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  1. Analysis
February 26, 2009

Middle Eastern promise for payments

The United Arab Emirates is defined by a large number of high net worth expatriate workers Because of this, payment card offerings are notable for their generous array of rewards and luxury services

By Verdict Staff

The United Arab Emirates is defined by a large number of high net worth expatriate workers. Because of this, payment card offerings are notable for their generous array of rewards and luxury services. However, the global economic slump is expected to hit growth this year, as Victoria Conroy reports.


The United Arab Emirates (UAE) was established in 1971 and is composed of seven emirates: Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al-Qiwain, Ras Al-Khaima and Fujeirah. Although the UAE is considered an oil-rich gulf state, it is actually Abu Dhabi that has the lion’s share of oil resources. The emirate of Dubai has used the wealth generated by oil to build an economy dependant on tourism and construction, fed by an inflow of expatriate workers who have flocked to the UAE over the last 15 years.

Economic background

UAE. Number of payment cardsIn July 2008 the population of the UAE was estimated to be 4.6 million, but the local population of 1.4 million is dwarfed by the 3.2 million expatriate migrant workers, attracted to the region by high tax-free salaries and sumptuous shopping and leisure facilities where migrant workers can go to flash their plastic in luxury retailers and in restaurants. Not only are locals outnumbered by expats, but men far outnumber women, constituting 68.7 percent of the population in 2007. According to the UAE central bank, around 74 percent of the population in the 15-64 age group is non-national.

These demographic quirks have had a major impact on the range of banking and payment services on offer in the UAE. Because of the high per capita GDP (estimated to be $43,000 in 2008), local banks have had to get up to speed quickly on the features and benefits that expat cardholders have come to expect as standard on their payment cards, with a rich array of lifestyle benefits and services attached. Also, because of the UAE’s reputation as a tourist destination, international travel to and from the UAE is frequent, resulting in many credit cards offering including travel benefits as a standard feature.

Although cash is the dominant payment method, representing 80 percent of personal consumption expenditure, the penetration rate for payment cards is 1.8 cards per person. As of December 2008, there were around 3.6 million credit cards in issue, compared to 2 million in 2005, while debit cards in issue have grown from 1.5 million in 2005 to nearly 4.5 million by the end of 2008, helped by the migration from proprietary ATM cards to internationally scheme-branded debit cards.

However, growth in debit card numbers has not yet turned into higher spending per card.

Vimal Kumar, head of cards at Mashreq Bank, told CI: “The UAE market has one of the lowest usage rates of debit cards at point of sale in the gulf region. As of the end of 2008 annual usage at the point of sale was $2,250 per card which is approximately 9 percent of the total volume on debit cards.”

Nevertheless, such rapid growth in card numbers brings with it a unique set of challenges, particularly in the credit card sector.

“The payment card industry is growing at a rampant pace,” Kumar told CI. “In the last decade the card numbers and billed volumes have grown by a compound annual growth rate [CAGR] of 40 percent, and this growth has been driven by a rapidly expanding customer base and high inflation. The demographics, behaviours, connectivity infrastructure and fierce and mature competitors are all augurs of a maturing and more profitable card business.

“The UAE credit card market is estimated to be one of the most profitable in the Middle East and North Africa region, driven largely by high levels of spend and roll-over balances. The estimated profit pool at the end of 2008 was in the region of $350 million,” Kumar added.

However, even this rich gulf state is not immune to the global economic slowdown. Property prices have tumbled in recent months, unemployment is rising and many expats are heading home, with much slower economic growth predicted for the next two years. GDP growth is expected to fall to low single-digit levels in 2009 and 2010, as the economic boom off the back of high oil prices winds down.

Card growth levels are expected to slow down considerably over the next two years, with borrowing levels impacted by the economic environment and job losses.

As a result, credit card issuers in the UAE are now bracing themselves for credit losses to escalate in the coming months.

Kumar told CI: “Given the scale of the meltdown in the financial and real estate markets it is natural to expect an escalation in the level of impaired assets in the cards business.

“The UAE has been witnessing rampant job losses, especially in the real estate, construction and financial services sectors and we believe this is just the beginning of a long painful journey for organisations to restructure their operating models to survive this difficult environment.

“Therefore we do anticipate higher level of losses in our cards business and have been proactively preparing to anticipate and deal with it.”

Mashreq Bank has responded by regularly reviewing customer limits and exposure to over-leveraging.

“In recent months we have recognised the risks associated with recession and job losses and have tightened our belts by correcting exposure on cardholders in order to make sure that they do not over extend their borrowing and manage their finances sensibly,” Kumar said.

“It is also about how we work the margins in making certain that returns on equity and return on capital are not compromised.”

The importance of differentiation

In such a nascent cards market with a seeming abundance of wealth, both local and foreign card issuers have understandably become ferociously competitive in terms of the features and benefits they offer on credit cards, and are also becoming increasingly creative and innovative when it comes to marketing and promotional campaigns.

It is not uncommon in the UAE for card issuers to run competitions giving cardholders the chance to become instant millionaires through prize draws, while those issuers with travel-orientated propositions regularly give away air miles in addition to the air miles accumulated through everyday credit card spending.

Given that credit cards are typically held by high net worth individuals, features such as round-the-clock concierge services, complimentary access to first-class airport lounges and dedicated customer service relationship managers are also offered as standard benefits.

But at the same time, issuers are also fine-tuning their pricing structures and value propositions to appeal to targeted consumer segments. Segmentation among such a wealthy cardholder base is a crucial element of acquisition and retention strategies for UAE issuers, and what might work in developed Western markets won’t cut it in the UAE. It is often the case that standard credit cards in the UAE have many of the features and benefits more commonly found on gold or even platinum cards in Europe and the US.

When it comes to gold, silver, platinum and premium cards on offer in the UAE, issuers there have definitely raised the bar in terms of what they are prepared to give to cardholders. Such cards are often only available to ultra high net worth individuals and for annual fees running into hundreds of UAE dirhams per annum. However, in many cases issuers will waive annual fees provided the customer signs up for some additional financial service.

Loyalty programmes and co-branding are also another way of standing out from the crowd, and several UAE banks have partnered with major retailers or airlines to enhance their card offerings and distribution potential.

But as UAE cardholders are now spoilt for choice, issuers are looking to expand the range of partners outside traditional industry sectors, and several issuers have now teamed up with partners in the telecom and health sector of late.

The ubiquity of loyalty programmes has forced issuers to rethink the way they reward cardholders too. A growing trend of instantly redeemable rewards, such as cashback at the point of sale, is becoming noticeable, with cardholders increasingly wanting instant gratification instead of having to wait to accumulate rewards such as air miles to be used at a later date.

Mashreq Bank’s Kumar told CI: “Aside from the airline loyalty programmes, most loyalty programmes in the UAE are not transparent and cardholders do not fully understand the nuances of the rewards programmes whether it is related to ‘earning or burning’.

“Many key banks offer cashback in the UAE but cardholders realise very late that most of these schemes are tiered and tied to certain minimum amounts of spend before it starts to accrue. We have been witnessing a shift towards cashback loyalty on credit cards, but these are mired in rules and regulations and are not very clearly understood by the cardholder.

“To take advantage of shifting customer preference, we recently launched the Etisalat Mashreq credit card that includes a very powerful loyalty programme, giving customers instant cashback in terms of free air time with no strings attached. There are no minimum spend levels to be attained to get cashback, no black-out periods and no delays in redemption.”

Kumar told CI that Mashreq is also planning on rolling out a new integrated loyalty programme in the near future that will reward customer behaviour across several different product lines – not just their card account.

“This new customer loyalty programme will create a new loyalty currency and will replace all stand-alone loyalty programmes that are in existence at this point in time. Our intention is to first create a good distance between us and our competitors and continue to invest in this platform before we start seeing tangible return on investment,” Kumar added.

The rise of Sharia-compliant credit cards

One area of segmentation that has really taken off over the last couple of years is the Sharia-compliant credit card. These products must adhere to the tenets of Islam and charge no interest.

Sharia principles dictate that Muslims are forbidden to participate in any financial practices or do business with any money-lending entity that charges interest, known as riba; invokes gharar, or uncertainty (most commonly in the form of variable interest rates); or uses funds for maysir, or gambling. The principal means for financial institutions to make money is through a fee-based process, where variable fees are charged to guarantee purchase payments to merchants or as a fee for the provision of a credit facility.

Issuers have taken the opportunity to roll out classic, gold, platinum and premium versions of Sharia-compliant cards, and in 2007 the market saw the launch of the first Visa Infinite Sharia-compliant credit card. Other offerings include the ‘Makkah’ card from First Gulf Bank, the region’s first unsecured Sharia-compliant card, which enables the cardholder to earn ‘points’ towards a trip to Mecca, a religious obligation that all Muslims are required to undertake.

Kumar told CI: “We are noticing changes in customer preference towards Sharia-compliant card products and have recently set up an Islamic banking division called Al Badr which will enable us to give greater attention towards introducing new Sharia-compliant products in this market.”

EMV, contactless and prepaid

The first EMV-enabled card in the UAE was launched in 2004 by Abu Dhabi Commercial Bank, an unembossed MasterCard debit product.

The recent central bank request for all UAE banks to migrate towards EMV-enabled cards is being driven by the need to cut down on fraud, but some banks are utilising that opportunity and chip technology to roll out more sophisticated loyalty programmes.

However, most magnetic stripe cards in the UAE already allow the accumulation and redemption of loyalty points and until now banks have not seen a clear compelling reason to fully migrate to EMV, saying that EMV cards will only really take off when customers see value in them.

Contactless is also making its mark in the emirates – in 2006, Fransabank launched the first MasterCard product with PayPass functionality in the region. And issuers have wasted no time in implementing online authorisation services Verified By Visa and MasterCard SecureCode.

When it comes to prepaid, initiatives such as payroll and transit cards have been launched over the last few years but the prepaid market is yet to take off.

Kumar explained: “The UAE is a very nascent market for prepaid cards and the legal and regulatory environment is not well defined yet. However, there is potential for growth in prepaid card penetration in the unskilled workers segment where salaries are paid out in cash because they do not hold a bank account primarily because they are considered uneconomical by most banks.

“The growth of prepaid cards in the UAE in the coming years will be driven by the transport sector, especially the metro rail and surface transport.

“As a bank we are evaluating prepaid salary cards and some exploratory work is already in progress. We also believe the metro rail and surface transport opportunity will revolutionise the prepaid card and we are taking steps to capitalise the opportunity as and when it presents itself.

“We believe that for a prepaid card to work it is important to have a clear-cut business case that addresses the problem we want to solve. The question left unanswered really is that given the current economic environment, will banks have spare capital to invest in developing prepaid card programmes?”

Bank and ATM operations

As of the end of 2008, there were 24 national banks operating in the country, with 611 bank branches in total across the emirates. The number of foreign banks operating in the UAE reached 82 in 2008, compared to 25 in 2006.

The Central Bank of the UAE operates the UAE Switch service, which links the ATM networks of all banks in the emirates, enabling customers of any bank to use any ATM. UAE Switch is also connected to the ATM switch services in other gulf region countries. The central bank recently decided to adopt global Payment Card Industry (PCI) standards for UAE Switch, meaning that all banks in the UAE will be required to migrate to EMV technology.

In the first half of 2008, there was a sharp increase in the number and value of financial transactions via UAE Switch, with the total number of transactions rising to 17 million, compared to 12.3 million in the first half of 2007, or an increase of 37.2 percent. The total value of transactions rose to AED18.3 billion ($4.98 billion) in the first half of 2008, compared to AED11.6 billion in the year-ago period, an increase of 57.1 percent.

Major issuers

Abu Dhabi Commercial Bank (ADCB)

ADCB’s debit card range incorporates EMV technology and a loyalty programme on the Smart Debit product called TouchPoints, where points are rewarded to cardholders for every retail purchase above AED4.

Double TouchPoints are given for retail purchases made overseas. ADCB also offers premium debit cards, such as the Privilege Club offering, which includes access to exclusive luxury benefits and a dedicated relationship officer. There is also the Excellency Premium lifestyle club, available on debit and credit cards, offered to extremely high net worth individuals.

Its ‘Just Dip The Chip’ campaign offers special discounts and benefits to customers who sign up for an EMV-enabled credit card offering, on standard, gold and platinum formats, with discounts available of between 15 and 25 percent on selected merchandise, provided customers spend at least AED200. Other credit card offerings include a card for self-employed business people, and the Lulu MasterCard-branded proposition, offering points redeemable at any Lulu store in the UAE. The Lulu card is also free for life from annual fees.

For the quarter ended September 2008, ADCB reported credit card loans and advances of AED1 million, up from AED685,182 at December 2007 and AED459,405 at December 2006. In its 2007 annual report, ADCB reported that its credit card portfolio grew by almost 50 percent faster than its peers in the market. ADCB also reported 80 percent growth in customer acquisition and credit card portfolio growth of 72 percent over the year.

It also launched one of the first contactless cards in the region, with the ADCB Flash credit card on the MasterCard platform.


Real GDP growth forecasts (%)

























Source: central banks, Emirates NBD

National Bank of Abu Dhabi

NBAD offers free-for-life Visa and MasterCard-branded credit cards for NBAD salary transfer customers with a minimum salary of AED5,000. Non-NBAD salary transfer customers need a salary of AED10,000 subject to one year of service with the same employer. The NBAD Elite Visa Platinum card offers luxury benefits such as complimentary use of airport lounges, free travel accident insurance of $500,000, and dining discounts.

Its gold card offering comes with a credit limit of up to three times monthly salary and has no annual fee, and a selection of billing and repayment dates. Cardholders also have the option to have a photo version of the card.

There are also regular promotions offering merchandise discounts. NBAD’s loyalty programme, the imaginatively-titled ‘Points’, is available on all NBAD credit cards, offering one point for every AED1 spent using the card. Points members do not have to pay annual fees on their credit cards, and points can also be redeemed for gift vouchers for use in selected retail outlets.

On the debit side, from February 2009, NBAD is replacing its proprietary ATM card and the Cash Plus Global Visa Electron-branded card with a MasterCard-branded debit card, and a premium debit card available to Elite customers, both of which can be used for internet shopping.

On the prepaid side, NBAD offers consumer and corporate prepaid offerings, such as the Dubai eGovernment prepaid card for government department online transactions and for everyday retail transactions. It also offers the Visa-branded Cash Passport prepaid card aimed at the foreign traveller segment. The nabd@surfer is an internet-only offering that comes in either prepaid or credit card format. It has an annual fee of AED25 for customers and AED50 for non-customers of the bank.

Emirates NBD

Emirates NBD, the Middle East’s biggest bank by assets, was formed in October 2007 following the merger of Emirates Bank and National Bank of Dubai. Emirates NBD posted a 35 percent increase in its credit card business in the first nine months of 2008. Emirates NBD also has the largest ATM network in the UAE, numbering 650 as of December 2008.

The entities comprising the Emirates NBD group are Emirates Bank and Emirates Islamic Bank, Al Shaheen Club, Network International, and Diners Club, along with asset management, securities and other operations. Emirates Bank offers meBank Visa and MasterCard-branded credit cards available to consumers earning over AED3,000 per month.

The meLady segmented product offering has been designed exclusively for women, encompassing current, savings accounts, personal loans and a range of credit cards under the meLady brand. Alongside special promotional discounts and travel benefits, meLady credit cards come with zero percent interest for the first three months and on balance transfers for the first three months, plus membership of the meMiles loyalty programme, where points have no expiry date. The cards come in silver and gold format, with annual fees of AED150 and AED400 respectively.

The long-running ‘Discounts & Privileges’ loyalty programme was recently discontinued to be replaced by a chip-based programme due to be rolled out in the coming months.

Al Shaheen, the banking unit aimed at high net worth individuals, offers a platinum Visa credit card incorporating concierge and golf experiences. Al Shaheen also offers Visa Electron-branded ATM/debit cards on its current accounts.

Emirates Islamic Bank (EIB) offers a range of Sharia-compliant card products – all cards are classed as charge cards on the Visa platform, with a maximum of 55 days’ free of credit. The cards are free of what are known as riba and gharar, and come with a security photo feature. EIB is one of the few banks in the Middle East to offer a Visa Infinite credit card, a Sharia-compliant ultra-premium offering that doesn’t charge interest. Cardholders instead pay a fixed fee per month allowing them to use the card up to their approved limit. Cardholders require a minimum salary of AED25,000 per month.

Its non-Sharia range of cards includes the Skywards EIB credit card, available in gold and platinum formats, in conjunction with Skywards, the frequent flyer loyalty programme from Emirates Airline. Cardholders receive 1 Skywards Mile for every AED1 spent on the card and the card also comes with a range of travel-related benefits such as travel insurance and complimentary airport lounge access. Cardholders are also entitled to discounts at participating retail outlets.

Revenues for Network International, Emirates NBD’s card acquiring business, continued its upward trend in 2008 by showing growth in operating revenues of 33 percent over 2007 to AED348 million. The primary drivers of this growth were significant increases in transaction volumes, comprising a 29 percent increase in acquiring income and a 54 percent increase in processing income. Network International now provides merchant acquiring services to over 9,700 merchants and processes cards for 42 financial institutions in the region.

Mashreq Bank



Payment infrastructure




June 07

June 08

Number of ATMs





POS terminals





Source: Central Bank of UAE, CI

Mashreq Bank’s Kumar told CI that as of December 2008, the bank had over 450,000 credit cards in force in the UAE, giving it a 13 percent market share in comparison to its competitors. Mashreq also has a large merchant acquiring business where it holds close to 30 percent market share and leverages its acquiring business to drive up spending on its credit cards.

Mashreq current accountholders automatically receive an EMV-enabled Visa debit card as part of their current account package. Premium current account customers also receive a free Visa or MasterCard gold credit card. All Mashreq credit cardholders are automatically enrolled into the MashreqPoints loyalty programme, and earn 1 MashreqPoint for every AED1 spent on the card.

Mashreq’s Millionaire credit card comes with no annual fee and the option for cardholders to set their own credit limits based on the level of their MashreqMillionaire investment, along with rewards points redeemable at participating merchant outlets.

The VIP credit card is a co-branded offering with Virgin Megastore, offering roadside assistance, accident care, and online and mobile services such as transaction checking and bill payments. The card also offers free cinema tickets, discounts on Virgin Megastore merchandise and travel benefits.

Mashreq also offers a range of Visa-branded co-branded cards in conjunction with Etisalat, the UAE-based telecom provider. Launched in June 2008, the Etislat credit card provides customers with free talk time based on reward points every time they shop using the card. The card is free for life for all UAE residents irrespective of their nationalities and no income documents are required and there is no minimum spend on the cards. Customers will earn Etisalat ‘More’ points for every AED1 spent.

In its 2007 annual report, Mashreq stated that the introduction of no annual fees for classic and gold credit cards had helped to accelerate its penetration in the sector, helping it to rank as the largest issuer in the UAE. Mashreq, as an acquirer, also launched an integrated electronic cash register POS solution which is EMV-enabled, along with a GPRS POS device, the first of its kind in the UAE.

First Gulf Bank

First Gulf Bank offers a range of standard, gold, platinum and credit cards aimed solely at women. Cardholders are also offered the First Rewards loyalty programme along with monthly promotions for shopping, dining and travel.

Once Platinum cardholders pay their first credit card bill, they are offered shopping gift vouchers worth AED550, redeemable at a range of luxury apparel retailers. They can also avail themselves of points redeemable against utility bill payments, and special golfing promotions with the Golf Fee card, and free valet parking at shopping malls and Dubai International airport.

First Gulf’s Ladies credit card offers a range of value-added benefits and discounts at a range of women-orientated retailers, and is aimed at ‘financially independent’ women. Other benefits include increased spending limits, auto breakdown assistance, insurance and access to the First Rewards loyalty programme.

Over the course of 2007 and 2008, First Gulf has become one of the fastest players in customer acquisitions and customer spending. First Gulf has also launched a full range of retail Sharia-compliant products and services under the ‘Siraj’ range, including the Makkah credit card.


RakBank offers a range of high end-orientated credit cards, such as the recently-launched Geant La Carte product, the Titanium MasterCard-branded range, and the prepaid nmC MasterCard offering.

In February 2009, RakBank launched the first debit card in the UAE to offer cashback on purchases, offering between 1 percent and 2 percent of the value of the purchase made with the card. RakBank was also the first bank in the UAE to introduce the concept of cashback on credit card purchases a few years previously. The RakBank debit card comes with premium MasterCard privileges, dining pr

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