Business Research & Analysis
The United Arab Emirates (UAE) experienced strong economic recovery in 2014, resulting in resumption of many construction projects which had been stopped during the economic downturn. This led to an influx of foreign workers in the country, which in turn drove demand for prepaid cards such as payroll cards and remittance payment cards. With continuing economic recovery, we expect gift cards to post strong growth over the next five years.
United Arab Emirates Prepaid Gift Cards are poised for strong growth in UAE due to strong consumer demand. Use of gift cards has become mainstream in UAE as consumers are increasingly using the card category to give presents. Gift card market continues to be primarily closed loop in the region, accounting for about over 80% share in 2016. Closed loop gift cards in the UAE are generally merchant branded gift cards from retailers such as Toys “R” Us, Nike, Swarovski, or leading hair salons or spas. Semi-closed loop prepaid cards are also popular as they allow cardholders to make purchases at any store in a specified mall or shopping center. Retailers prefer to introduce their own merchant branded gift cards to increase customer loyalty and brand engagement. However, consumers are increasingly preferring open loop gift cards in the UAE, due to the convenience and freedom of choice they offer. Furthermore, we expect millennials in the UAE to drive adoption of digital gift cards. This is likely to compel more gift card issuers to introduce mobile responsive gift card sites to enable consumers to make purchases using their mobile phones. In particular, digital gift card is going to be a key segment to watch out, driven by online shopping among other factors. Online shopping is quickly gaining popularity among consumers in the UAE,with high awareness amongshoppersregarding the convenience, speed, and security of their transactions. It has been reported that almost 65% of all online shoppers in the UAE are in the age group of 25 and 34 years. Cross-border shopping is showing promising growth in the UAE, Prepaid card market sizewith shoppers making online purchases from countries such as US, UK and India. Typically, online cross-border purchases require card payments and UAE users prefer payment methods which provide them with safety,convenience, and faster checkout. These factors are leading to increased adoption of digital gift cards for self-use. Corporates in the UAE are gradually increasing usage of gift cards to handover incentives. Notably, adoption of gift cards by SMEs is increasing in the country due to increased focus on employee retention and consumer loyalty. PayNXT360 expects usage of gift cards by corporates to steadily increase over the next five years. Many businesses already pay their employees through payroll cards and are familiar with the functions and benefits of the prepaid card category as a whole. We expect businesses to adopt prepaid cards for other functions as well, such as incentivizing customers and employees or utilizing prepaid cards for conducting business transactions or purchases.
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