The Central Bank of the United Arab Emirates (CBUAE) this month released its 2021 Financial Stability Report, detailing the measures taken to mitigate the impact of the pandemic on the country’s economy. And despite the bleak macroeconomic landscape and rising inflation, the CBUAE forecasts a “positive outlook” for the UAE’s financial system this year.
CBUAE payment systems remained “robust without disruption” in 2021, helped by accelerating the digitization of financial services. This led to the settlement of a total of 231 million transactions worth 11 trillion dirhams (about 3 billion US dollars) last year.
Continue reading: The UAE’s growing role as a regional FinTech hub
“In particular, the Instant Payment Instruction System (IPI), which provides instantaneous, real-time domestic transfers, saw a significant increase in transaction volume, confirming the trend towards greater use of digital payments over traditional transfer methods,” the report said.
The CBUAE also reported on plans to join the Arabian Gulf System for Financial Automated Quick Payment Transfers (AFAQ) as part of plans to encourage cross-border payments and allow financial institutions (FIs) operating in the UAE to transact with other GCC banks to be settled via their national currencies.
AFAQ connects the payment systems of the six central banks in the six Gulf Cooperation Council (GCC) countries – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
Also read: PYMNTS GCC Series: High Smartphone Penetration, Government Support Drives UAE’s FinTech Growth
Beyond the GCC, the CBUAE also worked closely with Buna, the Arab Monetary Fund’s centralized cross-border payments system, which enables central and commercial banks in the Arab region to seamlessly send and receive cross-border payments in local and international currencies.
See also: UAE Central Bank starts issuing licenses for retail payments
“The UAE dirham is ultimately used as the settlement currency in both systems [AFAQ and Buna]which will increase the use of the UAE dirham outside the country,” the report added.
The first phase of a National Instant Payment Platform (IPP), designed to enable secure and convenient electronic payments in the Middle East country, is also scheduled to be rolled out from October this year.
Learn more: The key to solving MENA banking challenges starts with regulators
“The IPP lays them [groundwork] to transform the financial services ecosystem in the UAE. It represents the beginning of the next generation of payment services in the region and provides the flexibility needed to respond to a rapidly changing payments landscape,” the report said.
Related: ACI Worldwide Partners with Banks to Integrate UAE Instant Payments
In January, PYMNTS reported that real-time payment software provider ACI Worldwide, which supports 17 domestic real-time systems worldwide, includingzelle and TCH in the US, is helping national banks connect to the UAE’s IPP.
“The announcement to build a domestic real-time payment system mandatory for all financial institutions is a testament to the vision and ambition of the Central Bank of the United Arab Emirates. It demonstrates the nation’s commitment to further increasing the country’s global recognition as a leading business and financial center,” said Craig Ramsey, global head of real-time payments at ACI Worldwide, at the time.
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