In line with the world’s most forward looking economies, the UAE is working to lead the digital front across the global economy. One may say that for a country with 75 per cent of its transactions cash based, the goal to become a cashless society by 2020 is aggressive; however the UAE is well known for executing the unimaginable; such as the world’s tallest building and the world’s biggest mall. Flying cars, driverless taxis and robot cops are ready to be piloted in the streets of UAE by the end of 2017. Given this backdrop, it is probable that the UAE will also become an almost cashless society by 2020.

Can this be done?

The potential is certainly there. The UAE has one of the highest mobile phone penetrations in the world, according to the Telecommunications Regulatory Authority. Global information company, Nielsen, has reported that for every 100 UAE residents about 78 of them own a smart phone. The adoption of digital technology is even wider in the UAE, with its tech-savvy young and affluent population. Furthermore, the embracing of new technologies is known to be higher in emerging markets than in developed countries.

Indeed, there is a widespread desire throughout the GCC for greater convenience in the financial transactions space. According to some, this can create a potential $3 billion market in the UAE alone by next year.

Modern technology has led to significant evolution in the payment space, where traditional wallets can now be easily replaced with a mobile phone. Most payment transactions for which the customer needs to visit a bank’s branch can now be executed simply through online or mobile banking.

Security concern

With electronic payments rapidly becoming the new norm, the idea of a cashless society is becoming a bigger reality, leading to demands for stronger authentication — without curtailing transactions. Cashless, contactless and frictionless payment transactions are the future; however, the perennial debate over security and privacy also needs to be addressed. Fraud and the failure to prevent fraud are not due to a lack of secure solutions, but a lack of wider adoption of a consistent standard. Currently, there are many security solutions available in the market that if implemented correctly and consistently, can prevent most instances of fraud.

The average person will always want the highest level of security possible to protect their assets, but in practicality, they are only willing to trouble themselves to a certain degree. While they want fast, unhindered payments, they also do not want to go through tedious authentication levels such as trying to remember long and complex passwords or carrying around tokens.

The UAE is doing everything it can to push digital finance and educate its citizens that mobile payment technology is absolutely secure and is the way forward.

Top priority

The UAE aims to become a cashless society by 2020, as per the Smart Government initiative. Digital commerce and cashless payments have been identified as top priorities in the UAE Vision for 2021. All the ground work is very well carved out to make this vision a reality. The UAE mobile wallet initiative also known as Emirates Digital Wallet, which will connect the entire payments ecosystem including banks, exchange houses, billers and other financial entities, is already in development phase and is planned to go live by early next year. Furthermore, the Wage Protection System, under which the UAE’s 4.7 million migrant workers will be paid electronically, is another great example of the UAE’s effort to create an all inclusive digital economy.

Mobile wallets

Although banks are partnering up with mobile payment ventures to enable digital payments, some may think that there is a grave danger emerging of Original Equipment Manufacturer (OEM) wallet providers and other technology giants such as Samsung, Apple and Google taking the lead in the payments space. The banking industry however does not see this as a threat; rather it is viewed as an enabler. In fact, banks are experts in providing financial services and have come a long way in digitising their products. Mobile wallets are simply add-on services that are an integral part of the industry’s digital future. In the recent past banks have been too focused on rebuilding after the global financial crisis and consequently, have not given financial technology their full attention, enabling non-bank players to enter the market. However, today the game has changed and most banks are heavily investing in digitisation and technological infrastructure to make progressive head way.

Banks are clearly aware of the benefits of digitisation. Mobile wallets enable banks to provide an all inclusive payment eco system, thereby increasing customer convenience. Wallets can be viewed as a complimentary accessory among many other accessories that can be used as a plug and play. In the wider scheme, banks must continue to enable wallets, e-commerce platforms, and payment aggregators. It is very clear that the banking network is at the heart of everything, empowering a multi-payment ecosystem.

The challenge for financial institutions is to become the digital main bank for their clients. It is here that banks will need to offer the best service in terms of ease of use, control, management of functionality and security. Banks must also invest time in educating customers on moving to digital channels to drive the shift from traditional branches to more effective digital mediums.

— Shezad Hameed, country head of Retail Banking, Standard Chartered