Mastercard Global Outlook 2021 Highlights Permanent Shift to Digital and Opportunity to Boost Financial Inclusion in the Middle East and Africa

The Mastercard Economics Institute has released Economy 2021 – a global outlook report providing detailed analysis of the economic impact of COVID-19 including permanent changes in digital consumer spending habits, growth of online banking, fintech disruption and opportunities to boost financial inclusion.

Among the key trends analysed is the sharp shift to digital platform use, driven by changed consumer behaviour, mobility restrictions and the necessity to generate business revenues beyond brick-and-mortar locations. The Mastercard Economics Institute, which was launched last year to analyse macroeconomic trends through the lens of the consumer, released the report to help governments and businesses of all sizes find a path forward following a gruelling and transformative 2020.

E-commerce is here to stay 

In terms of the e-commerce spending surge, the Mastercard Economics Institute estimates a permanent stickiness factor of 20-30% in overall retail spending, a key consideration as businesses contemplate scaling up their digital transformation efforts. This shift was also highlighted in a recent Mastercard e-commerce study, which revealed that 68% of South African consumers are shopping more online since the onset of the COVID-19 pandemic. This trend appears to be here to stay as 71% of respondents said they will continue to shop online post-COVID-19.

According to Economy 2021, as e-commerce rapidly becomes a way to pandemic-proof a business, adoption by older generations and added convenience and lower costs for consumers will contribute to the continued growth of digital demand in 2021.

Digitization is key to advancing financial inclusion 

Within the scope of accelerated digital transformation, the report also notes that continued digitalization in the Middle East and Africa (MEA) is key to advancing financial inclusion. This is especially relevant in regions such as East Africa, where IMF research found that even where financial inclusion through traditional banking services was declining, expanded access to digital tools and services increased financial inclusion. This trend is set to continue in 2021, especially in the more digitally advanced economies such as Ghana, Kenya and Uganda.

According to Economy 2021, the need to bring the population into the digital economy first through online banking solutions is paramount to delivering growth over generations to come. Fintech disruption in online banking is set to be a key driver for this. The Mastercard e-commerce study also noted more than three quarters (76%) of South African respondents learnt to bank online, reiterating the sentiment that it’s just not shopping, but all aspects of life that are moving online. Brick-and-mortar business creation is expected to decline further in 2021 in favour of online business creation and the adoption of initiatives that connect a merchant’s sales data with access to capital.

“We recognise the overwhelming pressure that small business owners are currently facing and are committed to supporting them through COVID-19 and beyond as they adapt to a new way of operating and evolved customer needs. This is why we have collaborated with Standard Bank, and Google to help small business owners move their operations online, accept digital payments and attract more customers.”

Suzanne Morel, Country Manager, Mastercard, South Africa

Another aspect of advancing financial inclusion highlighted by Economy 2021 is leveraging cutting-edge technologies to connect consumers to small businesses and micro-merchants. As digital innovation improves and internet access increases, digital payment solutions such as Contactless, Virtual Card Numbers and Quick Response codes offer more possibilities than ever before.

Mastercard has been working to bridge the financial inclusion gap through a broad range of efforts, including partnerships with mobile network operators, ongoing work on government disbursement solutions, wage digitization of private sector workers, solutions for gig workers, scaling efforts with telcos via their digital platforms and digital wallets.

The future is young

A key success factor for regional economies when it comes leveraging the growth of e-commerce and advancing financial inclusion is the young and fast-growing populations across MEA. Africa is home to 19 of the world’s 20 youngest countries. As millions of young consumers become mobile users for the first time, GSMA anticipates Sub-Saharan Africa to cross a 50% penetration rate of unique mobile subscribers by 2025.

In addition to the advantages that this demographic presents, Economy 2021 also sets out the associated risks such as growing youth unemployment. The report notes that the link between high unemployment, high youth unemployment and social unrest is likely to remain an issue in 2021, as is the potential fallout from climate change – which carries both short- and long-term risks.

“This growth of the digital economy represents a ‘coming of age’ for e-commerce, a turning point in bridging the digital divide. We are heading for a multi-speed global recovery that favors low-touch over high-touch. Small businesses and micro merchants are especially crucial to the region’s economies and by enabling them to accept digital payments, we can connect more people and communities to financial freedom and eventual prosperity.”

David Mann, Chief Economist, Asia and MEA, Mastercard

Mastercard has committed to powering small businesses through its payments technologies, network and insights, as part of a global $250 million pledge in products and services over the next five years.

Alongside e-commerce, the report anticipates automation around the Fourth Industrial Revolution (4IR), contactless interaction, local delivery services and ‘tele-everything’ to be other long-lasting trends. Among the trends expected to reverse as mobility restrictions are gradually lifted are eating out and leisure travel, a key GDP contributor in many MEA economies. Traditional tourism-focused economies, such as Mauritius, Kenya and Egypt, will benefit from international tourism’s eventual return.

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