For many years, UAE consumers seldom used cards over cash. But higher internet penetration rates and the proliferation of mobile devices have encouraged a move into electronic payments.

Payments solutions company MasterCard saw a growth of 20.7 per cent in purchase transactions in the Asia-Pacific, the Middle East and Africa, recording around 9,932 million transactions in 2014.

“Among consumers, the benefits of electronic payments are becoming more widely recognised. The increasing cost of cash, which some studies estimate to be up to 1.5 per cent of GDP, has encouraged governments across the Middle East to modernise their payment landscapes and move towards a world beyond cash,” Eyad

Al Kourdi, country manager, UAE, MasterCard told Gulf Business.

“Governments have also recognised that the benefits of electronic payments far outweigh those of cash in terms of speed, convenience, security and transparency. In addition to this, it has become clear that cash is inefficient and is tied to corruption, illegal activity and potential waste.”

As a starting point, the government is looking to encourage smart payments mainly through retail spending.

At the Cards and Payments Middle East 2015 event, Dubai’s Department of Economic Development launched the Dubai Plus card, a multi service privilege card programme for government and semi-government employees. The card will allow users to make purchases and ensure they are eligible for loyalty points on services and purchases.

In addition, electronic payments have also found favour in the UAE through the rapidly growing e-commerce industry, according to industry experts.

The UAE’s e-commerce market was valued at $2.3bn in 2014, found a recent report by Payfort. By 2020, the company estimates that e-commerce markets of both the Emirates and Saudi Arabia will have a combined value of $10bn.

Such massive growth in e-commerce has had a significant impact on consumers’ readiness to pay online, said MasterCard’s Al Kourdi.

“Consumers are looking for convenience, speed, value for money and safety of their transactions while shopping online. They are becoming more aware of the safety and security features and are getting familiar with the benefits of being able to shop on the go.”

UAE consumers have also shown an increasing affinity with mobile shopping, thanks to increasing smartphone and tablet penetration rates.

According to online retailer Souq.com, about 40 to 50 per cent of their sales are done through mobile devices. This growth has also led to a demand in tailored payment solutions.

California-based payment technology provider Verifone said it had seen a rise in demand for mobile payment solutions in the region.

“Together with our partner Marshal, we are developing our mobile point of sale solutions for retailers. Our solution is enabling them to do in store sales and accept contactless payments as well. The solution is also integrated to the retailer’s back office, which helps them to control their inventories and get multiple reports,” said Ozgur Ozvardar, general manager, MENA Verifone.

Increased confidence in digital payments has also led to the launch of advanced solutions such as MasterPass, the digital wallet programme of MasterCard in the UAE. Touted by the company as a safe medium to pay electronically, MasterPass has inked partnerships with local retailers such as Novo cinemas, Aido.com, du, Virgin Tickets and Ski Dubai.

According to Ozvardar, that there is now also an impending demand for unattended payment terminals in the UAE

“We now have over 400 self-service kiosks in the UAE including at the Burj Khalifa and we expect this to grow exponentially in the coming years as retailers realise the cost effective and revenue growing opportunities for unattended kiosks and service points.”

However, while the e-payments industry maybe gaining more traction among consumers it is also facing a growing security threat.

“The payments industry faces a growing variety of security challenges as the transaction environment grows in size and complexity and we face these challenges by evolving continuously,” insisted Al Kourdi.

“Online is quickly becoming the norm for more shoppers in the UAE due to the high level of awareness among consumers about the convenience, speed and safety of their transactions. This, in tandem with the development of better technology to secure payments, is playing an important role in easing concerns around security.”

Security also continues to be paramount for maintaining consumer trust in payment businesses.

“Without it (security), consumers don’t trust your product and they stop using it and move to another card, another channel or simply stick to cash,” said Ozvardar.

“Our job here is to make sure that cardholders feel comfortable in using their cards - both online and in stores. For example, our unattended, self-service kiosks are fully tamper-proof. They have been designed to work in extreme conditions of heat and cold, for example, and if tampered with will lock down to avoid the potential for fraud.”

The UAE has transitioned from being cautious to confident in carrying out smart payments but consumer trust is still essential for the market's continued momentum