UAE’s Real-time Payment Scheme


Being ready for real-time payments may require technology procurement, capacity building, culture change or a mixture of all three.

While a significant portion of payments made in the United Arab Emirates continues to be cash-based, we are now seeing a steady shift towards digital alternatives. Greater change is in store. The Central Bank of the UAE has announced National Payment Systems Strategy (NPSS), which will bring universal interoperability to payment systems and transform the country into a cashless society. At the core of this society will be real-time (or instant) payments. The NPSS will encourage a real-time 24*7 payment culture and the establishment of open banking to catalyse economic growth. The Central Bank intends the UAE Instant Payments Platform (IPP) to provide best-in-class payment services, promote financial inclusion, and increase the country’s financial stability.

Real-time Payment Ecosystem In GCC

According to ACI Worldwide’s Prime Time for Real-Time report, 28 million real-time transactions were made in the UAE in 2021, and this figure is expected to grow to 134 million by 2026. Real-time payments accounted for 3.2 per cent of the nation’s total non-paper-based transactions last year and are projected to account for 10.4 per cent of all electronic payments by 2026. Neighbouring Saudi Arabia launched its inaugural real-time payments system, Sarie, in April last year, with real-time transaction volumes reaching 175 million. Estimated cost savings stood at $23 million for businesses and consumers. Elsewhere in the GCC, Bahrain, which has a more mature real-time payments ecosystem, recorded 142 million real-time transactions in 2021, with estimated cost savings of $39 million.

IPP – the benefits for banks

The UAE’s IPP scheme puts the country within reach of a range of beneficial use cases, especially given the presence of RtP and centralised addressing services in Phase 1 and plans to add services such as eDDA (Electronic Direct Debit Authorisation) and e-cheque services shortly after that. Value-added services have been closely associated with real-time payment innovation around the world. The IPP will allow UAE banks to tap new customer segments and offer differentiated services to consumers and merchants.

Benefitting from the IPP, however, means going beyond mere compliance to implement strong, always-on systems that optimise the customer experience and build market confidence. Consumers will naturally welcome the convenience of secure, instant, always-available transactions. The UAE’s high smartphone penetration rate and digital-native population require a response to IPP from financial institutions to recognise the need for quick, convenient, and intuitive experiences. Engagement and loyalty from consumers will also lead to increased activity and economic growth.

To reap the rewards that the UAE’s IPP scheme holds, institutions must prepare for the likelihood that real-time services will be instantly popular. Banks and their processing partners must be capable of providing high availability in their services if they are to survive the wave of innovation that follows. They must plan scalability and avoid downtime at all costs by making appropriate systems investments.

The use-case explosion

Digital platforms must also be flexible to keep up with changes in consumer preferences. They should support card and non-card transactions and other payment methods. And they must be built on a hub architecture that can incorporate future payment types and workflows as soon as they emerge. They must also accommodate the coexistence of ISO and non-ISO systems and callouts to other elements such as core banking and digital channels via Open APIs.

Once the IPP launches in the UAE, use cases will explode. Banks and other FSI entities must be ready to support these use cases while understanding that not all of them will be customer-centric. For example, payroll can significantly benefit from real-time payments, turning settlement cycles into a thing of the past. But many use cases will involve the enhancement of the customer experience. Indeed, entirely new businesses may spring up to fill these gaps. In nations that have led the way in real-time payments, such as India and Malaysia, multiple use cases for real-time payments have taken off, along with the number of neo-banks and fintech companies capable of catering to digital-native customers from Day One of their operations.

Real-time payment schemes are invariably accompanied by multiple launches of value-added services as part of an FSI business’ core offering, whether the business is an established name or a start-up. Such services speed up adoption by consumers, merchants, and businesses. They often enhance security and increase ROI as new digital services are commonly designed to replace paper-based transactions such as cheques and cash. Consumers are drawn to these replacement services as they want to send money to friends and family without dealing with the complexities of account numbers and sort codes, preferring to use more memorable identifiers such as mobile numbers or email addresses. Businesses meanwhile favour more efficient invoice reconciliation and immediate liquidity for improved working capital. FSIs will provide all these benefits through value-added services on top of core real-time offerings.

Be prepared

Being ready for real-time payments may require technology procurement, capacity building, culture change or a mixture of all three. But for those that prepare well, through a well-provisioned digital system that is scalable and agile, IPP will pave the path to new offerings, new customers, and new prosperity.

If you liked reading this, you might like our other stories
Saudi Arabia To Celebrate National Day In The Metaverse
The Algorithms Behind Social Media’s Stickiness