Use of payment cards is gradually increasing in Bahrain, thanks to the combined efforts of the government, private companies, banks and card issuers. The progressive approach to electronic payments has had a positive impact on the country’s e-commerce market with more benefits to come in the near future
Payment card penetration in Bahrain stood at 111.2 cards per 100 individuals in 2016 – higher than regional peers including Israel (107.4), Oman (94.6), Saudi Arabia (88.1) and Lebanon (49.9).
The government has adopted a progressive stance and taken initiatives to encourage electronic payments. In February 2015 the government’s social insurance body, the General Organisation of Social Insurance (SIO), launched a service allowing insured residents to make insurance subscription payments using a debit or credit card.
E-government services allow residents to pay utility bills using debit or credit cards, and consumers can make payments through a national website, via a mobile app or at payment kiosks.
During the last decade the central bank introduced a number of security guidelines to improve consumer confidence in electronic payments. In 2007, it required all ATMs to be embedded with fraud-detecting and -inhibiting devices.
This was followed by guidelines on Europay, MasterCard, and Visa (EMV) adoption in 2009, requiring all debit and cards to be equipped with secured chip-and-PIN technology.
In 2012, the central bank enforced new guidelines under which banks must to send free short message service (SMS) alerts to customers for every transaction carried out using a debit or credit card.
Sharia-compliant banking products
Demand for Islamic banking products is rising. As of July 2015, there were 24 licensed Islamic banks operating in Bahrain. The growth of Islamic banking, operating in accordance with Sharia principles, has intensified competition in the domestic financial sector, and led many banks to modify and improve their product offerings to remain competitive.
In August 2016, Kuwait Finance House-Bahrain launched the Wakala Investment Account, a Sharia-compliant bank account and in April 2015, the bank launched a Sharia-compliant Visa Signature credit card.
Similarly, in May 2014, Credimax launched a Sharia-compliant Tayseer credit card, which is available in classic, gold, platinum and corporate variants.
Growth prospects for pay later cards
Pay later card penetration in Bahrain is low, and stood at just 13.8 cards per 100 individuals in 2016.
To encourage consumers to use credit cards, the Industry, Commerce and Tourism Minister issued a directive in January 2016, preventing banks and merchants from imposing surcharges on credit card users.
In accordance with the country’s Consumer Protection Law, a fine of up to $26,595 (BHD10,000) can be imposed on companies violating the directive.
Banks are undertaking several initiatives to promote the use of credit cards. There is no minimum salary requirement for entry-level credit cards offered by Ahli United Bank and NBB. Both banks charge no, or very low, annual fees.
As a competitive strategy, many banks in Bahrain now charge a low interest rate on conventional credit cards in an attempt to attract more consumers.
In addition to pricing benefits, banks are regularly establishing strategies to increase credit card usage.
In October 2015 Credimax partnered with hypermarket and department store chain Lulu Hypermarket to launch a co-branded card, MasterCard Danat. The card offers rewards, discounts and cashback at Lulu Hypermarkets.
Similarly, Standard Chartered and Citibank also offer co-branded credit cards in partnership with Gulf Air and Emirates Airlines respectively.
E-commerce in Bahrain grew from $379.3m in 2012 to $610.5m in 2016, at a compound annual growth rate (CAGR) of 12.64% for 2012–2016, and is expected to reach $912.8m in 2021. Growth was driven by greater internet penetration and a growing young population coupled with government’s efforts to promote e-commerce.
To promote e-commerce and create e-services, the government organised the third edition of the E-Commerce Forum and Exhibition in March 2016.
Card issuers are also playing key roles in promoting e-commerce in Bahrain. CrediMax organised an e-commerce workshop in April 2015, which focused on the government’s role in supporting various e-commerce initiatives, and the importance of new technology, innovation and business opportunities.
Prepaid cards record robust growth
The volume of prepaid cards in circulation and their transaction value both quadrupled during 2012–2016. While the prepaid cards market recorded a CAGR of 42.48% in terms of the number of cards in circulation, it increased at a CAGR of 43.20% in terms of transaction value.
Banks offer customised cards for online and in-store payments and in January 2014, BMI Bank launched two MasterCard-branded prepaid cards. The first is a generic multipurpose prepaid card which can be used to withdraw cash and make in-store purchases, while the second has been designed exclusively for online purchases. The cards can be loaded at all BMI Bank branches, ATMs and mobile banking platforms.
In July 2015, Ithmaar Bank launched the MasterCard eCard prepaid card for online shoppers. The card can be reloaded with any value between $2.70 and $26,595. Cardholders are also offered membership to the Ithmaar Rewards loyalty programme, through which they are entitled to earn reward points for each transaction they perform with the card.
The card also provides shoppers with discounts on shipping charges through logistics services company Aramex, as well as lifetime Aramex Shop and Ship membership.