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Leila Serhan, Senior Vice President and Group Country Manager for NALP at Visa

October 2022


5 - 6 Minutes

Destination Digital: Insight into the North Africa, Levant and Pakistan Region’s Growth Prospects

The North Africa, Levant and Pakistan (NALP) region is seeing rapid change, as eCommerce booms, consumers embrace contactless, and businesses establish themselves online. Here, Leila Serhan, Visa’s Senior Vice President and Group Country Manager for NALP, explains why the industry response must be to focus on the fundamentals to support the growth of the digital economy – while also taking advantage of new opportunities, including Big Tech.

Like much of the Central Europe, Middle East and Africa (CEMEA) region – and indeed the world – North Africa, Levant and Pakistan (NALP) are experiencing rapid change in their payments landscape, accelerated by consumer behaviors which are shifted markedly in the wake of the pandemic. Although the region faces diverse socio-political challenges, payment volumes have already exceeded their pre-COVID-19 levels, driven mostly by ecommerce transactions, while face-to-face transactions are slowly returning to their 2019 levels1.

The rise in ecommerce is part of the region’s “new normal”: across the wider CEMEA region, investments made in digital transformation have borne fruit, as markets have seen more sustainable growth in terms of the balance of consumers and retail merchants starting to make online transactions2. This has translated into more sustainable growth in the online share of card purchases, compared to merchant-led or consumer-led growth3. As well as online payments, consumers are embracing contactless, which jumped from 2 percent of transactions in 2019 to 34 percent in 2022. In Pakistan, for example, 40 percent of cards in circulation are contactless, a figure expected to reach 100 percent in the next two years4.

 The Rise of Big Tech

As seen globally, the influence of major tech platforms continues to grow in the NALP region, driven by company-specific factors such as brand, user experience, technical innovation, and business models. In CEMEA, Big Tech played a significant role during the pandemic with the dramatic rise in ecommerce and remains relevant – particularly the large digital platforms Amazon, Apple, Google, Facebook, marketplaces such as Shopify, and specialized payment platforms such as PayPal, Square and Stripe.

In comparison, NALP’s journey is at an earlier stage, in terms of how Big Tech players will develop in the region’s markets. They do have the potential to offer positive benefits, from enabling small businesses to sell online to the user experiences they can offer in terms of payments. They can also facilitate lending to SMBs, offer services from taxes and payroll to business account management, and support business functions as varied as operations and corporate cards.

However, as more spending consolidates on these platforms, the situation looks potentially more complicated. Here, Visa’s strategy is to continue leaning into its relationship with the major Big Tech players to ensure that customers can pay without interference or friction, while also ensuring that all players in the ecosystem continue to receive the benefits of a fair economy.

Outside of payments trends, there are other encouraging developments. Businesses are still establishing their online presence, but progress is rapid: across key CEMEA markets*, monthly downloads of business-related apps has roughly doubled from a pre-pandemic average of around 200,000 to over 400,000. In turn, the average number of daily active users of these apps more than tripled from January 2020 to September 20215. With this backdrop of ongoing digitization, the region is seeing rising investment, notably in fintechs. Specifically, investment into start-ups in North Africa grew 162 percent year-on-year to total $581 million, representing a 23 percent rise in the number of deals, which reached 180. In the Middle East region investment rose 132 percent to $1,997 million, with 410 deals representing a 5 percent rise6.

It is true that the global economy is losing pace after the post-pandemic recovery, and the NALP countries are not immune7. Inflationary pressures and rising interest rates around the world suggest a wider, short-lived recession is possible8. However, even as projections for next year point to slowing economies, there will be notable variations: in 2023, Egypt is projected to see 4.4 percent GDP growth, Iraq over 4.0 percent, Morocco around 3.1 percent, and Pakistan around 3.5 percent, above the 3.7 percent average for emerging markets9.

Now, the challenge is to ensure that the digital payments economy in NALP can grow sustainably, with the benefits that that brings to consumers and businesses alike. So, how is that achieved?

Three Fundamentals for Growth

Looking forward, Visa believes financial institutions in NALP should keep focusing on the fundamentals critical to growth, while also capturing mid-term opportunities. The key areas of focus for the region should be:

  • Ensuring data privacy and security, which, complemented by a better digital UX (user experience), are now one of the key reasons for choosing and switching banks. In fact, payment security and experience were the second most frequently given reason to switch banks, in a survey of consumers in 12 CEMEA markets – including the MENA countries (Middle East and North Africa)10. That signals that it is essential to ensure payments security and embrace technology, to build a better digital experience for consumers.
  • Accelerating SMB digitization and financial inclusion. While Visa continues to focus on this across NALP markets – and progress has been made – there is still a huge opportunity to displace cash, with just 11 percent of merchant locations already accepting card payments.
  • Acceleration of the penetration of digital payments, by making sure there is a high ratio of card activation in POS (point of sale) terminals. For context, the current share of active cards in NALP is around 58 percent, in Egypt around 39 percent, and in the CEMEA region around 64 percent. Meanwhile, the benchmark level seen in mature markets is around 85 percent . Furthermore, growing the share of active cards in emerging markets offers an opportunity to improve payment volumes by up to five times11.

Capturing New Opportunities

In tandem, while working to sustain growth, businesses must harness opportunities in the region – not least, around ecommerce. Visa believes the focus must be on accelerating ecommerce acceptance with marketplaces offering low-cost acceptance, in order to displace traditional Cash on Delivery as a more attractive payment option for consumers.

Fintech offers another growth area in NALP: here, Visa’s priorities are to partner with top mobile network operators (MNOs). In the B2B (business to business) field, Visa will grow the supply chain with target fast-moving consumer goods businesses and acquirers. Growing virtual cards is also a priority, and Visa will also scale fleet with oil and gas downstream distribution B2B travel. As for BNPL (buy now pay later), Visa will support Global Visa BNPL solutions for both traditional banks and fintech clients in NALP markets, ensuring that every Visa card is enabled with BNPL as a feature, and that it is also available as a payment option from every Visa seller.

Lastly, digitized SMBs (small to medium-sized businesses) offer a significant opportunity. An estimated 70 percent of new value created in the economy over the next decade will be based on digitally enabled platform business models, according to the World Economic Forum12. Conscious of that, Visa will support and promote SMBs’ digitization in CEMEA and in NALP, so that these businesses are best placed to participate in the digital shift and serve consumers.

A Dual Focus for the Future

The way money is used is changing, and at a rapid pace. While there is a clear shift towards new forms of payment, from BNPL to methods incorporating Big Tech, connectivity networks are in various stages of development and maturity across key payments markets. In response, Visa believes that the strategy for NALP must be to keep the focus on those three highlighted fundamentals – data privacy and security; card acceptance; penetration – while being ready to capture emerging opportunities, for the benefit of both consumers and businesses.

As a business, our purpose is to uplift everyone, everywhere by being the best way to pay and be paid, and that translates as a collective challenge. As we engage on getting to our digital destination, we need to innovate to include and grow as we drive more access for the communities we serve.

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All brand names, logos and/or trademarks are the property of their respective owners, are used for identification purposes only, and do not necessarily imply product endorsement or affiliation with Visa.

1VisaNet data (Domestic and International) Collection Only and Settlement
2Visa Business and Economic Insights, VisaNet
3Visa Business and Economic Insights, VisaNet (data for Q2-2019 to Q2-2022)
4Based on Visa’s Emergent Payment Landscape report
52022: CEMEA’s Year of Economic Recovery, Visa Business and Economic Insights Analysis of Apptopia data; * Saudi Arabia, South Africa and the UAE, business-related apps enable businesses to sell online and establish their digital presence https://navigate.visa.com/cemea/data-and-insights/2022-cemeas-year-of-economic-recovery/ 
6Analysis of data from Apptopia, Magnitt State of Startup Funding - 2022 Emerging Venture Markets Report, percentage change from 2020 to 2021: https://magnitt.com/research/state-of-startup-funding-2022-50796
7IHS Markit, Visa Business and Economics Insights, Oxford Economics
8World Bank, Oxford Economics
9Visa Business and Economic Insights, Haver Analytics, IMF, Oxford Economics
10Visa Consulting & Analytics customer survey across 12 large CEMEA markets (Q3/2021-Q1/2022)
11VisaNet data, benchmarking of card activity across 10 large CEMEA markets
12World Economic Forum article, ‘Shaping the Future of Digital Economy and New Value Creation’ https://www.weforum.org/platforms/shaping-the-future-of-digital-economy-and-new-value-creation

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