A new report by market research firm IMARC has revealed that Saudi Arabia’s e-commerce industry is poised for rapid growth in the coming years, driven by emerging technologies.
IMARC forecasts that the e-commerce sector will reach a market valuation of $708.7 billion by 2033, nearly tripling its current size. The expected growth translates to a compound annual growth rate (CAGR) of 15% over eight years.
The report noted that the combination of artificial intelligence (AI) and digital payments is fueling a renaissance for Saudi Arabia’s e-commerce sector. Several e-commerce marketplaces in the Gulf nation have turned to AI to personalize shopping experiences for customers, while various payment systems continue to drive adoption, despite a preference for cash-on-delivery.
The report also highlights Saudi Arabia’s high smartphone and internet penetration levels as another factor fueling e-commerce growth. Currently, nearly 99% of the country has access to internet connectivity, with smartphone penetration rates ranked among the highest in the world.
The IMARC report identified a young, tech-savvy population as another significant factor driving the industry’s projected growth. With over half of the Saudi population under the age of 30, experts predict that online shopping trends will grow exponentially in the coming years, driven by Gen Z and Gen Alpha.
“The country has one of the youngest and most connected populations in the world, with nearly 100 percent Internet penetration, and it is increasingly shopping online in a retail market that still has plenty of room for growth,” said Trendyol Gulf CEO Mohamed El-Ansari.
According to the report, Saudis are increasingly relying on online platforms to shop for electronics, such as smartphones and laptops, more so than other categories. Despite holding a lion’s share of the market, the IMARC report predicts growth in online grocery shopping, fashion retail, and healthcare e-commerce in the coming years.
Experts have predicted that the rising e-commerce adoption among residents will contribute to Saudi Arabia’s long-term diversification plan beyond oil.
High fees threaten digitization push
While Saudi Arabia has made significant efforts to digitize its local payments landscape, a study revealed that high fees charged by service providers remain a major stumbling block. Apart from steep transfer fees, respondents to the study have highlighted security concerns that hinder the use of digital payments.
However, the government is moving forward, considering a $40 billion AI investment fund to diversify its oil-based economy. To complement its internal efforts, the Saudi government has turned to bilateral agreements with its allies to advance digitization efforts amid a frantic technology arms race in the Gulf.
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Emirates and flydubai sign MoUs with Dubai Finance to advance cashless payments
United Arab Emirates-based airlines Emirates and flydubai have signed a Memorandum of Understanding (MoU) with Dubai’s Department of Finance (DOF) to enhance the scope of cashless payments in the country.
According to a report, both airlines are targeting tourists and cash-reliant travelers as untapped markets for digital payment adoption. Last year, nearly 19 million foreigners visited Dubai and the UAE, with a significant portion relying on cash to make payments for goods and services.
Faced with the stark reality, Emirates and flydubai inked separate MoUs with the DOF in an event with key industry players in attendance. Emirates COO Adnan Kazim and flydubai’s CCO Hamad Obaidalla penned the cooperation document in the presence of senior Emirates and flydubai executives and representatives from the DOF.
Under the new partnership, both airlines will leverage the DOF’s deep connections to relevant government departments to offer digital payment services to travelers. Already, the airlines have unveiled initiatives to boost cashless transactions, with Emirates offering as many as 14 payment gateways for its customers.
Meanwhile, Emirates and flydubai have adopted Skywards, a loyalty program leaning on digital assets for earning and redeeming rewards. Currently, a significant portion of airline payments by customers is digital, but executives are eyeing opportunities for further growth across the entire tourism landscape.
“With our global network, Emirates will also promote Dubai’s cashless ecosystem internationally, encouraging millions of visitors each year to embrace secure digital solutions from the moment they book their tickets,” said Kazim. “We hope what we are building today will become the blueprint that other major cities will follow.”
The MoU will advance talent exchange among players in the local travel and tourism industry, with the DOF and airlines organizing joint workshops and training sessions. Furthermore, parties to the MoU plan to organize nationwide marketing campaigns to incentivize tourists to adopt digital payment options.
The MoU forms part of plans to advance the Dubai Cashless Strategy, an ambitious blueprint by authorities aimed at achieving 90% cashless transactions across the private and government sectors.
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Leading the UAE’s push for digitization
Dubai has emerged as the leading emirate in the UAE for digitization and the adoption of emerging technologies. Armed with a new regulator for digital assets and a rulebook for operations, Dubai has opened its doors to foreign service providers.
The city has given the green light for locals to invest in tokenized real estate, setting the pace for the rest of the Gulf nation. Meanwhile, Dubai has unveiled a blueprint for AI adoption, featuring a forward-thinking licensing approach designed to attract global firms and talent.
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Watch | UAE will lead the Middle East in blockchain adoption: Dr. Zayed Al Hemairy
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Source: https://coingeek.com/ai-digital-payments-drive-saudi-arabia-e-commerce-growth/
