So you’ve set up your business and now want to join the world of e-commerce? Smart move. The industry is on the up.
An estimated 30 million people in the Middle East shopped online in 2013, up 65 percent from 2011, according to a PayPal survey. The market is set to reach $15bn this year, up from $11.2bn in 2013.
But there are a few hoops to jump through before you can process payments online.
The first step, according to tech entrepreneur and founder of e-commerce website JadoPado, Omar Kassim, is to set up a merchant account with an “acquiring bank” – one allowed to accept and process cards.
Only three banks in the UAE are authorized to do this. They are Network International (the Emirates Bank payment gateway), Mashreq Bank and National Bank of Abu Dhabi (NBAD). These banks all charge set-up fees and annual fees.
In addition they take a cut on each transaction. Network International, according to Mr Kassim’s experience, starts at three percent, while Mashreq and National Bank of Abu Dhabi start at around 3.5 – 3.65 percent. This fee is split between the acquirer, the network and the card issuer.
Security deposits are generally required too – Network International’s $50,000 can be prohibitive for SMEs, especially start-ups.
Next you need a payment gateway – effectively a point of sale (POS) to process card payments and store data when a customer is shopping online.
These take the form of a hosted payment page (so your website connects to the payment gateway’s server at the last step of the check-out process, to complete the purchase), or an application programming interface (API) (which can be integrated into your own site or mobile app and allow you to connect to the gateway and submit the customer’s credit card data for authorization).
Your website will connect usually with the payment gateway’s server at the last step of your standard checkout process to complete the purchase.
All the local acquiring banks bundle with a payment gateway. Beyond the banks, there are eight third-party payment gateways available in the UAE, according to Wamda: 2Checkout; CashU; Checkout.com; Gate2Play; Innovate Payments (now Telr); PayFort; and PayPal.
Not all will accept payment in dirhams, and set-up fees can vary from nothing (2Checkout) to thousands of dirhams, as can recurring monthly and annual fees. The cost per transaction is usually made up of a percentage plus a flat dollar or dirham rate, ranging from 2.5 – 5.5 percent plus AED 1 ($0.27) – AED 2 ($0.54) per transaction.
Innovate Payments merged with Telr in mid-2014. As well as providing a payment gateway focused on emerging markets in the Middle East and Asia, Telr plans to offer B2B solutions including credit and debit card payment, cash on delivery, mobile payment and payment at third party locations, where customers pay cash at local stores and retrieve deliveries later.
Paypal becoming a regional player
US company PayPal may soon be transforming the e-commerce market in the UAE and across the Middle East.
PayPal launched operations in the region back in 2012 after signing an agreement with Aramex to support Shop & Ship, which makes it easier for people buying products overseas.
Until recently, though, one of the biggest complaints about PayPal was that you could only withdraw funds to a US-based bank account or through a locally issued one in US dollars.
But that is changing after the company signed an agreement with Network International in late 2014 to allow UAE e-commerce companies to withdraw funds from PayPal, in dirhams, directly into their local bank accounts.
E-commerce free zone
If you don’t want to do it yourself, you could also look to use a service like ShopGo, which allows you to create and run your entire store, and allows you to be paid locally through local and global payment gateways, for as little as $79 a month.
And soon there will be a whole free zone dedicated to e-commerce in Dubai, including a payment gateway, a storefront developer, licensing and leasing.
Matajircom, which claims to be the world’s first purpose-built e-commerce hub, will be fully operational in the second quarter of 2015.