Payments transformation – UAE executive round table

On November 3rd Finastra was delighted to host a UAE focused round table event at the beautiful Ritz Carlton Dubai. We explored a new interactive format which began life as a typical panel session of four people – and ended as a very lively discussion among fifteen attendees who all took part with verve and enthusiasm.

To our delight, what was billed as a discussion on ‘Payments Transformation’, quickly became an insight into the ‘Transformation of Payments’. How global phenomena are driving local thinking – and how local initiatives in the UAE and wider can build from the bottom up to transform the world of all customers, large and small, needing to move their money.

Roy Marsh, Finastra Global Payments Director chaired the event and opened by challenging the panel and the attendees with some Finastra views of the world; taking as his cue the subject of Central Bank Digital Currencies which was the main topic of conversation at the recent SIBOS in Amsterdam.

Finastra’s view is that despite more than 100 central banks having embarked on initiatives to propose or develop CBDC’s the world’s main G7 currency players still appear to be taking a cautious look, rather than commit significant resources. And that the rush to be part of the discussion was as much to do with a herd instinct to follow or explore, rather than a declaration of any specific destination.

So, the challenge to the panel was ‘What do we have here?’ Is this Blockchain, or Crypto for payments all over again, as five years ago, which caused a lot of discussion but has ultimately gone nowhere. Or are we witnessing something more akin to the rise of the internet 25 years ago which has now become firmly embedded in our lives?

And if this is really a new movement in the world of money – what is this new phenomenon exactly, how do we explain it to lay people and who among the bank’s customers will really benefit?

Our panel took an interesting angle on the subject. Pratikk Dalal, CFO Al Maryah Community Bank opened our panel response with a lovely story. He related how his mother in India continues to buy her vegetables at the market as she has done since he was a boy. Of course, in his early years she would buy them using cash, later as the mobile banking became available funds could be transferred using text messages. Today vegetable sellers in Indian markets now routinely display QR codes for their customers to select their payment methods.

So, Pratikk asserted, that if this level of sophisticated technology has already reached his mother, and has become fully accepted, then the concept of a CBDC may not be quite the jump in adoption as many people imagine.

Another panel member responded, and he also talked about how technology that is now so embedded in people’s lives that they will accept this new form readily. In his view – CBDC ‘will hijack the world’ – a big statement. Our attendees rallied with opposing views.

One of our first reactions from the floor was shock at the trillions of dollars that have been leaching to the crypto world, a lot driven by the gaming industry. The concern, shared by others, was that not all tech developments are appropriate for the smaller customer; we asked the group to consider quite how this new technology really benefits the drive for greater social inclusion, and better still financial literacy.

A further point was made that there are still such cultural differences in the use and management of money across different countries that it was hard to see how CBDC’s could really be adopted in a form to suit everyone. Rather that we should expect, if it goes ahead, that CBDC’s will rollout gradually. First between governments at central bank to central bank level, then interbank, then bank to large corporates and so on. Just maybe, after that process has been fully executed, then smaller businesses and retail customers might become participants. But this will not be a big bang.

Among the attendees we also witnessed several detractors from the concept of CBDC’s altogether, those who felt that it was likely to go the same way as the cryptocurrency because there could never be a global standard approach when so many central banks were already considering their own versions.

A common view was that Banks anyway are regularly blindsided by major technology providers. Taking the obvious names into account such as Amazon, PayPal, Apple etc. one specific question that was posed to the panel is just where are the bank’s today with an offering related to the Metaverse? Are bank’s allowing themselves to be left behind again? However, given that these days banks are tech companies too – shouldn’t they be looking more at collaboration?

Séba Daher, Lead Solutions Consultant for Finastra brought the discussion to more immediate and local challenges. And he made this point around collaboration – do bank’s really have it in them to work in collaboration with the fintech providers? In what areas would collaboration prove to be a success?

Pratikk picked up on these points of collaboration within the Central Bank of the UAE’s National Payments Systems Strategy (NPSS). If banks were going to adopt new real time schemes, for domestic or cross border processing, how likely is it that customers will be able and willing to transfer their business into a world of solely digital processing? Pratikk reiterated that he is a keen believer in the acceptance of technology.

But there was also a view that there remained a very large percentage of UAE potential customers who could not qualify to hold a bank account, according to the usual banking risk and regulatory strictures. How therefore are we in the UAE going to be able to roll out this technology to them all? Don’t we have a moral and social responsibility to provide financial inclusion on a much wider scale? Indeed, isn’t there really a moral imperative to do so to ensure we uplift all members of the community?

The ‘use and adoption of new technology’ discussion also picked up on the local corporates’ reliance on payments by cheque. Given the embedded nature of these systems there will have to be a long-term co-existence of these older channels alongside newer modern forms. Let alone the possibilities of a CBDC based currency.

In summary the process of modernisation of payments has clearly reached unimagined levels if vegetables sellers in India are routinely using QR codes; however even in tech-led societies such as the UAE old habits such as cheques die hard. So, the process of Payments Transformation continues apace with many banks in the room clearly facing a bewildering array of new possibilities, while trying to manage daily life in the face of these changes.

Our thanks to our panel members including Pratikk Dalal, Venkatraman Sadagopan and Seba Daher, and to the extended views of all the participants who so willingly took to the microphone to explore their ideas and opinions and to create such a fertile debate.