Cash accounts for around 90 percent of most transactions
in the Middle Eastern region, while cards as a payment method are
generally distrusted by the local populations. Brian Quarrie,
managing director of First Data in the Middle East, speaks to
John Hill about the
region’s card market development.


Despite a particularly tough year in
the payments sphere, many industry figures have been touting
prepaid as a product with great potential to produce revenue.
Nowhere is this more prevalent than developing countries such as
the Gulf Cooperation Council (GCC) states, where a combination of a
largely unbanked immigrant workforce and government mandates
specifying all wages must be paid into an account has lead to a
massive market for prepaid products.

Brian Quarrie is managing director of global
payment processor First Data’s Middle East operations and explains
that, while there is certainly scope for development of the card
market in the region, there are several issues that need to be
addressed beforehand.

“Government mandates in the United Arab
Emirates to end cash-based salary payments in favour of electronic
payments have created exponential demand for prepaid products,”
Quarrie told CI.

“An electronic system for wage payment brings
transparency into the system and allows authorities to monitor
salaries and wage payments, thereby reducing disputes pertaining to
non-payment or under-payment of wages.”

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Global networks for local

There are similar challenges in
countries like Pakistan, where the majority of the population is
unbanked, but there is a need to distribute funds securely, quickly
and transparently, which means there are certainly opportunities
for building networks that can deliver locally to their

“There is a potential for some consolidation
across the retail banking space and some rationalisation in terms
of those institutions looking at their costs, and what they want to
be in three-to-five years’ time,” Quarrie added. “I think there’s
going to be some dramatic changes in terms of how banks position
themselves in the market, the products they offer and also their
demographic focus.”

“Financial institutions in countries such as
Saudi Arabia and Kuwait took action prior to the economic downturn
to try and limit their exposure to consumer credit risk. Part of
this was due to central bank regulation of the debt burden ratio
for both cardholders and card issuers during the past three years.
While these countries are currently experiencing small and steady
growth, they should be in a strong position in 18 months time.”

Quarrie adds that aside from prepaid, there is
potential for loyalty applications to grow across all sectors of
the financial services industry, in order to maintain the
‘stickiness’ of clients, and also there is potential for growth in
risk management.

More work needed in

Brian Quarrie, First DataMany of the local and international payment players in the
GCC and surrounding areas are trying as best they can to both
promote and educate the mass market about card usage and electronic
payments. Despite these attempts, Quarrie thinks there is still
work to be done in terms of acceptance.

“The region is fairly diverse, but, in
general, ATM coverage is still growing and developing,” he told CI.
“Card acceptance and demand is becoming greater, especially in
countries such as Saudi Arabia and Pakistan, which have bigger
populations. Payments infrastructure in the region has surged in
the last five years with the UAE leading the region, because of the
high numbers of tourists who require a standard payment method. In
contrast, the situation hasn’t changed substantially across many
other Middle Eastern countries and Pakistan.“Cash still remains
king here. Around 90 percent of transactions are cash-based, so
while there is room for growth, we have to take into consideration
these are highly regulated markets, and we don’t have the ability
as we do in western Europe to build out businesses on the POS and
ATM side as easily.”

Outsourcing a major

Having recently signed a deal with
both the International Bank of Qatar and the National Bank of
Kuwait for global issuing and consumer finance processing under the
First Vision platform banner, Quarrie believes there is a
burgeoning market for outsourcing in the region.

“The opportunity for outsourcing has
definitely opened up,” he told CI. “Very few financial institutions
considered outsourcing in the past, and when they did it tended to
be mainly around credit card and electronic processing fees, which
is partly a result of the complexity of local regulation. Now, with
the economic downturn and growing compliance costs, many more
institutions are looking to outsource a range of their non-core
activities to control costs and improve efficiencies and

Various regulations in the Middle East area
have meant some international card issuers and processors looking
to move in have been left out in the cold, unable to follow their
traditional business models. Quarrie thinks this could mean a much
more egalitarian approach could be required.