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  1. Analysis
February 28, 2010

Country Survey: the UAE

The UAE was once seen as the shining economic star in the Middle East region, but lately its lustre has worn off due to an unprecedented economic crisis that pushed the emirate of Dubai to the verge of bankruptcy However, card issuers, while cautious over rising levels of credit losses, remain optimistic about the future

By Verdict Staff

The UAE was once seen as the shining economic star in the Middle East region, but lately its lustre has worn off due to an unprecedented economic crisis that pushed the emirate of Dubai to the verge of bankruptcy. However, card issuers, while cautious over rising levels of credit losses, remain optimistic about the future. John Hill 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. The area has undergone a profound transformation from an impoverished region of small desert principalities to a modern state with a high standard of living.

UAE Number of POS terminalsAlthough 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 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.

The government has increased spending on job creation and infrastructure expansion and is opening up utilities to greater private sector involvement.

But the global financial crisis, tightening international credit, falling oil prices, and deflated asset prices caused GDP to drop by nearly 4 percent in 2009. UAE authorities have tried to blunt the crisis by increasing spending and boosting liquidity in the banking sector.

The crisis hit the emirate of Dubai hardest, as it was heavily exposed to depressed real estate prices. Dubai lacked sufficient cash to meet its debt obligations, prompting global concern about its solvency.

In February 2009, Dubai launched a $20 billion bond programme to meet its debt obligations. The UAE Central Bank and Abu Dhabi-based banks bought the largest shares. In December 2009, Dubai received an additional $10 billion loan from the emirate of Abu Dhabi, bringing Dubai back from the brink of bankruptcy.

In 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.

The credit card market

The UAE credit card industry has grown rapidly over the past six years, owing to the economic growth in the region over the past decade. Most banks operating in the country offer credit cards to their accountholders.

According to a MasterCard 2009 report, UAE residents account for approximately one-third of the credit cards in the entire Middle East region.

The report also establishes that 59 percent of UAE residents have some of the highest card penetration rates in the world. In a country with a population of around 4.6 million, there were 2.4 million credit cards by the end of 2008.

All the internationally recognised credit cards, such as MasterCard, Visa, Diners and American Express, are used to make purchases. UAE credit card service providers focus on the retail consumer industry to boost sales. However, a majority of the transactions in the country (80 percent) still take place with cash.

UAE number of ATMsBecause of the high per capita GDP (estimated to be $43,000 in 2008), credit card offerings in the UAE typically come 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 offerings including travel benefits as a standard feature.

However, the industry is also facing a credit card crisis due to an increasing number of defaulters.

Due to intense competition in the UAE credit cards industry, the country saw a huge market share war beginning in 2007. UAE credit card providers used aggressive marketing and sales tactics to achieve their goals in the booming economy.

Thus, salesmen began to approach every citizen to sell credit cards to them without considering their credit ratings or ability to make repayments. The after-effects of the market war were visible by mid-2009, in tandem with the UAE suffering the impact of the global economic turbulence of the past two years.

Thousands of expatriates have lost their jobs in the trade and tourism hub of Dubai since the financial crisis triggered a real estate crash late in 2009 that brought the six-year economic boom to a sudden halt.

According to, an online news resource, some of the UAE banks witnessed more than 2,500 credit card customers departing the country every month without paying off their balances.

Thus, managing debt has become a nightmare for several UAE credit card providers.

According to one major lender, RAKBank, most of those leaving without settling their credit card bills were employed in the construction sector, which took a severe battering as the UAE’s economic crisis unfolded.

RAKBank, which has around 20 percent market share in the country’s credit card sector with around 300,000 customers, has seen around 1,300 customers fleeing in the same period.

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, especially in the real estate, construction and financial services sectors.

The debit card market

Debit card numbers have also grown rapidly over the past two years, helped by the migration from proprietary ATM cards to internationally scheme-branded debit cards, but this has not yet turned into higher spending per card – in fact, the UAE has one of the lowest usage rates of debit cards at the POS in the Middle East region.

Figures from Visa show that as of the second quarter of 2009, the growth rate of UAE-issued debit card numbers was double that of credit cards, indicating increasing demand. However, retail spending on debit cards grew by only 12 percent compared to the same period of 2008.

The growth rate of spending on credit cards was over 23 percent. But there is consistent debit usage both at the ATM and POS. Undoubtedly with the current economic backdrop, consumers are preferring to use debit as a way to control their spending, and also because it is easier to obtain a debit card than a credit card.

According to an official at major issuer Emirates NBD, debit card spend at the ATM and POS increased by 20 percent over 2009, whereas the growth rate for credit remained flat.

In 2008, when the economy had yet to go into freefall, both credit and debit card spending grew by over 30 percent. Nevertheless, some issuers such as Citi maintain that their credit cards are used 10 to 15 times more than debit cards because of loyalty programmes and security.

The advent of EMV, contactless and prepaid propositions are, to varying degrees, helping to promote awareness and usage of debit.

The first EMV-enabled card in the UAE was launched in 2004, and more recently the central bank has requested that all UAE issuers roll out EMV propositions.

However, migration is likely to lag far behind other countries as most banks have not seen a compelling reason to fully migrate to EMV, given that magnetic stripe cards already allow the accumulation and redemption of loyalty points.

One of the first contactless propositions was launched in 2006 on the MasterCard PayPass platform. Issuers have wasted no time in implementing online authorisation services Verified By Visa and MasterCard SecureCode, which should promote the safety and security of e-commerce and online payments.

When it comes to prepaid, initiatives such as payroll and transit cards have been launched over the past few years but the market is yet to take off. Given that the legal and regulatory environment is not well defined, prepaid uptake is likely to be restricted to the payroll and transit segments.

The importance of differentiation

The intensely competitive nature of the credit card market in the UAE has meant that issuers have had to offer generous features and benefits on standard cards which are more in line with premium cards offered elsewhere in the world. 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.

New Visa Infinite CardAt the same time, segmentation is becoming a crucial element of acquisition and retention strategies for UAE issuers. Gold, silver, platinum and premium 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.

The ubiquity of loyalty programmes has, however, forced issuers to rethink the way they reward cardholders.

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.

One area of segmentation that has really taken off over the past 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 banks quickly followed suit and many have set up their own Islamic banking units in order to create tailored products for this increasingly important consumer segment.

As of the end of 2009, there were 24 UAE-incorporated banks and 28 foreign banks operating in the country, with 756 bank branches in total across the emirates. As of December 2009, there were 3,599 ATMs operating across the UAE, compared to 2,420 at the end of 2008.


Mashreq Bank

Mashreq Bank had over 450,000 credit cards in force at the end of 2008 (figures for 2009 were not available at the time of going to press), and it 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.

It has 226 ATMs across the UAE. Mashreq current accountholders automatically receive an EMV-enabled Visa debit card as part of their current account package. All Mashreq credit cardholders are automatically enrolled into the MashreqPoints loyalty programme, and earn 1 MashreqPoint for every AED1 spent on the card.

Mashreq also offers a range of Visa 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. There is no minimum spend on the card.

In 2009, Mashreq expanded its credit card offering by teaming up with Air Arabia to offer a unique combination of premium banking services along with Air Arabia’s range of travel services. Mashreq also unveiled its Business Platinum debit card aimed at small to medium-sized enterprises – the first of its kind in the UAE.

As with the rest of the industry, Mashreq was hit hard by credit card losses, but it claimed its portfolio had stabilised and it expects loan losses to improve during 2010. In 2009, its acquiring volumes were impacted by lower spending at retailers, but it did establish a partnership with China UnionPay (CUP) to accept CUP-issued credit and debit cards in the UAE.

Abu Dhabi Commercial Bank (ADCB)

ADCB’s debit card range incorporates EMV technology and a loyalty programme on its Smart Debit product called TouchPoints, where points are rewarded to cardholders for every retail purchase above AED4 ($1).

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.

In November 2009 the bank launched the Excellency Visa Infinite credit card which will be offered to selected to selected clients. It is the most exclusive credit card issued by ADCB and comes with a personal relationship manager.

National Bank of Abu Dhabi (NBAD)

NBAD offers free-for-life Visa and MasterCard-branded credit cards for NBAD salary transfer customers with a minimum salary of AED5,000. 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.

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 prepaid side, NBAD offers consumer and corporate prepaid offerings, such as the Dubai e-Government 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.

Emirates NBD

Emirates NBD was formed in October 2007 following the merger of Emirates Bank and National Bank of Dubai, and claims to have a market share of 10 percent in the retail credit card market across the UAE. Credit cards comprised 9 percent of its $6.7 billion retail loan portfolio as of September 2009.

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. The long-running ‘Discounts & Privileges’ loyalty programme was recently discontinued to be replaced by a chip-based programme.


RAKBank offers a range of high end-orientated credit cards, such as the 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.


Real GDP growth forecasts


2008 (%)

2009 (%)

2010 (%)





















Source: Central banks, Emirates NBD

The RAKBank debit card comes with premium MasterCard privileges, dining privileges and other travel and insurance benefits.

In June 2009, RAKBank announced that it would offer higher customer savings on credit cards, with 5 percent of international spend on the cards reimbursed to users. The new cashback feature is available on all MasterCard and Visa credit cards, including the popular MasterCard Titanium card, and applies to all retail purchases and cash advances made using the cards while abroad.

In addition, cardholders in the UAE also benefit from 5 percent savings on internet purchases made from international e-commerce sites in any foreign currency.

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.

Over the course of 2007 and 2008, First Gulf became one of the fastest players in customer acquisitions and customer spending.

First Gulf has launched a full range of retail Sharia-compliant products and services under the ‘Siraj’ range, including the Makkah credit card.

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