Where next for consumer spending post-pandemic?
It’s been a year and a half since the pandemic changed the way the world lives, works and plays. Consumers have had to adapt frequently, as infection rates fluctuated and governments issued new rules and restrictions. Some changes are here to stay, while others are more transient.
Visa’s most recent COVID-19 Impact Tracker,1 which focuses on the UAE, KSA, Russia and South Africa, helps us understand how consumers and businesses in these countries continue to react to the evolving nature of the pandemic.
Vaccination unlocks spending and reinforces consumer confidence
One clear indicator from the research is that where vaccination rates are high, consumers are more hopeful about their country’s economic recovery. High vaccination rates bring a positive shift in sentiment towards households’ financial well-being, including income, spend and savings. In the UAE and KSA, where a large percentage of the populations are vaccinated, over 80% of consumers are more optimistic about their country’s economic recovery – 71% and 77% respectively believe that this recovery will mean an improvement to their salaries by 2022.
“Based on current trends, slightly less than half of the economies in CEMEA are expected to return to their pre-pandemic output level by the end of 2021, including three of the largest economies in the region: Russia, Nigeria and Kazakhstan. Even better, an additional quarter of countries including many in the GCC are expected to recover fully by 2022. All in all, we’re looking at three out of four economies fully recovering within two years from the pandemic start,” said Wayne Best, Chief Economist at Visa.
As countries begin to open up, consumers have become more comfortable about their spending and appear more financially liberated as they gain more confidence in the economy, with fewer consumers focusing on ‘saving and budgeting’ compared to June last year.
The acceleration of digital payments continues, unabated
Since the start of the pandemic, digital payments have over-taken cash, as consumers looked to contactless payments for convenience, hygiene and speed. Cash payments and cash on delivery have decreased greatly across all markets. In the September 2021 research, 57% of consumers in Russia, 44% in KSA, 43% in South Africa and 40% in the UAE reported lowering their cash spending and cash on delivery.
“Consumer preference for mobile payment and digital wallets continued to gain ground, as these payment methods are becoming more popular and widespread in our key CEMEA markets. More than two-thirds of consumers in the UAE reported increasing their usage of both mobile payments and digital wallets. Similarly, 42% of consumers in Russia reported increasing their usage of mobile payment and 33% of consumers reported increasing their usage of digital wallets,” says Mohamed Bardastani, CEMEA Economist and Director of Business and Economics Insights at Visa.
With cash avoidance being a key trend during the pandemic, contactless payments in general have risen across the focus countries.
Online shopping – there is no going back
As noted in the previous three waves of Visa’s study (conducted in May and June last year), customers have increasingly turned to online shopping channels for both essential and non-essential purchases, with a noticeable shift in sentiment towards eCommerce and away from traditional face-to-face purchases. Overall, the COVID-19 pandemic has created significant opportunities for eCommerce, with many retailers entering the digital sphere for the first time, and many consumers making their first online purchases in key categories.
“Most CEMEA consumers report continued preference for online shopping, even once the COVID-19 crisis is fully over, especially for food delivery, fashion and groceries. In the UAE, KSA and South Africa, online fashion/luxury purchases are becoming more popular, while online food delivery continues to grow in the UAE, and online grocery shopping continues to gain ground in South Africa,” says Bardastani.
SMBs support remains critical; digital is the way to go
“Entrepreneurship is evidently firing very early in this stage of the recovery. And most of these businesses are small businesses, because it was Gen Z who were mostly displaced and they're the most technologically savvy. So the barrier for them to start a new business is very low. And with the number of apps and programs such as Visa supporting small businesses, tap to pay, tap to phone, the barriers to enter and start new business have never been lower,” says Visa’s Chief Economist Wayne Best.
As eCommerce and contactless payments become the ‘new normal’, it is more important than ever that businesses adapt to the changing consumer demand for a digital experience. Ninety-two percent of consumers in the UAE say COVID-19 has permanently changed how they pay, compared to 68% globally. In Russia, more than a third (35%) of SMBs say accepting contactless payments is among the top investment areas needed to meet consumer expectations.2
The need for SMBs to provide their customers with more convenient ways to pay, as well as have an online presence, are even more critical now. At the height of the crisis, positive sentiment and support for SMBs was extremely strong, with consumers preferring to shop at neighborhood stores, and spread the word among family and friends to support local businesses. The study shows that consumers across CEMEA markets continue to feel strongly about supporting SMEs and local businesses.
“Our research shows how the COVID-19 pandemic has transformed the way the region’s consumers spend their money, with many of these significant behavioral changes likely to continue after the pandemic is over,” says Best. “As online shopping and contactless payments become the ‘new normal’, it is more important than ever that businesses adapt to the changing consumer demand for a digital experience, which is increasingly seen as a safer and more seamless alternative to cash.”
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1 COVID-19 Impact Tracker in CEMEA, September 2021 – KSA, Russia, South Africa and UAE
2 Visa’s Back To Business Study 2021
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