A high-level panel of the finance industry’s payments leaders recently joined the Real Time Payments: Convergence, Ideation, and Innovation Roundtable Debate in Dubai. The event was hosted by MEA Finance in partnership with ACI Worldwide and supported by IR.
Attendees and event highlights
The focus of the roundtable was on real-time payments, with attendees primarily from leading banking and financial institutions in the Middle East, participating in various roundtable discussions throughout the day.
It’s predicted that by 2026, immediate payments will account for 25% of electronic payments globally and will be the key driver of payments change in the UAE.
"The implementation of the National Payments System Strategy (NPSS) by the Central Bank of UAE (CBUAE) will result in greater efficiency of the entire payment ecosystem"... MEA Finance
The UAE is on the brink of an instant payment’s revolution. The panelists revealed the potential impact of the real time payments transformation in the UAE, which is expected to drive significant economic benefits.
The new real time payments infrastructure will support both the everyday consumer, and corporate payments 24/7, with eagerness from Fintechs to participate, either as payments facilitators or in partnership with banks.
Financial institutions will capitalize through the introduction of new revenue models, by curbing institution expenses, driving customer satisfaction, and increasing consumer loyalty through embedded payment experiences.
While the scheme is being met with positivity in its initial stages, it is just the ‘rails’, or supporting infrastructure. It is up to the banks and Fintechs to build the ‘trains’, or overlays that will flow along the rails.
- The real time payments scheme will offer better liquidity, particularly for small to medium enterprises (SMEs).
- While cash has been the most frequently used payment method in the UAE, it can be costly to manage. Bank charges (statement fees, reconciliation), cash shrink (theft, fraud or other cash loss activities), cash in transit deposit costs, close/start, rebuild drawer etc. These additional costs can be removed with instant payments.
- Workers can be paid quickly, allowing better financial planning
- Businesses can be more flexible, and able to offer value added services to their customers.
Bank and financial institutions need to decide how the new scheme will fit in with their existing suite of services, from an operational, technical, and business perspective.
Key operational considerations
- Fraud and compliance, where authentication and screening need to happen in milliseconds.
- Customer support, which will need to be available 24x7x365.
- Transaction settlement and liquidity management, which will be affected continually throughout the day, including holidays and weekends.
Key technical considerations
- Is the core banking system ready to operate in real-time 24/7? This means an evaluation of platforms to ensure they are secure and agile enough to move fast payments now and in the future.
- How will they manage downtime through outages and other technical faults?
- Have they factored in a robust always-on monitoring system.
- How will they meet SLAs? Key business considerations
Key business considerations
- Have they developed a solid business plan around instant payments?
- Are they just doing this for compliance, or are they building another revenue stream?
- Banks need to generate revenue from the consumers, so how do they ensure that corporates at every level are on board with the scheme?
Real time payments schemes in the Middle East are already underway:
- Bahrain – has been live for several years
- Saudi Arabia – will be ready in a matter of months
- UAE – is anticipated to go live in 2023 In the Middle East, there are also digital overlay services that are used especially by the Fintechs. For example, consider central banks to be the ‘railways’, then the banks are the ones getting the passengers and the Fintechs are the ones selling the additional services like coffee.
The Middle East has the eagerness and the momentum to adopt real time payments schemes, and with the tech-savvy younger generation already expecting instant payments, Fintechs will want to work with banks, playing a big part in launching new schemes.
Central bank will oversee the inflow and outflow of funds, and have an overview of the adoption rate, and this will help evaluate and monitor customer experience.
Real time payments are an open environment with susceptibility to fraud and money laundering, so it needs to be heavily monitored.
"With its inaugural real time payments scheme launched by the Central Bank in April 2021, early uptake resulted in real-time payments transaction volumes reaching 175 million in 2021. This lead to estimated cost savings of US$23 million for businesses and consumers and helped to unlock US$166 million of economic output"... ACI Worldwide
While Economic Impact data for the UAE is not available as the Instant Payments Platform scheme is not yet live, the clear link between adoption of real-time payments and economic growth has already been demonstrated by Saudi Arabia.
IR and ACI
IR and real time payments software provider, ACI have had a two-decade partnership, which has recently been extended to include end-to-end enterprise transaction monitoring.
Part of the ACI Enterprise Payments Platform, ACI Payments Monitoring, powered by IR Transact provides banks and financial institutions with visibility into the health of their systems and the status of payments in real time. The monitoring solution covers high and low value real-time payments, as well as card payments.