Tech-savvy UAE is aggressively adapting smart solutions in all segments of the economy, and with the banking sector being the backbone of the country, it is inevitable that the wave will engulf change faster than one can even think of.
Close on the heels of the 35th Gitex Technology Week, bankers in the region deliberated on various issues that are at the threshold of throwing challenges open and bringing out the best to enhance the experience of both bankers and consumers, with one challenged to provide the best and the other demanding it.
According to Marmore's UAE Banking Report, the government has taken initiatives to digitise the UAE's banking and financial sector under its smart government programme, to offer digital solutions, enhance financial inclusion and minimise transaction costs for consumers. In recent years, consumers, especially those in the younger generation, have shown a preference to meet their banking needs remotely through the Internet.
The UAE Banks Federation, a standards body representing 50 banks in the country, has cleared its mobile wallet project for launch, pending final approval from the Central Bank of the UAE. The project is part of the UAE's smart government initiative and will enable banks to offer peer-to-peer (P2P) and NFC mobile payments, as well as loyalty programmes to customers.
IDC recently estimated that IT spending in the Middle East and Africa in 2015 will surpass $270 billion. UAE banks are looking to get ahead of the technological change happening in the sector.
Commercial Bank of Dubai launched the first personal finance management platform, followed by a Facebook arm, to offer a virtual banking experience. Along the same lines, Mashreq's eCube digital branches and iMashreq self-service branch now include the option to use remote video banking. Mashreq also pioneered its EMV (Europay, MasterCard and Visa)-compliant mobile point-of-sale (POS) solution Payport, and took NFC contactless payments mainstream with its TAP n GO stickers.
In the remittance and payments space, Emirates NBD launched P2P payments to its customers via MePAY, while RakBank launched ATM card-less cash withdrawals. Most recently, Beehive, the UAE's first online marketplace for P2P lending was launched. The introduction of the Al Etihad Credit Bureau increased smartphone penetration amongst the population, and the potential disruption of non-banks are the key ingredients that will drive further change.
At present, the UAE accounts for $230 billion in consumer payments to 170 government entities and more than 350,000 merchants annually, 75 per cent of which are cash transactions. UAE consumers, businesses, merchants, banks, forex companies and even government service providers will be handling far less cash by 2020, according to Triple, a UAE-based digital payments service company.
M.R. Raghu, senior vice-president for research at Markaz, said: "Globally, the usage of cash lessened as plastic cards became more popular. With the introduction of mobile wallets and other mobile-based payment platforms, cash may be affected by the usage of [both debit and credit] cards."
"Innovations in payment systems is only a means by which cash gets transferred to consumers, borrowers and other parties, and banks will still have to play the role of the intermediary connecting various parties. As long as the banks are able to keep up with the changes happening in the sector, and use technology efficiently to reduce costs and improve services they will be able to attract business across verticals."
The UAE is fast emerging as one of the most competitive and fastest-growing markets for cashless payments in the region, with over 12 million cards catering to a bankable population of 3.5 to four million, according to Lafferty Research 2014. The country boasts of a vibrant and tech-savvy populace with high broadband and smartphone penetration levels, and alternative payment mechanisms such as mobile wallets and direct debit platforms are becoming increasingly popular.
E- and m-commerce, NFC payments and innovations such as mobile POS will drive cashless transactions, and bring hitherto untapped segments like home delivery into the payments domain. UAE banks are moving quickly to upgrade payment technologies, spending huge sums to improve their technology infrastructure, with special focus on security.
"Banking has moved from the traditional relationship based to technology-based service, and user experience is now as important as a dedicated relationship manager in how the bank's customer service is perceived," added Raghu,"
"Developing mobile phone compatible solutions and ensuring ease of service is required if banks hope to capture millennial and an increasingly tech-savvy expat clients. Banks are far more likely to succeed in selling their products and increasing cross-sell if they adopt more transparency in their product descriptions, rates and charges."
Ehsaan Ahmed, head of GTS and corporate strategy at Noor Bank, said: "Mobile wallet is emerging as an alternative mechanism to payments. Banks need to continuously invest in developing capability to offer new payment solutions. Relying on traditional expertise of handling payments as cash, cheques or through credit or debit cards, is not sufficient for banks looking to excel in delivering value add to their customers. Banks that are innovative are engaging with specialist partners to ensure they have a value added and competitive solution to take to their clients."
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