Payments in the Middle East: Key Innovations in the UAE & Beyond

In recent years, the payment landscape in the United Arab Emirates (UAE) and the broader Middle East region has been experiencing a significant transformation. While this process may seem like a consequence of technological progress alone, its roots go deeper and are related to cultural nuances, shifting consumer preferences, and strategic governmental efforts.

As a result, in a matter of a decade, this geographical area has positioned itself at the forefront of digital growth in the global financial scene. Let’s take a closer look at the driving forces behind this rapid evolution, explore some of the key solutions that have gained local favor, and delve into the perspectives of the Middle East’s payments in the foreseeable future!

Key Payment Developments Across the Region

While it is true that payment systems are undergoing rapid evolution in many areas worldwide, this trend is particularly evident in the Middle East. Some of the main developments driving the region’s fintech scene forward lately include:

Real-Time Payments

Middle Eastern countries recognize the importance of speed and efficiency in transactions and actively invest in infrastructure to facilitate instant payments. One such initiative is the GCC RTGS (Gulf Co-operation Council Real Time Gross Settlement System), also known as the Afaq Payment System.

This real-time payment system not only enhances the convenience and accessibility of financial services in the Middle East but also fosters economic growth by enabling faster and more seamless commerce.

Cross-Border Commerce

Speaking of international commerce, Middle Eastern countries make significant efforts to provide unified shopping and payment experiences across the region. One project designed to support this trajectory is the Arab Regional Payment System (BUNA) led by the Arab Monetary Fund.

This system brings together GCC, Middle East, and North Africa markets for intra-regional payments and boasts over 100 participants across six currencies, namely:

• UAE Dirhams
• Egyptian Pound
• USD
• Euro
• Jordanian Dinar
• Saudi Riyal

As BUNA evolves, it is set to expand currencies, countries, and bank participation.

Regulatory Advancements

Regulatory improvements are another key force driving payment evolution in the Middle East. This includes legal efforts governing cross-border transactions, stored-value facilities, retail and wholesale payment systems, data management, cybersecurity, and resilience.

It is clear to see how Middle Eastern financial institutions, driven by statutory obligations, have prioritized digital agendas and compliance with international and local standards. Similarly, local corporate treasurers are adopting best practices and implementing platforms to boost transaction transparency, security, and compliance.

Cybersecurity

As digital transactions become increasingly commonplace in the Middle East, cybersecurity has become a top priority for the local payment industry. In response to growing fraudulent activity, local governments, FIs, and fintechs implement advanced encryption technologies, multi-factor authentication protocols, and real-time fraud detection systems to safeguard sensitive financial data.

Financial Inclusion

Another significant development in the Middle Eastern payment landscape is the emphasis on promoting financial inclusion. The region’s governments and other relevant stakeholders are leveraging mobile technology, digital wallets, and innovative payment solutions to provide financial services to previously marginalized and underbanked communities.

For example, Bahrain’s national digital wallet, BenefitPay facilitates remittances and peer-to-peer payments, offering migrant workers a convenient and cost-effective solution to send money to their families back home. Another example is Taqseet, a fintech platform in Egypt that provides microfinance loans to underserved individuals and small businesses.

Progressive Digital Payment Platforms & Systems in the UAE

Some of the digital payment initiatives that have gained popularity in the UAE and Dubai in particular include:

Blockchain-Powered International Money Transfers

In 2018, UAE Exchange, a leading remittance provider in the Middle East, partnered with Ripple to leverage blockchain technology for cross-border payments.

By adopting Ripple’s blockchain-based payment solutions, the PSP managed to significantly upgrade the speed, transparency, and cost-effectiveness of remittances and increase financial inclusion for migrant workers and their families.

Domestic Payment Upgrades

There has also been notable progress in digitizing traditional paper-based payment processes in the UAE. Some key advancements in this regard include the adoption of the following initiatives:

• Image-based cheque clearing
• A Direct Debit system governed by the UAE’s Central Bank
• The Wages Protection System (WPS) for streamlined and transparent payroll management, introduced in 2009
• Aani, a 24/7 instant payment system launched by AI Etihad, a subsidiary of the Central Bank of the UAE, in 2023

These systems have become integral components of the UAE’s and Dubai’s domestic payment infrastructure and laid the groundwork for further developments in the local fintech scene.

Government-Led Payment Optimization

In 2015, the UAE government launched the DubaiNow app as part of its efforts to create a progressive and cashless society. This software enables Dubai residents to access 120 city services from more than 30 government and private sector entities. With the help of DubaiNow, users can make a wide range of payments, including utility bills, fines, and public transportation fees.

Peer-to-Peer Payment Services

P2P payment platforms have gained significant traction in the UAE, with apps like Beam, Ziina, and NOW Money providing users with easy-to-use interfaces and secure payment channels. These platforms have become particularly popular among the younger demographic, driving the shift towards digital payments in the country.

What Does the Future of Payments in the Middle East & UAE Look Like?

Overall, it is clear that the fintech scene in the Middle East is thriving. The course set by the region’s regulatory bodies and other government authorities has drawn plenty of interest not only from local startups but also from internationally recognized payment service providers and investors.

What’s more, regulatory sandboxes and access to sovereign wealth funds have also contributed to the creation of a fertile ground for innovation and resulted in various digital payment solutions catering to both corporations and individuals. Therefore, the future of payments in the Middle East and UAE appears to be filled with continued growth, innovation, and international collaboration.