The UAE is one of the 20 most advanced digital economies on earth: it has the highest smartphone penetration on the planet, and its government has the world’s first Minister for Artificial Intelligence.
So why is a 17th-century technology — the cheque — still so deeply embedded in business payments processing here?
And why are businesses not grasping digital payments technology with eager hands when it is faster, more efficient and more secure?
The value of cheques processed by the Central Bank of the UAE may have declined 3.2 per cent in 2017 and 5.7 per cent in 2016, but they still made up over 30 per cent of total transactions last year. It is a similar story in other markets across the Middle East.
Meanwhile, in countries such as Germany, Sweden, Norway, Poland and Finland, the use of cheques is very limited or even completely phased out.
The issue many businesses face is that they have complex treasury systems, built for manual, paper-based payments — it can be an incredibly daunting task to rebuild this infrastructure. There are a raft of treasury platforms available for businesses: which one should they invest in?
And how do they know the platform they decide to adopt doesn’t become obsolete in a few years’ time? Sometimes, businesses tell us that they are simply used to managing and processing payments with cheques — habits can be hard to break. Many businesses also feel comforted by the legal protection cheques can provide, where bouncing a cheque may result in fines and criminal charges.
None of these issues are insurmountable and some of them are simply misconceptions. One thing that for sure is that the cost of transitioning to digital will, without a doubt, be worth it in the long run. However, as a banker, we are responsible for working with our customers to help them in their digital transformation.
It’s our responsibility to help them understand the benefits as well as guide them on getting the most out of the digital tools at their disposal. This means banks not only need to invest financially in the technology, but also invest time in supporting their customers.
At HSBC, we are investing $15 billion to $17 billion globally over the next three years, primarily in technology and areas of growth, complementing the work of our digital integration and relationship management teams in supporting our clients transition to digital. Our objective is to make it as easy as possible for our corporate clients to benefit from digital banking solutions.
Payments are only the beginning when it comes to the potential for digital banking for corporates. We recently conducted a survey among our clients in the region to see where they see the most exciting developments in the world of treasury: artificial intelligence (AI) came out as a strong first with 59 per cent of the votes, followed by big data with 24 per cent.
It is early days, but we are looking at using AI and big data to help clients with cash flow forecasting, predictive analytics and chatbot services. The potential to go beyond this is huge: PricewaterhouseCoopers (PwC) predicts that AI will contribute $38 billion to the financial sector in the region by 2030.
There are no longer any excuses for businesses not to adopt digital payments in our region. Not only are governments and central banks actively encouraging it, but as massive economic transformation programmes such as UAE Vision 2021 and Saudi Vision 2030 begin to reach peak activity levels, businesses risk being left behind.
Cheques have survived for over 350 years, and I expect they will be with us for a while longer. However, when you consider the benefits of digital payments, we have surely reached a point where the cheque’s time as a preferred form of payment is coming to an end.
(Noor Adhami is Regional Head of Global Liquidity and Cash Management, HSBC, Middle East, North Africa and Turkey.)