Dubai – Decypha: With a global move towards a completely digital orientation, applications promoting a cashless lifestyle began to emerge the last couple of years; however, the world is yet to see a completely cashless economy. Joining the race, however, is the United Arab Emirates (UAE), it is the first Middle East country and the 14th worldwide to introduce the digital wallet concept to its economy. While the move is on a small scale, it is expected to impact the country’s economy.
The Digital Wallet
The Mobile Wallet Project or the currently called Emirates Digital Wallet allows businesses and consumers in UAE to receive, store and transfer money. The cashless payment uses near-field communication (NFC) technology that will allow consumers to use their mobile phones to pay for goods and services by tapping their devices on a machine and allow the transaction to take place according to Gulf News. Citizens owning Android mobile devices with NFC feature can also use it in restaurants, coffee shops, and supermarkets among others.
Consumers adapting the digital wallet can pay bills, order groceries, choose insurance, schedule doctor visits at any given place and time.
Adopting the Concept
Among the first banks to adapt the digital trend was Emirates NBD which uses Visa’s Token Service technology that transfers data between two devices that are placed closely to each other; however consumers must have Emirates NBD Pay application downloaded on their mobile phones first. For consumers to download the application they need to upgrade their mobile banking app on Google Play store and link it to credit/ debit card, afterwards the consumer replaces his/her mobile near the terminal to finalize the transaction.
Emirates NBD has managed to develop the concept of Digital Wallet over the past two years through the UAE Banks Federation and the UAE Central Bank that helped provide advice and guidance on regulatory standards needed to apply cashless trends according to CPI Financial.
Impact on UAE
A trend that will grow in usage in the upcoming decade, UAE’s digital wallet proves several benefits to residents and the country’s economy. Residents are now allowed to use the NFC technology where around 50% of 100,000 point-of-sale terminals accept digital payment. The emerging modern trend comes in parallel with the UAE’s smart government initiative through it’s interconnect payment networks enabled through smart phones and digital devices.
UAE’s digital wallet feature further benefits such us boosting GDP worldwide by 6% compared to traditional business trends, achieving $ 3.17 trillion by 2025. The increase in GDP, the result of digital finance, will formulate 95 million job opportunities worldwide and two-thirds of the increase in GDP will result from enhanced productivity of businesses and governments which will occur due to digital payments according to McKinsey Global Institute (MGI).
MGI additionally predicts that individuals who are part of emerging economies such as that of UAE could save 12 billion hours a year by adapting digital financial services rather than traditional ones used today. On the other hand governments can gain $ 110 billion by reducing leakage in expenditure and tax collection. Other benefits the country will enjoy is an 80% to 90% decrease of costs endured when financial service providers offer digital accounts to customers rather than physical accounts found branches today. Financial service providers could save $ 400 billion in direct costs through digital payments, expanding their balance sheets to $ 4.2 trillion.
Over 25 service providers in UAE who own approximately 250 online services offer e-pay for their customers such telecommunications company Etisalat that launched Etisalat Wallet in 2016, a mobile phone-based commerce service according to Reuters.
Despite the positive outcomes UAE’s digital wallet is expected to acquire, some security concerns are aroused regarding the use of mobile phones as e-wallets. Safety of using mobile devices for payments remains questionable as some maybe vulnerable to hackers, theft, and burglary.
Security concerns however are easily tackled if a consumer abides by the formal steps when installing the mobile banking app as when of the steps require consumers to install multiple security layers to protect access to the app.
Suvo Sarkar, Senior Executive Vice President and Group Head for Retail Banking and Wealth Management at Emirates NBD, stated that if a transaction is over AED 100 customers will be subjected to further security level as they will be requested to enter a PIN, according to Gulf News.
A detailed framework of application construction shows that the services go through three layers of security: first the iris scan or fingerprint or password, second is mobile security platform called Knox and third is the tokenization.
Knox is already installed in modern smart phones in the device’s hardware which protects the device. Knox is used by FBI, CIA, Scotland Yard, Abu Dhabi Police and Dubai Police according to a statement by Mohamed Gharaibeh Head of Enterprise Mobile Business at Samsung Gulf Electronics.
Incorporation into the Economic System
For the digital wallet to be well incorporated in the country, three essentials need to exist to grasp the economic opportunities from digital finance including widespread mobile and digital infrastructure, dynamic business environment for financial services that promotes competition and innovation, and products that meet individuals and businesses’ needs, according to Khaleej Times.
UAE’s Central Bank has issued a Regulatory Framework for Stored Values and Electronic Payment Systems also called e-payment regulation last January. The E-payment regulation was an effort to incorporate the digital payments within the economic ecosystem by providing secure digital payments in UAE and regulating digital payments infrastructure and other financial technologies.
The Central Bank is also allowing authorities to monitor and achieve law enforcement against Payment Service Providers (PSP) based on the provisions of the newly issued regulation to protect public interest, general economy, retail customers, and general payment system.
UAE’s willingness for Cashless Dubai
The country’s readiness for such trend is proved by Gharaibeh as he mentioned that 75% of point sale machines in UAE are Magnetic Secure Transmission (MST) which is featured on the usual credit or debit card while 25% are NFC compared to 90% MST and 10% NFC globally, emphasizing the high usage of digital payment and its high security in the country.
PSP whether government, retail or others are eligible to provide digital payment services within the UAE after they’re subjected to specific licensing, registration, and payment authorization requirements from a compliance perspective . They’re also obliged to acquire a certain license from the central bank.
One of the prominent companies who already adapted the cashless concept is Samsung which has turned over how people use their money through launching digital wallet service called Samsung Pay, applied on smart phones and smart watched in UAE according to Gulf News.
Samsung Pay service is now present in 17 countries, while UAE remains a suitable and a ready environment according to Gharaibeh for the mobile digital wallet that will promote a cashless community by 2020.
Samsung has previously tested the service with UAE’s Mashreq Bank last Januart and has achieved over 21,476 transactions since then. The service is also incorporated with other banks such as Emirates NBD, Abu Dhabi Commercial Bank, HSBC, National Bank of Abu Dhabi, RAK Bank, and Standard Chartered.
The application is easily installed on recently launched Samsung products such as Galaxy S8, Galaxy S8 Plus, Galaxy S7, Galaxy S7 Edge, Galaxy S6 Edge Plus, Note 5, Galaxy A5 and Galaxy A7 (2016), Galaxy A Series (2017) and Gear S3 smart watch.
Effect of Cashless Concept on Other Economies
Developing nations and countries with emerging economies can tackle broad economic issues and achieve economic growth through integrating digital payments according to a report released by the World Bank Development Research Group.
The digital trend tends to offer benefits for senders and receivers and increase citizens’ access to affordable financial tools. There are also benefits to poor people and financial development where issues such as financial transparency and traceability or remittances could be tackled.
Countries who adapt digital wallets will be able to lower the cost of services and increase security of sending, paying, and receiving money.
UAE’s Digital Wallet will pave the way to a feasible living to citizens by allowing them to spend, transfer and store their savings without using physical cash. As the world’s daily growth requires imaginative solutions, cashless spending cater the characteristics and needs of the country’s local environment.
By Fatma Khaled
