UAE’s transformation to a cashless economy boosted by the pandemic

By Backend Office, Desk Reporter
Cashless Payment
Representational Image

Ramana Kumar, head of payments and digital banking at First Abu Dhabi Bank (FAB) has opined that the concept of having a cashless payment system and banking is no longer just a distant dream but is rapidly becoming a new reality in the UAE, with the global pandemic accelerating the country towards a new system. 

Mr. Kumar said, “People have started to see the value in [going cashless] and our customer transactions have picked up in terms of eCommerce and digital payments”.

He also added that the bank seen a drastic shift in branch transaction migration with its digital platforms fulfilling more than 90-95 percent of overall transactions, which is a marked change in consumer behavior. He remarked that a large part of the digital activities involve cashless payments.

It is not just bank customers who are setting the trend towards digitization, but companies and merchants as well have channeled their transactions through digital payments. Before, there were merchants in baqalas (small grocery shops) or some of the small scale merchants who thought that collecting money directly from the customers would be the best payment system. But, the COVID-19 situation forced shoppers at getting payments done via cards, eWallet and so on.  The pandemic has triggered changes and has led to a transformation as today even baqalas in and around households use card payments while making their deliveries today added Mr. Kumar.

Strategy of survival

Mr. Kumar stated that shifting to digital payments became a matter of survival for many shops and companies

“During the peak COVID situation we went and fixed the machines in these merchant locations. Merchants were sitting with stock and no customers were visiting their shops, so we called them and we set it up for them remotely to link their payments digitally” he shared his experience during the pandemic period.

Digital conversion

Mr. Kumar acknowledged that the change in consumer behavior towards digitization would have a significant impact on physical branches of banks, which he said would also help drive bank costs down.

“The customer power or control drives all the cost factors for a bank. Digital payment by default drives the cost down for us,” said Mr. Kumar, adding that this does not mean that physical bank branches will no longer exist, instead they are becoming more digitally skilled at how branches work.

Cashless payment initiatives

Two major cashless payment initiatives were launched in the UAE this month included Abu Dhabi Pay, which Abu Dhabi Government Services (TAMM) launched in collaboration with FAB. The initiative allows residents and citizens to pay for digital government services using the Digital Wallet app.

The second one, Klip was launched by Emirates Digital Wallet along with FAB, Mashreq Bank, National Bank of Fujairah and MasterCard. This allows customers to transfer money to others via mobile number and pay for goods using existing merchant reach offered by partner banks.