The adoption of digital wallets in the Middle East and Africa has been growing steadily over the last number of years and this has been accelerated because of the COVID-19 pandemic. With merchants now prioritising online and in-store payments, there is now an increase in acceptance of new payment tools such as digital wallets. As smartphones become more widely available, consumers throughout the Middle East and Africa are embracing digital payments and are subsequently using digital wallets. For example, in Kenya smartphone penetration, which is now at 60%, will rise to over 80% by 2025. This has opened the door for telcos, such as Safaricom in Kenya, to create Super Apps that can offer services beyond money management to include everyday services such as restaurant bookings, food delivery and taxi hailing. Some banks have recognised this threat from non-traditional rivals and have used digital wallets as the catalyst to acquire new customers.
In-country regulatory initiatives are increasing competition for financial services with financial and telco firms launching digital wallets as a first step to gaining banking licenses. This has resulted in banks facing increased competition from non-traditional rivals. In western Africa for example, both Orange and MTN have been issued banking licences and in Saudi Arabia 16 licences have been issued to fintech firms for payments services. This highlights the need for retail banks to adopt broader digital banking platforms that support customer-to-bank interactions for direct and emerging channels such as digital wallets and offer customers new products and services that go beyond banking through, for example, Super Apps. Digital wallets have become an entry point for consumers to engage with financial services, and they create new opportunities to target the underserved banking population. This can lead to the creation of a marketplace through the development of Super Apps which will provide banks with opportunities to offer new products and services. By teaming up with a strong digital banking platform provider, banks can respond to these challenges quickly and effectively, providing their customers with ground-breaking technology and innovative features.