Real-time payments set to underpin economic growth in the GCC

The digital transformation of our economies has given rise to an entire ecosystem of new services, new behaviours and new expectations among consumers and businesses alike. Smartphones and its new super apps have changed the way we shop, pay, travel and enjoy our free time.

Our new lifestyle comes with the expectation of immediacy – consumers and businesses want to be ‘on’ 24x7x365 – and payments for goods and services is no exception.

More and more consumers and businesses expect instantaneous transfers of funds to be standard. This is nothing less than a revolution in the payments industry – a major disruption and a challenge to which banks and their partners must rise.

I see three main drivers that enable and accelerate the move towards real-time payments (RTP) in the Middle East:

1. Central mandates help catapult the GCC region to success
The rapid adoption of real-time schemes has often been driven by governments, regulators, and central banks; we highlight the role of central authorities in our 2022 Prime Time for Real-Time report. In 2021, the governments of Saudi Arabia and Bahrain launched real-time payments schemes, the United Arab Emirates (UAE) is set to launch its IPP scheme in 2023. Kuwait, Oman, Qatar, and Iraq are other countries in the region poised to follow suit.

Initiatives are invariably aimed at promoting best-in-class payments services, financial inclusion, and increased financial stability, all of which will inevitably lead to stronger economic growth.

Upon the launch of Saudi Arabia’s RTP system, Sarie, in April 2021, the Kingdom saw real-time transaction volumes reach 175 million that year. Cost savings were estimated at $23m for businesses and consumers, and the economic boost was calculated at around US$166 million. In Bahrain, a more mature RTP market, 142 million real-time payments were recorded last year, with cost savings of US$39 million and an economic boost of US$246 million. When the UAE’s Instant Payments Platform (IPP) goes live, the government expects real-time transactions in the country to make up 10.4% of digital payments by 2026.

We can expect these successes to continue. GCC governments have always shown a willingness to encourage and incentivise private sector growth. As a result, the region is home to a strong start-up ecosystem and an especially vibrant fintech sector supported by cloud hyper-providers. Our report shows a clear link between hands-on government involvement in RTP and the speed of its adoption, and strong central mandates have helped to catapult the GCC region to success.

2. Request to pay services will allow for new revenue streams
To gain maximum benefit from real-time payments and to drive real-time transactions, building value-added services on top of the new payments rails is crucial. This will enable banks to offer new innovative products and services — to consumers, corporate and merchants. Request to Pay Digital Overlay Services — notably UPI in India or Pix in Brazil — have become very popular with consumers. They allow consumers to pay merchants directly and gain control over their finances in completely different ways.

Innovative banks that partner with fintech innovators to build RTP-enabled, digital payment experiences will be positioned to drive the largest number of real-time payments transactions and gain the maximum benefit from their investment in real-time.

To take advantage of these opportunities, financial institutions will have to select the right partner and understand that new services must account for the new consumer who inhabits a post-pandemic, hybrid workplace and who shops and banks from home by default. Therefore, real-time payments must be seen not just as a core, instant-transactions proposition, but also as a suite of services that enhance convenience and add value for consumers.

3. Cloud as the big enabler of real-time payments
It is hard to imagine RTP working without a robust underlying IT infrastructure and for many reasons, cloud computing stands apart as a key enabler of instant payments. As the competitiveness of the RTP space heats up, cloud will make it possible for financial institutions to realise a faster time to market as it standardises IT operations and security in ways that accelerate the deployment of infrastructure and simplify connectivity. The cloud is also famously flexible, allowing these organisations to introduce and then rapidly scale new digital experiences that resonate best with customers.

Moreover, in the highly regulated and security conscious world of finance, the fact that the region’s hyperscale providers can manage and scale data security and privacy requirements and offer near-automatic regulatory compliance places a tick in that all-important checkbox. As if all this wasn’t compelling enough, the hyperscale providers offer the economies of scale to reduce costs in a range of areas.

Security at scale builds trust, while better analytics capabilities help to build more relevant use cases. The availability and choice of hyperscale cloud providers in the region will further accelerate RTP service delivery.

For these reasons and more, the cloud stands apart as the precise environment RTP providers need to take full advantage of the significant real-time opportunity. The cloud has proven itself as the launchpad for digital services across industries, and the payments sector must become cloud-first and data-centric to thrive.

Prime time for real-time
The payments revolution is already in full swing. As we have seen, governments want it because it drives economic growth, and FSI players want it because it will help them to build new revenue streams. And as it happens, the necessary technology for implementing it already exists. All that is left for the FSI stakeholder is to decide when and how they will move.

The RTP market will be designed by those who look beyond the core necessities to the world their customers inhabit. The home shopper, the mobile-banking customer — whatever the use case, there is a smorgasbord of RTP-enabled services just waiting to be invented. And a wealth of new revenue streams awaits their pioneers.

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

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