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Real-Time Payments in the United Arab Emirates

5 min read

Real-Time Payments in the United Arab Emirates

What you need to know about the launch of Real-Time Payments in the United Arab Emirates

Real-time payments have been a game-changer for financial transactions. Businesses and consumers love the speed and simplicity inherent in this financial transaction revolution. In the United States, the market for RTP is expected to grow by a CAGR of 34.9% by 2030. United Arab Emirates (UAE) is entering the Real-Time Payments ecosystem with an announcement by The Central Bank of UAE (CBUAE) on UAE’s Instant Payment Platform (IPP) initiative, part of the National Payment Systems Strategy (NPSS); the launch of the IPP is a three-phase effort into late 2023. The UAE joins Bahrain, Kuwait, and the Kingdom of Saudi Arabia (KSA), which have also developed instant payment schemes. Here is an update from Eastnets on what the IPP entails and how it must be protected against fast fraud.

The UAE Instant Payment Platform (IPP) and Real-Time Payments

The Central Bank of UAE (CBUAE) has a vision of a robust, standards-based, domestic real-time payments scheme used by all financial institutions. This vision became a reality with the announcement on the 15th of December 2022 by the CBUAE about the imminent release of the Real-Time Payments Instant Payment Platform (IPP) in the UAE. The statement explains how the IPP will be deployed using a phased implementation, with the initial launch supported by a pilot group of licensed financial institutions.

The IPP is an essential part of the move by the UAE towards a cashless society. The CBUAE, in developing the infrastructure to deliver this, describes a collection of digitization tools and frameworks in its Annual Report 2021. The National Payment Systems Strategy (NPSS), mentioned in the report, is a central part of this digitized financial infrastructure, providing the foundation stone for the facilitation of seamless electronic transactions.

The CBUAE describes the NPSS objectives as: “Modernize the payments infrastructure, an SME funding platform, and the Financial Services Cloud Infrastructure, with the objective of making the UAE a center of excellence in MENA financial cloud services.”

Fully digitized financial transactions will provide innovation opportunities for UAE firms with the NPSS and IPP delivering a platform for the digitization of the financial services sector in the country. 

The support for digitizing financial services is critical for the UAE, as the UAE’s previous instant payments initiative, “Immediate Payment Instructions” (IPI), another domestic instant payments scheme launched in 2019 and backed by 70+ institutions, had limited uptake. According to the Financial Stability Report from the Central Bank of the UAE (CBUAE), the IPI saw some uptick in use to 2021, showing demand. However, the IPI still underperformed, which is attributed to the limits placed on use cases handled by the IPI; limitations included restrictions on handling transactions to only eight hours a day, five days a week.

The IPP is expected to reinvigorate Real-Time Payments by bridging the gaps in the IPI use cases and forging a new generation of payment service offerings. 

According to Mordor Intelligence, Real-Time Payments in the UAE are expected to grow by a CAGR of 14.56% by 2027. If this is the case, the move to the IPP is a critical requirement for the financial services sector in the UAE, allowing it to handle large volumes of financial transactions.

A statement from H.E. Khaled Mohamed Balama, Governor of the CBUAE, sums up the IPP initiative: “The CBUAE has set out to implement ambitious initiatives in financial infrastructure transformation and national payment systems in close cooperation with the financial industry officials. We encourage the financial sector to implement the innovative functionalities and transfer the benefits to the financial consumers.”

The NPSS roll-out involves three phases, the pilot had taken place in late 2022. The second phase launch is imminent and expected in Q2 2023; this phase will extend the service to include direct debit and e-cheque clearing. The roll-out will continue with phase three expected to go-live in Q4 2023. 

What is needed for Real-Time Payments to succeed?

Real-Time Payment support by the IPP, without the limits experienced using the IPI, will revolutionize the payments system of the UAE. This is a welcome move for the financial services sector, merchants, and consumers. The importance of the financial industry to ready itself for the IPP was highlighted by the CBUAE, which stressed how the Instant Payment Platform must be implemented following the approved action plan.

The financial sector must also be ready to take on the expected increase in fraud that comes with a fast, simplified RTP system, such as the IPP. The world of 24/7/265 instant payments is attractive to fraudsters as much as it is to the merchant, financial service, and consumer. Eastnets has written about the complex nature of anti-fraud and RTP in a blog post, “How can banks stop fraud in a world of instant payments?” We discussed the inherent danger of Real-Time Payments that will lead to real-time fraud. As businesses in the UAE become part of the ecosystem of the IPP, they must weave into this ecosystem advanced anti-fraud measures that work with RTP systems.

Instant, real-time payments place challenges on the system and must leverage an integrated and intelligent approach. Payment Hubs, such as PaymentSafe, are designed to comply with all business, technical, and security requirements outlined in the central bank rulebook, so commercial banks can easily implement them. By integrating with a fraud detection solution, PaymentSafe performs real-time risk assessments on each payment and detects fraudulent activity. This helps banks to deliver faster, more secure, and more reliable payments to customers. PaymentSafe utilizes robust security measures, such as encryption for data storage and communication with other systems, as well as multi-factor authentication to prevent unauthorized access.  Payment hubs, such as PaymentSafe, work because they are real-time and in sync with the RTP system itself

As your organization moves to faster payments, evaluate advanced tools that respond, in real time.

Contact us to learn more about how we can help you modernize your payment infrastructure today. 


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