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The Central Bank of the United Arab Emirates (CBUAE) released its 2021 Financial Stability Report in August, 2022 detailing measures put in place to mitigate the pandemic’s impact on the country’s economy. And despite the bleak macroeconomic landscape and rising inflation, the CBUAE projects a “positive outlook” for the UAE’s financial system in 2022.
When it comes to CBUAE’s payment systems, they remained “robust without disruptions” in 2021, helped by the acceleration of digitalization of financial services. This led to the processing of a total of 231 million transactions, amounting to 11 trillion dirhams (about $3 billion), in 2021.
“In particular, the Instant Payment Instruction System (IPI), offering real-time instant domestic fund transfers, witnessed a significant increase in transaction volumes, confirming the trend of higher use of digital payments over traditional fund transfer methods,” the report noted.
The CBUAE also reported plans to join the Arabian Gulf System for Financial Automated Quick Payment Transfers (AFAQ) as part of plans to promote cross-border payments and enable financial institutions (FIs) operating in the UAE to process transactions with other GCC banks using their domestic 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 UAE.
Beyond the GCC, the CBUAE also worked closely with the Arab Monetary Fund’s centralized cross-border payment system, Buna, which allows central and commercial banks in the Arab region to seamlessly send and receive cross-border payments in local and international currencies.
“The UAE dirham will ultimately be used as a 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 provide safe and convenient electronic payments in the Middle Eastern country, is also scheduled for roll out starting in October 2022.
“The IPP lays the [groundwork] to transform the financial services ecosystem in the UAE. It represents the beginning of the next generation of payment services in the region, providing the flexibility needed to respond to a rapidly changing payment landscape,” the report stated.
Real-time payment software provider ACI Worldwide, which supports 17 real-time domestic schemes worldwide, including Zelle and TCH in the U.S, is helping national banks connect to the UAE’s IPP.
“The announcement to build a domestic real-time payments scheme mandatory for all financial institutions is testament to the vision and ambition of the UAE Central Bank. It signifies the nation’s commitment to continue to elevate the country’s global recognition as a leading economic and financial hub,” Craig Ramsey, global head of real-time payments at ACI Worldwide, said at the time.
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