Although rising, frequency of payment card use in Oman is lower than in regional neighbours such as Israel and Saudi Arabia, but government initiatives and growing consumer interest in Sharia-compliant products are expected to increase uptake, intensify competition and lead to overall improvements in bank and issuer offerings

Payment card use is gradually rising in Oman, although overall card use in the country is much lower than many of its peers.

Frequency of use per card in Oman was 23.1 in 2015 – lower than regional neighbours Lebanon with 31.6, the UAE with 47.6, Kuwait with 52.7, Iran with 59.6, Saudi Arabia with 89.4 and Israel with 144.9.

However, initiatives have been taken to encourage adoption of payment cards in the country, such as the improvement of payment infrastructure, the adoption of new technology such as contactless and EMV, the introduction of Sharia-compliant cards and the government’s push for electronic payments.

Preference for Sharia-compliant banking

The growth of Islamic banking – or, more accurately, Sharia-compliant banking – has intensified competition in the domestic financial sector, and led banks to modify and improve product offerings.

The number of consumers interested in Sharia-compliant banking and financial transactions is growing in Oman.

To capitalise on this, in December 2015 Bank Nizwa collaborated with MasterCard to launch a range of Sharia-compliant credit cards.

Similarly, Al Hilal Islamic Banking Services launched a Sharia-compliant Visa credit card in November 2014, available in Signature and Platinum variants.

Cardholders are eligible to receive value-added benefits such as unlimited access to more than 500 airport lounges around the world, a 24-hour concierge service, up to 25% discounts at restaurants, and free medical referrals.

The central bank introduced Islamic banking in 2012, granting financial institutions licenses to operate as Islamic banks.
This resulted in a robust growth in Islamic financial institutions, which, according to the central bank, are expected to account for 10% of the total banking industry by 2018, up from 7.5% in 2015.

By the end of 2015, the combined network of Islamic bank branches was 60, which included two banks and six banking windows in Oman.

Convenient, instant services drive growth

Along with an improved payment infrastructure, convenience of banking services has emerged as a key driver of the debit card market.

Instant card issue is a growing trend in Oman. To reduce waiting times for consumers, Bank Dhofar launched an instant card issue service in September 2013, allowing customers to collect debit cards instantly when opening a bank account, and start using them immediately.

In June 2015, Alizz Islamic Bank launched an instant card issue service at all its branches. The process helps to reduce PIN mailer distribution costs, and enhances customer satisfactions.

To reduce waiting times, Bank Dhofar introduced the Cardless Cash service in January 2014. This service allows users to withdraw cash without a debit card at ATMs.

Users log in to Bank Dhofar’s mobile banking app, select the Cardless Cash option, enter the account to be debited and create a four-digit PIN. The cardholder then receives a confirmation SMS containing a six-digit reference code from the bank. The user then selects the Cardless Cash option at an ATM and use the reference code and four-digit PIN to withdraw cash.

Rising preference for premium

Demand for premium payment cards is rising in Gulf Cooperation Council states, including Oman. Consumers have become more sophisticated, and cards are now an essential part of their lifestyles.

Consumer demand for high-quality services and rewards is also rising, and banks are offering exclusive benefits and rewards to serve the most profitable consumers.

Alizz Islamic Bank partnered with MasterCard in March 2015 to introduce the World Elite MasterCard in Oman. This is an invitation-only card offered to affluent consumers, and provides a range of value-added services such as travel and lifestyle benefits, concierge service and insurance.

Alizz Islamic Bank also offers the Titanium and Platinum MasterCard credit cards and Titanium MasterCard debit card with a range of value -added benefits.

Banks eyeing corporate users to expand

In addition to retail consumers, banks in Oman also serve corporate customers, including large businesses and SMEs.
Newly established businesses provide an important opportunity for banks to target corporate customers. According to the World Bank, there were 2,730 new businesses registered in Oman in 2013.

With the growing number of businesses in Oman, demand for commercial cards is expected to rise between 2016 and 2020.

Issuers such as Bank Muscat, Bank Dhofar, NBO, Bank Sohar and Oman Arab Bank serve these customers by offering commercial cards, which provide exclusive dining, shopping, travelling and entertainment-related offers, free travel insurance and medical assistance, and access to airport lounges.

To offer better control and convenience in managing business expenses, Oman Arab Bank partnered with MasterCard to launch the MasterCard Corporate credit card in May 2016.

Companies using the card can track and manage expenses online, and are offered employee-level, department-level and company-level statements to increase efficiency in managing expenses.

Oman Arab Bank also partnered with Visa to launch the Visa Smart Commercial Card, which aims to minimise administrative costs and provide improved capabilities in managing business transactions.

Businesses can set daily, monthly or per-transaction spending limits, and the cards also include EMV chip technology.