Banking internet
Digital payment solutions, despite the widespread reach of high-speed internet, have not had it easy, primarily because a large number of this consumer demographic remains unbanked. Image Credit: Pixabay

We live in an age of instant gratification - moving money across continents is no exception. From a historical and current perspective, the payments sector is nothing short of an essential service that keeps the global economy ticking.

The sector transformed its purpose to suit the needs of the global economy, with the rollout of faster transactions compared to traditional wire transfers and lengthy bank trails. Now, with the emergence of digital solutions as an enabler, the ground underneath the sector has shifted once again.

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In a connected world, digital is being increasingly seen as the answer to achieve financial inclusion for the estimated 272 million people who work outside their home countries and whose remittances sustain nearly 800 million people, especially in low and middle-income countries. But can digital build on its promise of banking the unbanked migrant?

An obvious solution

The UAE, which is one of the major hubs of the global migrant economy, has a possible answer of its own to support this cause. The WPS (Wages Protection System) digitizes the unbanked.

The UAE’s personal remittances touched an all-time high of Dh41.4 billion in the first quarter of 2020 - a growth of 7.8 per cent over last year. But the numbers are forecast to hit new lows until the end of this year - and yet that doesn’t take away the crucial role of the sector in fueling global economies.

Indicators apart, stats reveal that over 60 per cent of UAE’s adult working population is currently outside the mainstream financial system, particularly those working in the areas of manufacturing, trading, F&B, and construction. In short, the people who make up the country’s blue-collar worker segment.

Reaching out

Digital payment solutions, despite the widespread reach of high-speed internet, have not had it easy, primarily because a large number of this consumer demographic remains unbanked. This is where the UAE’s WPS makes a difference - but by looking at the problem of payments differently.

Approved by the UAE Government in 2009, in conjunction with the Central Bank and Ministry of Labor, WPS puts the onus on companies to honor the monthly wage payments as outlined in their labor contracts. Once enrolled with a licensed service provider, such as LuLu Exchange for example, employees are provided with a salary card that doubles up as an international debit card.

The link

This streamlines wage payments and connects the unbanked to formal banking services in one shot. WPS’ impact on digitizing the traditional payments sector developed roots with the Central Bank of UAE’s decision last year to allow the use of such salary cards as an online payment option. This feature found its inflection point in recent months, with millions of blue-collar workers across the country seeking a solution to their cross-border payment needs during the peak of the ongoing health crisis.

To give an example of WPS’ positive impact on the digital payments industry, we have been witnessing a 200 per cent growth in online transactions from customers using our ‘MyPayMyCard’ salary card. Furthermore, such transactions account for a healthy 25-30 per cent of our total online transactions.

When crunched for value, these numbers throw up an interesting insight: the transition to digital is so much more smoother when regulators and service providers marry the convenience of the medium with existing made-for-physical customer experiences. In short, it helps to keep things real... even in a virtual world.

- Richard Wason is CEO of LuLu Financial Group.