Beckoning a new dawn for real-time payments in the UAE

As the UAE moves closer to the introduction of its mandated real-time payments scheme, due for launch in the fourth quarter of this year, financial institutions across the nation stand to be its beneficiaries. The innovative instant payments platform (IPP) will open the country’s financial infrastructure to round-the-clock payments, 365 days a year.

Instant transfers between Dhs-denominated bank accounts are a cornerstone of the National Payments Systems Strategy and lay the groundwork for an innovative payments ecosystem that has already proven to be immensely valuable in countries across the globe.

The momentum towards real-time payments is an inevitable effect of changing consumer preferences and the need for businesses to operate in real-time. The benefits of being able to send and accept payments in the blink of an eye go beyond speed. For billers and merchants, real time improves liquidity management, payments data and analytics, and cost savings by avoiding interchange fees. While the most common uses for real-time payments centre around person-to-person and consumer-to-business payments, real time rails can also be used further, such as to develop value-added services that create additional revenue streams for financial institutions.

Consumers have long craved for the convenience of secure, instantaneous, 24/7 fund transfers. The UAE has one of the world’s highest smartphone penetration rates and a young population that live a substantial proportion of their lives in digital spaces. If these digital natives can move money through their handheld devices instantaneously, financial institutions that allow them to do so will earn their engagement and loyalty. Given the scale and established customer bases of UAE financial institutions, they are ideally positioned to deliver on the potential held by immediate payments. Additional services facilitated will also boost consumer spending and heighten economic growth.

As I see it, here are three potential steps to seize the initiative.

1. Prepare for volume
Customers expect “real-time” services. Financial institutions and processors must provide for what the term implies. The offering must be highly scalable and available 24/7. All parties in the service chain must invest in systems that meet these demands. The platform must have robust payment orchestration capabilities, support other payment types — card and non-card, including alternative payment methods. This convergence necessitates a strong hub architecture that can extend to incorporate future payment types and workflow processes as they emerge. It must be able to accommodate the coexistence of ISO and non-ISO systems, and callouts to other elements such as core banking and digital channels via Open APIs.

2. Unlock more use cases
The fraternity should look towards successful schemes in other countries: such as India and Malaysia, where consumers and businesses have seen continuous growth, driven by multiple use cases for real-time payments, as well as an increase in the number of neo-banks and fintech companies whose propositions benefit from a digital-native customer base. In the UAE, operators are looking to enable multiple use cases for real-time payments from the get-go. Hence, financial institutions must be geared to support the need. Sometimes the value-add in a use case is found at the initiator’s end of the transaction. An example is payroll, where the time gained pre-transaction for the corporate customer is of immense importance. By switching payroll to real-time payments, organisations no longer have to concern themselves with settlement cycles.

3. Accelerate time to value
In many countries, schemes have been launching new value-added services as part of their core offering, and even as mandated requirements for participants. These services are designed to accelerate adoption by consumers, merchants, and business, improve security and increase the value of participants’ investment. The biggest addressable market is in paper-based payments, both cash and cheque. These new services often target the replacement of paper-based transactions with seamless digital real-time experiences. Consumers should find it easy to send money to friends and family. Instead of using bank accounts and sort codes, alias or proxy identifiers like a mobile number or email can be introduced to ease the experience. Businesses must reap tangible benefits like better reconciliation of invoices and immediate liquidity for improved working capital. To enable this, services must be enabled at the core of the scheme, and real-time payment solutions at financial institutions will need additional capabilities as part of their core product.

Path to success
Real-time payments have far-reaching benefits for the entire financial ecosystem. By making the right technology investments that ride on real-time rails, UAE financial institutions will find that IPP presents them with the opportunity to win new customers and compete successfully in the future.

Santhosh Rao is the senior vice president, Sales – MEASA at ACI Worldwide

Read: Here’s how UAE banks can protect real-time payments from fraud