Cash remains a preferred payment method for more than a third of consumers in the Middle East and Africa, even as electronic alternatives rapidly gain ground, according to Boston Consulting Group’s (BCG) latest study, titled ‘The Cost of Electronic Payments and Cash’ (pdf). The report — which for the first time includes Egypt among four Middle East and Africa countries — says the region’s reliance on cash continues to set it apart from Europe and other developed markets, though its share has been shrinking in recent years.

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Cash still accounts for around 35% of transactions in the Middle East and Africa, compared to roughly 20% in Europe. But the report — which based its findings on surveys of 100 merchants in each of Egypt, Saudi Arabia, the UAE, and South Africa, along with additional surveys of consumers and merchants conducted in December 2024 — argues that the decline has been sharp, with government-led digitization drives and changing consumer habits pushing adoption of cards, digital wallets, and other electronic payment methods.

The true cost of payments goes beyond fees: Even though merchants usually think of payment costs as the fees they pay banks or processors, the BCG report makes clear that’s only part of the picture. “Payment instruments, including cash, come with multiple direct fees, associated services, and a broad range of indirect costs,” the report notes.

Cash isn’t free: Merchants in Egypt usually prefer cash, as the common perception is that cash is free, but that’s not the case. Our analysis shows the cost of cash in Egypt is about 1.8%. That’s still lower than other methods, but not zero, BCG Cairo’s partner and managing director Bassem Fayek tells us. “A full end-to-end analysis reveals that the cost of accepting cash ranges from 1.3% to 3.0% in Middle East and Africa markets,” the report said. In Egypt, the end-to-end cost of handling cash averages 1.8% of transaction value, made up of 0.1% in direct costs, 1.2% in indirect expenses such as equipment and shrinkage (money damage or loss), and 0.5% in back-office reconciliation. Saudi Arabia (1.6%) and the UAE (1.3%) follow a similar pattern, while South Africa is the outlier at 3.0% due to elevated crime that pushes up secure transport costs. Even where direct costs are low, reconciliation and shrinkage drive the bill.

Cash costs will rise as usage falls: The BCG report warns that the cost of handling cash in Egypt and other MEA markets is likely to increase as usage declines, mirroring trends in Europe and the Nordics. Egypt already sees cash acceptance costs ranging from 1.8% to 2.4%, broadly in line with regional peers but higher than some international benchmarks. In more advanced markets, as cash usage declines, the per-transaction cost actually increases because banks lose economies of scale to maintain ATMs and other infrastructure, Fayek says.

APMs start free, then add fees: BCG notes that alternative payment methods (APMs), such as digital wallets and account-to-account transfers, can be cost-competitive with cards when they reach sufficient scale, citing South Africa where in-store APM acceptance costs 2.7% versus 2.6% for debit cards and 3% for cash. In markets like Saudi Arabia, where government policy actively promotes adoption, costs are even lower (0.3% versus 1% for debit cards).

Egypt, however, was still an outlier at the time of the survey: APMs carried negligible costs because no merchant fees were applied and transactions were largely treated as free peer-to-peer transfers. But the report flags that transaction fees have since been introduced by Egypt’s main APM provider — mirroring a global trend where free P2P services begin charging merchants once they scale.

REMEMBER- In April, state-backed digital payments platform Instapay introduced transfer fees of 0.1% per transaction, with charges ranging between EGP 0.50 and EGP 20. That move followed a record 1.5 bn transactions processed on the app in 2024, worth EGP 2.9 tn. Instapay’s evolution highlights how APMs often launch as free services to drive adoption, before shifting to a fee-based model once they become integral to the payments ecosystem.

Credit vs. non-credit: Credit-based instruments — including credit cards and BNPL schemes — remain more expensive than debit and APMs, with merchants covering higher direct costs tied to providing credit. Across the region, buy-now-pay-later (BNPL) carries the steepest cost: in-store acceptance fees hit 5.6% in Saudi Arabia, 5.9% in the UAE, and 6.3% in South Africa. Online BNPL is even pricier, running 0.3-0.6 percentage points higher. Across markets, BNPL is more than twice as expensive as credit cards, primarily due to significantly higher direct costs resulting from financing and default risk.

Egypt bucks the trend: Here, BNPL acceptance costs are just 2.4% — broadly in line with credit cards at 2.1% — because interest charges are borne by consumers, not merchants. BCG notes this defrays the merchant service fee, making BNPL far cheaper for Egyptian retailers than in neighboring markets. In Egypt, BNPL costs are relatively close to credit cards, but the model is different. Credit cards are usually secured by deposits, while BNPL does not require that, which makes the default risk higher and gives consumers higher short-term purchasing power, Fayek notes.

Egyptian consumers are still cash-heavy: The report also underlines that in Egypt, cash on delivery (COD) remains significantly more expensive for merchants than APMs, debit, or credit cards . Yet COD continues to hold a strong consumer appeal, as many shoppers prefer to inspect goods before payment — a dynamic BCG says mirrors the “pay-after” appeal of credit-based products like BNPL.

Access to customers outweighs cost considerations: More options mean access to a broader customer base. For example, a dentist may accept BNPL, even if it’s more expensive, because it allows patients who otherwise couldn’t afford treatment to pay, Fayek says. BCG notes that merchants in Egypt and across MEA do not choose payment methods solely based on cost — the overriding factor is access to different customer groups. Cards, especially those tied to international schemes, give access to wealthier and business clients, while cash is still seen as the channel to reach more local consumers. BNPL and APMs, meanwhile, are carving out a niche among younger, tech-savvy shoppers. For higher-value sectors like hotels and home furnishings, cards are more heavily favored, whereas food stores and restaurants rely more on cash and APMs. For merchants, the decision to accept new payment methods is less about transaction costs and more about market outreach.

Consumers, on the other side of the equation, put a premium on security and fraud protection — The survey found that “75% of consumers feel very protected when using credit cards, followed by 64% for debit cards, 61% for APMs, and 56% for BNPL.” BCG adds that nearly a third of consumers would cut their spending if these protections were not in place, underlining the role of security in sustaining transaction volumes.

Small merchants bear higher cash costs: The report also shows that merchant size is a major determinant of cost. “The cost of cash acceptance is between two and a half times to four times greater for small and medium-sized merchants compared to large merchants,” as they cannot benefit from economies of scale in handling and transporting cash. By contrast, large retailers not only negotiate lower card acceptance fees — roughly 30% lower than small merchants — but also integrate registers and payment terminals to cut down on indirect costs such as miskeying.

In Egypt, this means the smaller end of the retail market continues to shoulder a disproportionate burden when serving cash-preferring customers, while larger merchants are better placed to absorb the costs of digital transactions thanks to scale discounts and stronger bargaining power with payment providers.

Providers hold the key: The report stresses that payment service providers will play a central role in helping merchants navigate rising indirect and back-office costs. By integrating payments into business processes and advising on the right mix of methods, providers can ensure merchants balance cost with customer reach. This creates opportunities for fintechs and P2P solutions to design offerings tailored to SMEs. No one has really solved the SME payment space yet — it’s an area to watch, Fayek says.

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