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Digital Banking and UAE Financial Transactions: The Future of Banking

Stanley Hugo
Digital Banking and UAE Financial Transactions: The Future of Banking

The UAE's Central Bank has made a new program to accelerate digital banking in the financial services sector. This is with moves spanning open finance and a new digital currency.

The Financial Infrastructure Improvement Programme also includes a domestic card scheme, a quick payments platform, a financial cloud, and supervisory systems.

The new Central Bank Digital Currency (CBDC) is going to be used for both cross-border payments. Also, UAE financial transaction usage. The aim is to “address the problems and issues of cross-border payments and help drive improvements for domestic payments respectively”, the regulator said.

“The FIT program embodies the ideas and aspirations of our wise leadership towards digital banking in the economy. Thus, improving the financial sector,” said Khaled Kahn, an officer of the Central Bank.

“We are proud to be building a system that will support a thriving UAE financial environment and its future growth.”

Central banks are looking into the development of digital banking. This too amid the growing use of cryptocurrencies as an asset class for both retail and institutional investors.

The Bank of England and Treasury have chalked out a plan to introduce a new central bank currency. Thus, including a new state-backed digital pound which could be launched this decade.

Last year, the Reserve Bank of India doled out its first pilot scheme for the e-rupee. In this, some banks use the digital rupee to settle secondary market deals in government bonds. The RBI plans to start testing the everyday uses of the digital version of the Indian rupee.

 Central Bank of Oman is also making a digital currency and open banking services. This, the country's state news agency reported last year.

The rapid development of CBDCs might help to boost financial inclusion and stability, as per Fitch Ratings.

CBDCs will continue to gain pace as regulators keep tailoring them to complement money with digital central bank money. The Boston Consulting Group said in a recent report.

The payments industry revenue in the country is expected to grow to $18.7 billion by 2030. This is driven by the young and tech-savvy residents in the country, the report added.

Through the FIT program, the UAE Central Bank will better its digital leadership. This will be done by adopting “advanced” supervisory systems and data management solutions, it said.

It will also look for ways to develop and implement a number of digital infrastructures. These include the establishment of eKYC (electronic know your customer), Also, a smart hub to support the development of financial software.

The new domestic card program will feature the UAE’s “first unified, secured and smooth card payment platform to increase the growth of e-commerce and UAE financial transactions”, the Central Bank said.

“These digital systems will improve regulatory compliance, reduce the cost of operation, enhance innovation and customer experience, and most importantly, improve their security and operational resilience,” the regulator said.

Last month, the Central Bank gave out new guidelines for licensed financial institutions, including banks, finance companies, exchange houses, and insurance firms. Also, agents and brokers, to combat money laundering and the financing of terrorism.

The new guidelines are aimed at the use of digital identification systems by legal financial institutions, or LFIs, to deal with customer due diligence obligations.

UAE Banks Federation (UBF) has revealed that the rate of digital banking services usage through a number of digital banking channels has risen over 100 percent, reflecting the advancements made by the UAE in deploying the latest technologies and customer confidence in the degree of security of these services.

Speaking at the MEA Finance Banking Technology Summit, held in Dubai recently, Jamal Saleh, director general of the UAE Banks Federation (UBF), said: “This great leap in digital banking take up was achieved in line with the strategic thought of the Central Bank of the UAE. This is characterized by its proactive approach to making the appropriate framework to keep abreast of technological change. Also, it supports the banking sector in making innovative solutions. The reason in order to give the best services to people in a secure, reliable, and easy-to-use way.”

Saleh added that the digital banking sector in the country is a model for digital transformation. Also, we have witnessed great growth in the adoption of advanced banking systems and providing customers with banking services and things through various digital channels, where the rise in usage reached 100 percent.

He stressed the high degree of customer confidence in the digital banking sector. The reason is that the UAE ranks very high globally in terms of customer confidence in financial institutions at 84 percent in 2022. This is according to the annual index done annually by the UAE Banks Federation.

UBF is committed to supporting banks in their digital journey

Saleh explained that the UAE continues to better its leadership in digital banking. This is built on the adoption of the Digital Transformation Strategy by the Central Bank of the Arab nation in 2022. The reason is to ensure the provision of secure and reliable digital payment infrastructure. Also, the use of technology in banking services supports the creation of the future of financial technology in the country. Also, maximizes the use of artificial intelligence, and big data. Lastly, to develop the infrastructure for secure cloud computing systems for the sector for UAE financial transactions.

Under the guidance of the Central Bank of the country, the UBF works to support, accelerate, and develop the digital transformation of member banks. This helps ensure the top levels of cybersecurity and data protection. Thus, improving human capital and deploying the latest technologies to improve risk management and cost control. Thus improving effectiveness in making technical solutions for business and fraud prevention.

The UBF also recently held its annual general meeting (AGM), chaired by Abdulaziz Al Ghurair, the chairman of the federation.

During the meeting, the UBF approved strategic plans for 2023 to develop the banking sector. Also, strengthen its place under the supervision of the Central Bank of the country and improve UAE financial transactions.

The plan includes Emiratization, with the goal of employing thousands of UAE nationals by 2026. Also. working with the Emirates Institute of Banking and Financial Studies (EIBFS) to make a training program. The purpose is to prepare future banking and economic sector leaders, 

Stanley Hugo
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