Cross-border payment adoption helps UAE SMEs earn more than pre-pandemic era

Around 77 per cent plan to tap into more international markets moving forward, Mastercard report says

Buying products from overseas was a key reason consumers are increasingly using cross-border payment solutions, Mastercard's study showed. Alamy

Small and medium enterprises in the UAE are earning more money compared with before the Covid-19 pandemic era, driven by the adoption of digital techniques and international sales opportunities, a new study from MasterCard showed.

Up to 44 per cent of SMEs in the Emirates said business has been better, with 66 per cent posting growth in online sales and 77 per cent planning to tap into more international markets moving forward, MasterCard said in its annual Borderless Payments Report.

Cross-border payments were a critical component in this rise in activity, with almost two thirds (64 per cent) saying it enabled their business to grow and 53 per cent claiming they are now leveraging this platform more than in the pre-pandemic era.

“With international travel halted and government boundaries sealed tight, cross-border payments helped keep millions of people and businesses afloat,” Stephen Grainger, executive vice president for cross-border services at MasterCard, wrote in the report.

“With resources around the world stretched dangerously thin, people were able to send financial relief to loved ones, and companies were able to keep international operations running.

“The unprecedented disruption introduced by the pandemic has seen many SMEs looking keenly towards prospects in new markets. With small businesses in the UAE and across the world growing their international customer and supplier networks at pace, especially online, it’s crucial that financial institutions have the right cross-border solutions in place to support them.”

Businesses and consumers across the region and the world continue to shift towards online economic activity as technological advancements have provided safer and more convenient ways of fulfilling transactions.

The UAE's e-commerce sector is forecast to grow 60 per cent to more than $8 billion by 2025, from 2021, according to a recent report by Euromonitor International.

Globally, the market is expected to hit $55.6 trillion by 2027 at a compound annual growth rate of about 27.4 per cent, from an estimated $13tn in 2021, data from US-based research firm Imarc Group showed.

The growth in earnings of UAE SMEs is almost at par with the global average of 46 per cent, up from 39 per cent in the prior year, with two thirds saying they have recovered to at least pre-pandemic levels, the study added.

Individual earnings and remittances

On the consumer level, 40 per cent of workers globally said they made more money in 2021 compared with before the outbreak of the pandemic, up from 28 per cent in the previous year, due to the reopening of economies, return to work and labour shortages that raised wages in many markets, MasterCard said.

Adding to this was the rise in the gig economy, which includes side jobs and freelance work; about 6 in 10 respondents (57 per cent) said they work outside their main jobs, the study found.

This has enabled people to remit more money.

“By far the biggest reason consumers send cross-border payments is to support family and friends living in a different country,” MasterCard said.

About 45 per cent of consumers said their family members in other countries are struggling and in need of financial support because of the pandemic, the study found.

“Consumers’ desire and means to help loved ones in other countries fuelled a rise in the number of cross-border payments sent and received. Half of the survey respondents say they sent larger sums of money overall during the pandemic,” the study said.

Another key factor driving cross-border payments is buying products from overseas, the report found.

Overall, the steady increase in cross-border payment was because consumers are increasingly confident and comfortable using digital solutions, it added.

MasterCard's annual study surveyed more than 7,500 consumers and over 3,000 SME owners across 15 global markets between December 2021 and January 2022.