For boosting the Financial Inclusion within the Middle East and Africa territory Mastercard Global Outlook 2021 Highlights Permanent Shift to Digital and Opportunity

Press Release

  • Mastercard Economics Institute report forecasts that 20-30% of the COVID-related surge in E-commerce spending to be a permanent feature in share of overall retail spending
  • Trend away from cash is expected to be more persistent in economies such as the UAE; the e-commerce opportunity in East Africa is significant to bridge the digital divide
  • Young and digitally savvy populations across MEA are key to long-term growth outlook, but youth unemployment poses a threat to growth prospects.

Dubai, UAE; 13 January 2021:

The Mastercard Economics Institute has released Economy 2021 – a global outlook report providing comprehensive analysis of the monetary impact of COVID-19 together with enduring fluctuations in digital client spending habits, progress of online banking, FinTech disruption and prospects to bolster financial inclusion.

Among the crucial trends analysed is the sharp swing to digital platform utilization, powered by transformed client behaviour, flexibility margins and the requirement to produce business revenues beyond brick-and-mortar locations. The Mastercard Economics Institute, which was launched preceding year to analyse macroeconomic trends through the lens of the client, released the report to benefit governments and businesses of all sizes find a path forward following a gruelling and transformative 2020.

E-commerce is here to stay

In terms of the E-commerce expenditure outpouring, the Mastercard Economics Institute evaluates a permanent stickiness factor of 20-30% in overall retail spending, a core thought as businesses anticipate scaling up their digital conversion efforts. This shift was also highlighted in a recent Mastercard E-commerce learning, which revealed that 73% of clients in the Middle East and Africa (MEA) were spending more online than they did before the pandemic.

The enduring trend away from cash is anticipated to be more determined in economies such as the UAE, which already has a buoyant E-commerce organization and a young, digitally savvy population. That said, according to Economy 2021, as E-commerce swiftly becomes a way to pandemic-proof a business, embracing by older generations and added convenience and lower costs for clients will contribute to the sustained evolution of digital demand in 2021.

Digitization is key to advancing financial inclusion

Within the opportunity of accelerated digital transformation, the report also notes that sustained digitalization in MEA is key to advancing financial inclusion. This is especially relevant in regions such as East Africa, where IMF research found that even where financial inclusion through traditional banking services was declining, expanded access to digital tools and services increased financial inclusion. This trend is set to continue in 2021, especially in the more digitally advanced economies such as Ghana, Kenya and Uganda.

According to Economy 2021, the need to bring the population into the digital economy first through online banking solutions is paramount to delivering growth over generations to come. Fintech disruption in online banking is set to be a key driver for this, especially in East African economies. Brick-and-mortar business creation is expected to decline further in 2021 in favour of online business creation and the adoption of initiatives that connect a merchant’s sales data with access to capital.

Another aspect of advancing financial inclusion highlighted by Economy 2021 is leveraging cutting-edge technologies to connect consumers to small businesses and micro-merchants. As digital innovation improves and internet access increases, digital payment solutions such as Contactless, Virtual Card Numbers and Quick Response codes offer more possibilities than ever before.

Mastercard has been working to bridge the financial inclusion gap through a broad range of efforts, including partnerships with mobile network operators, ongoing work on government disbursement solutions, wage digitization of private sector workers, solutions for gig workers, scaling efforts with telcos via their digital platforms and digital wallets.

The future is young

A key success factor for regional economies when it comes leveraging the growth of e-commerce and advancing financial inclusion is the young and fast-growing populations across MEA. Africa is home to 19 of the world’s 20 youngest countries, and the Middle East & North Africa (MENA) region has the largest youth population in the world, with more than half of residents under the age of 25. As millions of young consumers become mobile users for the first time, GSMA anticipates Sub-Saharan Africa to cross a 50% penetration rate of unique mobile subscribers by 2025.

In addition to the advantages that this demographic presents, Economy 2021 also sets out the associated risks such as growing youth unemployment. The report notes that the link between high unemployment, high youth unemployment and social unrest is likely to remain an issue in 2021, as is the potential fallout from climate change – which carries both short- and long-term risks.

“This growth of the digital economy represents a ‘coming of age’ for e-commerce, a turning point in bridging the digital divide. We are heading for a multi-speed global recovery that favors low-touch over high-touch,” said David Mann, Chief Economist, Asia and MEA, Mastercard. “Small businesses and micro merchants are especially crucial to the region’s economies and by enabling them to accept digital payments, we can connect more people and communities to financial freedom and eventual prosperity.”

Mastercard has committed to powering small businesses through its payment’s technologies, network and insights, as part of a global $250 million pledge in products and services over the next five years.

Alongside e-commerce, the report anticipates automation around the Fourth Industrial Revolution (4IR), contactless interaction, local delivery services and ‘tele-everything’ to be other long-lasting trends. Among the trends expected to reverse as mobility restrictions are gradually lifted are eating out and leisure travel, a key GDP contributor in many MEA economies. Traditional tourism-focused economies, such as Kenya and Egypt, will benefit from international tourism’s eventual return.

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