The adoption of digital technology in the Middle East
Creating opportunities for businesses operating in the region.
Companies invest billions in digital channels each year to improve customer experience, but it is important for them to understand what consumers actually want to ensure their investment pays off. Since the pandemic, digital channels have become increasingly important for both consumers and companies, but it remains to be seen whether consumers will revert to their pre-pandemic behavior, maintain their digital ways, or adopt entirely new behaviors. A McKinsey survey of three Middle Eastern markets offers insights into consumer preferences and patterns, providing guidance for companies seeking to develop successful digital strategies. The research suggests that digital channel adoption and spending will continue to rise, with artificial intelligence playing an increasingly important role. To engage consumers more effectively, companies should tailor their offerings to specific countries and industries and allocate a higher share of advertising spending to digital channels. The survey's nine charts offer a clear view of consumer preferences and provide guidance on where companies can focus their efforts.
1. Digital access varies by country
The three Middle Eastern countries in the survey have varying levels of internet penetration and access modes. The UAE leads with 99% of consumers having internet access, while Egypt lags with only 71%. The UAE also outperforms Egypt and Saudi Arabia in mobile and broadband subscriptions. Egypt, however, has the largest untapped market for digital businesses, with 31 million residents lacking internet access. Companies that focus on improving digital channels and catering to the Egyptian market have a great potential for growth in the future.
2. Consumers embrace digital across industries
Middle Eastern consumers have adopted digital channels at a similar rate to leading countries in Europe and North America over the past six months. On average, consumers in Saudi Arabia and the United Arab Emirates use digital channels to interact with around 4.5 industries, while in Egypt the average is 3.8 industries. The overall digital adoption rate in the region stands at 78 percent, with Egypt slightly behind at 74 percent. This high level of digital engagement presents an opportunity for companies in the Middle East to create a competitive edge by developing innovative features and functionality specifically tailored to this market, which can then be exported to other regions.
3. Apps are the preferred digital channel for consumers
Middle Eastern consumers prefer mobile apps over websites as their primary channel, with mobile engagement rates 1.6 times higher than in Europe and North America. They also heavily use marketplaces, similar to Asia and 1.7 times more than in Europe and North America. In Egypt, 25% of users prefer alternative channels such as social media or call centers over websites or apps.
4. Digital adoption takes hold across industries
Digital adoption rates across industries in the three surveyed Middle Eastern countries are relatively similar, with rates of about 75-80%. However, the grocery and healthcare industries have the lowest digital adoption rates, at around 55%, as they heavily rely on in-person experiences. The United Arab Emirates lags behind in digital adoption of grocery, healthcare, and apparel compared to its neighbors, likely due to the strong mall culture in Dubai. Meanwhile, Egypt has lower digital adoption of financial services (banking and insurance) than its neighbors.
5. User experience is key to higher digital adoption
Digital services can be more convenient and faster than in-person interactions, but many people still prefer physical services because they find digital services difficult to use or believe they lack desired functionality. This is especially true in Egypt and Saudi Arabia where healthcare and government digital services are seen as particularly challenging. Even in the United Arab Emirates, where the government is promoting digital adoption, people are more likely to feel that in-person processes are faster. To increase digital adoption, organizations must create digital user experiences that are tailored to people's needs and address their pain points. Those that can successfully do this will stand out from the competition.
6. Trust in digital channels does not guarantee satisfaction
Companies in the region must focus on providing a digital experience that prioritizes what consumers value the most. Just because people trust digital channels doesn't mean they are satisfied with the services being offered. Trust is important, but user experience, product availability, and information are the main factors that contribute to user dissatisfaction. The good news is that companies can improve their performance on these factors and increase consumer satisfaction.
7. Digital use among consumers is on the rise
Consumers in the region have been increasingly using digital channels over the past three years, and this trend is expected to continue. Most consumers across countries and industries anticipate maintaining or increasing their digital use in the next six months, except for grocery in the United Arab Emirates. This growth is in contrast to Europe where digital adoption has slowed down. Egypt is expected to see the highest growth in digital service use compared to Saudi Arabia and the United Arab Emirates, with insurance, government, healthcare in Egypt, and travel in the UAE experiencing the greatest increases. Companies in other industries can take inspiration from this trend and aim to improve their digital user experiences.
9. Consumers warm to emerging tech
Although emerging technologies such as cryptocurrency have faced recent issues, they continue to garner attention globally. However, widespread adoption has yet to be achieved, as consumers are still trying to understand their usefulness. In the Middle East, digital users have higher expectations for these technologies than those in Europe and North America, with Egypt slightly ahead of Saudi Arabia and the UAE. AI and hyperpersonalization were viewed as having the most potential, while the impact of the metaverse and nonfungible tokens (NFTs) is still uncertain. In Latin America, digital users have similar expectations as those in the Middle East.
To take advantage of the growing digital adoption, companies should prioritize a mobile strategy and create products that are optimized for mobile devices.
To succeed in the Middle East region, companies need to focus on designing mobile-first products and taking advantage of the growing digital adoption. Egypt presents a significant growth opportunity for first movers. In sectors with more consumer touchpoints, such as grocery, healthcare, and retail, companies should invest in improving the user experience to increase adoption rates. Digital marketing spending should be strategic and experimentation with consumer engagement is crucial. Companies should also prioritize customer value management to enhance pricing and invest in personalization to deliver exceptional experiences. By managing these priorities, companies can gain market share in this rapidly evolving region.
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