By A Staff Reporter
Millennials in the UAE and Saudi Arabia tend to be higher spenders than their global peers and are the fastest growing segment within the region, said a study.
The Millennials group is also driving the surge in eCommerce spending in the GCC, which increased by 25 percent in 2015, payments technology company Visa said in a study published today on the spending habits and payments preferences of Millennials in the United Arab Emirates (UAE) and Kingdom of Saudi Arabia (KSA), revealing a wealth of untapped opportunities for banks, issuers and merchants.
Over 1,000 Millennials (18-34 years old) and Non-Millennials (34+ years old) across KSA and the UAE were interviewed for the study.
Technology is deeply embedded in Millennials’ everyday lives, with the study showing they are actively online between 4.5 and 6.5 hours a day, and have fully embraced online payments. eCommerce is by far the most popular activity, with 76 percent of UAE and 58 percent of KSA millennials shopping online, while approximately half currently pay their bills online.
Interestingly, Millennials in the UAE and KSA use social media to influence their purchasing decisions. The research highlighted the importance of social media and peer reviews, and their influence on spending and purchasing behavior. Although social media is primarily used for entertainment purposes, Millennials in both countries do use social sites to actively look for product information, seek out peer reviews and make purchases.
The rise of online payments has seen a parallel move away from cash towards cards. In the UAE, credit cards are the preferred way to pay for all major online categories. In KSA, due to their popularity among younger millennials (18-24-year-olds), prepaid cards are the preferred means of payment for electronics (40 percent), travel for leisure (44 percent), and travel for business (53 percent). Cash on delivery, however, remains the preferred payment method for clothing (33 percent) and takeaway food (40 percent) in the Kingdom, suggesting untapped opportunities in these sectors for card issuers and retailers.
Millennials will continue to drive the trend towards increased card usage over the medium-term, and Visa predicts that by 2018 credit cards will account for 65 percent of non-cash retail payment volumes by all UAE residents, while in KSA debit cards will account for more than 70 percent.
The decision to choose one payment proposition over another is heavily influenced by the rewards and benefits associated with specific products, with KSA Millennials particularly valuing travel-related benefits, while travel benefits, discounts and cashback are motivating factors in the UAE.
However, the study identifies a significant satisfaction gap between what Millennials expect from their payment cards versus what they currently get. In particular, UAE Millennials are dissatisfied with their travel miles and cash back offerings, while KSA Millennials want more travel miles in addition to better voucher options.
Commenting on the findings, Kriti Makker, of Visa Performance Solutions who undertook the study on behalf of Visa, said: “With Millennials in the UAE and KSA having spending power two and five times that of their Middle East peers, there is significant potential for banks, issuers and merchants with the right business models.
Visa’s research shows Millennials in these countries to be highly sophisticated consumers who have embedded technology into their lives, which has important commercial implications for areas like the development of loyalty programs and the targeting of advertisements.”
The study identified a series of specific opportunities for banks, issuers and merchants to capture a greater share of the Millennial market in the UAE and KSA.
With approximately 80 percent of millennials in both the UAE and KSA paying their electricity and water bills online, Visa’s research suggests this is a natural area for development, for instance by extending reward programs and co-branded partnerships.
Digital banking is another clear opportunity, according to Visa’s research. While more than 50 percent of Millennials in the UAE and KSA prefer to bank digitally, they are frustrated by the user experience. Key service gaps in the UAE are the inability to monitor card transactions, payment alerts and a lack of personalization, while KSA Millennials are also unhappy with personalization options, as well as the overall user experience and a lack of real-time updates.
To adapt to the changing preferences of Millennials, banks, issuers and merchants should adopt a consumer-centric business model focused on personalized services; an interactive and engaging digital community centered around the brand; seamless integration of the customer experience across various touch points; and accurately targeted communication with customers.
Makker added: “Significant potential exists to fill the gap between what new-generation consumers want and what they receive. Those in the digital payments and banking industries need to increase their value propositions and create a seamless and integrated experience in order to satisfy the end consumer. A customer-centric and multi-channel approach is the only way forward to address an evolving tech-savvy market.”