Abu Dhabi: The UAE government just boosted its push towards a future of cashless payments by bringing in 16 of the country’s biggest banks that signed a deal to support mobile payments.
The Memorandum of Understanding (MoU) signed by the banks mandates that a new entity will be formed to own and operate a mobile wallet (mWallet) platform, which is part of the UAE’s smart government initiative.
In a statement on Tuesday, the UAE Banks Federation (UBF) said the signing of the memorandum signals the beginning of the implementation stage of the platform, and marks “an important milestone” in the development of mobile payments.
The mWallet was announced in 2014 as a platform for a secure mobile phone app to replace traditional cash payments between any two parties, as well as a means to receive, store, and transfer money. It essentially acts as a cashless wallet, allowing users to make payments anywhere through their smartphones.
Users of the mWallet do not necessarily have to have accounts with any of the 16 partner banks. A spokesperson told Gulf News there hasn’t been a confirmed roll-out date for the service, but once launched, it will allow both residents and tourists in the UAE to use the platform for cashless payments.
Abdul Aziz Al Ghurair, chairman of the UBF, stated that the creation of the platform is a global first and will provide “a vital path towards a future [of] cashless payments and cash-free environment in the UAE.”
“It is an essential and integral building block of the Smart Government initiative and will give the UAE a head start in transforming its economy for the benefit of residents here,” he said in a statement.
Tuesday’s announcement comes two days after telecommunications operator, etisalat, announced the launch of etisalat wallet in the UAE, allowing users to make transactions like purchases and paying utility bills, among others.
But even as more entities push for a cashless future, consumers seem to push back in the UAE, with over 76 per cent of consumer transactions in 2015 having been in cash, according to data from Euromonitor International. That percentage is, however, likely to decrease.
Rabia Yasmeen, an analyst at Euromonitor, said cash payment transactions were valued at Dh215 billion in 2015, a figure that is expected to decline by 1.6 per cent in 2016. Euromonitor expects a 14 per cent growth in card payments in 2016, amounting to Dh208 billion.
“As the government of the UAE works towards establishing smart technologies in the cards and payments sector, we expect that cash transactions will continue to decline in value terms by a compound annual growth rate of -3 per cent during 2016-2021. Considering the latest MoU signed between 16 banks and UAE Banks Federation, this rate could decline further,” Yasmeen told Gulf News.
She added that mobile payments specifically are expected to grow from Dh1.3 billion in 2015 to Dh1.9 billion in 2016, and reach a value of Dh6.4 billion in 2021.
“With one of the highest mobile phone penetration rates in the region, m-wallets are the most interesting arena for banks to play in, as this brings consumers who do not use credit cards or do not have a bank account into the formal payment network,” Yasmeen said.
The mWallet will be regulated by the Central Bank of the UAE.
