Mastercard believes that 20-30% of the COVID-related shift to e-commerce spending will become a permanent feature going forward with even more opportunities to boost financial inclusion in the Middle East and Africa (MEA).
The Mastercard Economics Institute's new Economy 2021 report shows a sharp global shift toward digital platforms, driven by changed consumer behavior, mobility restrictions and the necessity to generate business revenues beyond brick-and-mortar locations.
The trend away from cash is expected to be more persistent in Middle Eastern economies such as the UAE, but the e-commerce opportunity in East Africa is significant to bridge the digital divide.
This shift was also highlighted in a 2020 Mastercard e-commerce study, which revealed that 73% of consumers in the Middle East and Africa (MEA) were shopping more online than they did before the pandemic.
"The digital divide in East Africa remains a challenge. The e-commerce opportunity in Africa is, therefore, significant. The need to bring the population into the digital economy first through online banking solutions is paramount to delivering growth over generations to come. The opportunity for fintech disruption in Africa is high," the report reads.
Alongside e-commerce, the report anticipates automation around the fourth industrial revolution, contactless interaction, local delivery services and "tele-everything" to be other long-lasting trends.
Advancing financial inclusion
The report notes that continued digitalization in MEA is key to advancing financial inclusion in the region.
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.
Fintech disruption in online banking is set to be a key driver for financial inclusion, especially in East African economies.
Brick-and-mortar business creation is expected to decline further in 2021 in favor of online businesses and the adoption of initiatives that connect a merchant's sales data with access to capital.
"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 for Asia and MEA at 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."
As digital innovation improves and Internet access increases, digital payment solutions such as contactless payments, virtual card numbers and QR codes offer more possibilities than ever before, the Mastercard Economics Institute said.
A young future
A key success factor for 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 and North Africa (MENA) region has the largest youth population in the world, with more than half of residents under the age of 25.
Millions of young consumers will become mobile users for the first time and the GSMA expects sub-Saharan Africa to cross a 50% penetration rate of unique mobile subscribers by 2025.
Young and digitally savvy populations across MEA are key to long-term growth outlook, but youth unemployment poses a threat to growth prospects, the report added.
— The Staff, Connecting Africa