” said Torre. “We have a network of networks strategy, where we can basically take one API and push it to an account or a card anywhere. So that plugs nicely into a domestic RTP system.”
Looking ahead, in the CEMEA region, as economies reopen, there remains strong growth in eCommerce. “You’ll see a lot more virtual card issuance,” Torre predicted. “You’ll see a lot more tap-to-phone, really scaling and broadening reach to the sellers and consumers out there.”