Digital adoption and online spending are projected to grow in the Middle East, offering companies in the region several new opportunities to tap into, a McKinsey & Company study has shown.
The degree of digital adoption in the region has grown over the past six months, placing it on par with major economies in North America and Europe, according to the study, which focuses on the UAE, Saudi Arabia and Egypt.
The UAE, the Arab world's second-largest economy, has the highest degree of digitalisation, with 99 per cent of the population having access to the internet.
Digitalisation in Saudi Arabia, the Arab world's largest economy, is at 90 per cent while Egypt, which McKinsey described as having greatest potential to grow its digital capabilities, offers 71 per cent of its population access to the internet.
“Tailoring offerings by country and industry will be a crucial element in catering to digital consumers and capturing the full value from digital offerings,” McKinsey's analysts wrote in the report.
“Companies across industries also have an opportunity to reallocate a higher share of their advertising spending to digital channels to engage consumers more effectively.”
Enterprises and governments in the region are focusing on boosting their digital transformation due to the critical role it plays in the economy and society, as the world prepares for a future largely powered by technology.
The UAE and Saudi Arabia have unveiled several initiatives to promote the use of technology in daily activities and transactions.
Advantage, Middle East
With the Middle East having one of the highest rates of consumer digital engagement globally, companies can tap into the growing demand for online services, the study said.
“Companies in the region have an opportunity to create an advantage by developing cutting-edge features and functionality tailored to Middle East consumers that can be exported to other markets around the world,” McKinsey said.
However, trust in digital channels does not guarantee satisfaction, as companies need to focus on the factors consumers value the most.
“Companies need to prioritise user experience, product availability and information because these account for most user dissatisfaction,” the study said.
“The good news is that companies are in a position to improve their performance on each of these measures — and, by extension, consumer satisfaction.”
Apps lead the way
Consumers in the Middle East are “overwhelmingly” mobile-first, outpacing website use, the study found.
Saudi Arabia had the highest app engagement, with more than half of the consumers preferring this channel. App use in the UAE and Egypt was at 45 per cent and 40 per cent, respectively.
As a result, consumer engagement on apps in the three countries was 1.6 times higher than in developed markets in Europe and North America, where websites are still dominant, McKinsey said.
No other region in the study surpassed an app engagement of 40 per cent, with Asia-Pacific the closest at 38 per cent.
Consumers in Europe, North America and Latin America still prefer to use websites, the study found.
Greater online spend
The growth of digitalisation among consumers has led companies to improve their online platforms as they seek a bigger share of the increasingly competitive e-commerce space.
Digital consumers make up the majority of users in a number of industries, “reinforcing how digital channels have reshaped engagement and commerce”, McKinsey said.
Entertainment was the top category in the UAE, with 84 per cent of consumers preferring a fully digital experience. Banking, telecoms, travel and utilities rounded off the top five.
Meanwhile, grocery, health care and apparel lagged behind in all three countries regionally. However, this presents an opportunity, given the large number of untapped users in the region, the study suggested.
In the UAE, the underperformance of these three categories shows a pattern that might be influenced by Dubai’s strong shopping mall culture, McKinsey said, as “consumers might require a much better value proposition to switch to digital channels”.
Egypt, on the other hand, has lower digital adoption of financial services, both for banking and insurance, than its counterparts.
Travel was the leading category in all three countries, with at least 23 per cent of consumers saying they would spend 50 per cent or more in the coming years.
Overall, digital spending is projected to grow in the Middle East, with more than 50 per cent of consumers saying they are prepared to spend more while less than 10 per cent see themselves spending less, it said.
“It is no surprise that increased penetration and consumer adoption of digital channels have translated to more spending,” McKinsey said.
COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
Where to donate in the UAE
The Emirates Charity Portal
You can donate to several registered charities through a “donation catalogue”. The use of the donation is quite specific, such as buying a fan for a poor family in Niger for Dh130.
The General Authority of Islamic Affairs & Endowments
The site has an e-donation service accepting debit card, credit card or e-Dirham, an electronic payment tool developed by the Ministry of Finance and First Abu Dhabi Bank.
Al Noor Special Needs Centre
You can donate online or order Smiles n’ Stuff products handcrafted by Al Noor students. The centre publishes a wish list of extras needed, starting at Dh500.
Beit Al Khair Society
Beit Al Khair Society has the motto “From – and to – the UAE,” with donations going towards the neediest in the country. Its website has a list of physical donation sites, but people can also contribute money by SMS, bank transfer and through the hotline 800-22554.
Dar Al Ber Society
Dar Al Ber Society, which has charity projects in 39 countries, accept cash payments, money transfers or SMS donations. Its donation hotline is 800-79.
Dubai Cares
Dubai Cares provides several options for individuals and companies to donate, including online, through banks, at retail outlets, via phone and by purchasing Dubai Cares branded merchandise. It is currently running a campaign called Bookings 2030, which allows people to help change the future of six underprivileged children and young people.
Emirates Airline Foundation
Those who travel on Emirates have undoubtedly seen the little donation envelopes in the seat pockets. But the foundation also accepts donations online and in the form of Skywards Miles. Donated miles are used to sponsor travel for doctors, surgeons, engineers and other professionals volunteering on humanitarian missions around the world.
Emirates Red Crescent
On the Emirates Red Crescent website you can choose between 35 different purposes for your donation, such as providing food for fasters, supporting debtors and contributing to a refugee women fund. It also has a list of bank accounts for each donation type.
Gulf for Good
Gulf for Good raises funds for partner charity projects through challenges, like climbing Kilimanjaro and cycling through Thailand. This year’s projects are in partnership with Street Child Nepal, Larchfield Kids, the Foundation for African Empowerment and SOS Children's Villages. Since 2001, the organisation has raised more than $3.5 million (Dh12.8m) in support of over 50 children’s charities.
Noor Dubai Foundation
Sheikh Mohammed bin Rashid Al Maktoum launched the Noor Dubai Foundation a decade ago with the aim of eliminating all forms of preventable blindness globally. You can donate Dh50 to support mobile eye camps by texting the word “Noor” to 4565 (Etisalat) or 4849 (du).
Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
The National in Davos
We are bringing you the inside story from the World Economic Forum's Annual Meeting in Davos, a gathering of hundreds of world leaders, top executives and billionaires.
