Oman is in severe need of diversification. The country remains highly reliant on oil, a resource that is quickly growing scarce. One sector which could solve this problem, through the creation of jobs and garnering a greater share of the country’s GDP, is finance; particularly payments, cards and e-commerce
With its economy heavily dependent on depleting oil resources, Oman has tried to diversify into other sectors, in particular tourism and gas-based industries. It is aiming to reduce oil’s contribution to GDP to 9% by 2020, and create more jobs for the growing population. With the government and banks striving to offer better services to the banked population, and banks expanding their presence and improving banking infrastructure, Oman’s cards and payments industry grew between the years 2009 and 2013.
During this period, a recovery in crude oil prices, supported by sustained domestic demand and a monetary policy by the Central Bank of Oman (CBO), resulted in positive growth for the banking industry. The Eighth Five Year Development Plan (2011-2015) emphasises huge public investments, and the development of the tourism and software sectors, enabling positive economic growth.
Cheques and credit transfers had a combined industry share of 96.6% in 2013, in terms of transaction value. The share of payment cards is increasing, as banks and the government are increasing benefits and awareness levels among consumers and merchants, as well as encouraging customers to use cashless transactions.
The consumers’ preference for debit
Debit cards remained the preferred payment card between 2009 and 2013 in terms of transaction value, growing from OMR2.1bn ($5.6bn) in 2009 to OMR3.2bn in 2013, at a CAGR of 10.78%. This value is anticipated to reach OMR4.5bn in 2018, at a CAGR of 6.91%.
Most consumers prefer to use debit cards to withdraw cash from ATMs, rather than POS terminals. An increase in the number of POS terminals, as well as banks’ steps to enhance security measures for debit cards and encourage consumers to use their debit cards by offering discounts, card fraud insurance, SMS transaction alerts and emergency cash services, helped the debit cards market grow.
Oman moving towards a cashless society
The CBO has appealed to the country’s residents to use non-cash payments as often as possible, including salary and other routine payments or withdrawals. To support this, the National e-Payment Gateway system was introduced in July 2012 in association with MasterCard as an electronic payment gateway service that offers payment services for the e-commerce industry, promoting online business and enabling consumers to shop and pay bills online.
In June 2014, Bank Muscat introduced a biometric system for e-cards to improve transaction efficiency and speed. This will enable secure e-card transactions at Royal Oman Police directorates, ministries and government establishments as a national ID, and resident cards can be loaded with cash at Bank Muscat branches.
Debit and credit card transaction volumes and values at ATMs and at POS terminals increased between 2009 and 2013, indicating a growing willingness to make utilise cashless transaction services.
E-commerce and card payments going hand-in-hand
Oman has emerged as a key market for e-commerce in the Middle East. Rising internet and smartphone penetration, coupled with a rising number of online retailers of books, electronics, fashion products, games and products, fuelled e-commerce growth. Internet penetration in Oman grew from 26.8 in 2009 to 69.5 in 2013, primarily as a result of improved infrastructure and increased internet use, mainly by younger consumers.
According to the Oman Internet Users and E-commerce Survey 2014, 19.4% of adult internet users in the country use e-commerce to buy an increasing variety of products and services online, or pay bills.
A 2014 study by MasterCard on Omani consumers’ online shopping behaviour, consumers are increasingly using the internet for online shopping.
Customer segmentation to increase card volumes
Specific customer segments such as high-income individuals, women, teenagers, and internet users are yet to be fully explored by Omani card issuers to increase the number of cards in circulation.
In February 2014, Bank Muscat introduced Oman’s first premium Visa Signature credit card for Asalah priority banking customers, targeted at high net worth individuals (HNWIs). Bank Dhofar introduced its first credit cards for university and college students in March 2014, offering students discounts at shopping outlets and libraries in both Oman and around the world.