Despite the richness that many of the Gulf countries posees, payment methods in the Arab world are still developing. In general Middle Eastern countries have typically been cash-based societies and the use of credit cards has been a relatively new thing in the region, that means that cash is the king. In addition, the Islamic law or the islamic finance forbid the interest-based payment methods because they are considered to be against the practices of Islam. In this article we will present some of the ways of payment in Middle East.
1. Collect On Delivery
Collect on delivery is probably the most popular payment method in Middle East. Clearly the lack of credit cards in the region collect on Delivery has gained popularity as an online payment method among locals. This payment method allows consumers to see the products they buy online before they actually pay for them. Due to this fact many online retailers has a return rate higher than any other payment methods.
With that said, it’s important to note that in countries like Saudi Arabia up to 75% of the online transactions that happen are Collect on delivery. Considering the Saudi Arabia is the wealthiest market in the region, successful regional e-commerce companies can’t afford to ignore cash on delivery. Current statistics say that Saudi Arabia has a population of about 36 million people also has no taxes for citizens and has a very large middle and upper class. So despite the drawbacks of cash on delivery and seeing the potential, many e-commerce retailers have decided to use cash on delivery because of all the opportunities in Saudi Arabia regardless of the drawbacks.
2. Debit Cards
Debit cards are the second most popular payment method in Middle East. Due the rules in Islam about credit and interest many banks and financial institutions do not offer credit cards. As a result of this debit cards have gained a lot of popularity. Debit cards allow the consumer to still make electronic purchases with a card with the Visa or MasterCard. For the consumer the drawbacks of debit cards include not being able to buy something above the amount of money you have currently in your bank account and also many of these debit cards don’t offer the same protection that a credit card would have for buying online. That said, for e-commerce retailers accepting debit cards in many ways is better than credit cards.
3. Credit cards
Despite the rules of Islam has with credit cards, many consumers in the region still own or use credit cards to make purchases online. There are several audiences that use credit cards in the Middle East. First and foremost there are many foreigners that live in the Middle East and many of them using credit cards. In addition to this not all Arabs are Muslims and many Muslim Arabs do not adhere to all the rules regarding interest. These Arabs will often use credit cards as a better alternative to other payment methods. The two most commonly accepted credit cards are VISA and MasterCard.
CashU is a Middle East region specific method of payment . Thousands of vendors in the Middle East that use CashU as a payment option get direct access to millions of young buyers across the the MENA countries. In essence CashU is basically a prepaid payment card. Consumers around the Middle East can go to different locations and use cash to top up their cards and then later they can use that same card to make purchases online. This card has become very popular in countries like Saudi Arabia among those who have limited access to credit cards and tend to think that buying things online is either unsafe or unreliable.
PayPal is stated to have a 5% share of the region’s e-commerce market. Their plan to roll out in Middle East is to create partnerships with local banks in the region to offer their services to more customers and bring consumers more flexibility with their online shopping. PayPal is a great option for many consumers in Middle East. That said for some consumers in the region it’s very hard to get a PayPal account. For example in Jordan to our knowledge there is only one bank that will allow you to set up a PayPal account through it. To add to this in many countries in the region banks aren’t trusted by many segments of society. To do this it’s hard to see PayPal totally dominating online payments in the region.