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UAE central bank reveals nine-pronged digital payments programme

On the road to a digital dirham: the UAE’s central bank includes a commitment to a CBDC in its ‘Financial Infrastructure Transformation Programme’ | Credit: Carola Schöttler; Pixabay

The issuance of a central bank digital currency (CBDC) and launch of an instant payments platform are among the initiatives in a multi-pronged fintech-related action plan published this week by the Central Bank of the United Arab Emirates (CBUAE).

The CBUAE has launched its ‘Financial Infrastructure Transformation Programme’ as it looks to ‘accelerate the digital transformation’ of financial services, according to its announcement. It states that the digital payment initiatives will ‘drive financial inclusion, promote payment innovation, security and efficiency, and achieve a cashless society’.

The ‘FIT Programme’, which comprises nine initiatives in total, sets 2026 as the target date for what is described as ‘full integration’. It is part of the country’s recently launched ‘We the UAE 2031’ vision and also links to the UAE’s ‘Digital Economy Strategy’, which launched almost a year ago. The programme is also part of a ‘strategy aimed at enabling the CBUAE to be among the top central banks globally’.

The CBDC – a digital dirham – will be for both cross-border payments and domestic usage ‘in order to address the problems and inefficiency of cross-border payments and help drive innovation for domestic payments respectively’, the central bank states.

The cross-border component is logical and expected, given that the majority of the UAE’s estimated population of about 9.3 million are expatriates, and the CBUAE’s significant volume of experimentation to date in the international CBDC arena.   

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CBUAE’s nine ‘FIT’ initiatives

The central bank’s FIT Programme describes the instant payments platform as a ‘secure, efficient and robust’ platform that will ‘support financial inclusion and enable a cashless society through digital payments’.

A ‘domestic card scheme’ – described as the UAE’s first ‘unified, secured and efficient’ card payment platform to facilitate the growth of e-commerce and digital transactions in the country – is also contained in the FIT Programme, as is a ‘secure and user-friendly’ eKYC (know-your-customer) platform to facilitate non-face-to-face customer on-boarding and ongoing customer due diligence.

The programme includes a commitment to open finance – specifically to enable inter-connectivity and inter-operability among ‘all players and institutions’ – and SupTech (supervisory technology). Both open finance and SupTech, as well as CBDCs, are among the recently revealed priority topics for the Bank for International Settlements (BIS) Innovation Hub for 2023 (as they have also been for the previous two years).

Completing the nine initiatives are the launch of an Innovation Hub (as a ‘collaborative platform for engagement, research and development for fintechs’); ‘financial cloud’ (described as a ‘secure, resilient, scalable and reliable sovereign financial infrastructure); and ‘excellence and customer experience’ (described as ‘supporting exceptional customer experiences and fostering a culture of excellence across the financial sector’).

Details and implementation updates for each the FIT Programme’s pillars will be announced ‘in due course’.

“We are proud to be building an infrastructure that will support a thriving UAE financial ecosystem and its future growth,” said the central bank’s governor, H.E. Khaled Mohamed Balama, who was promoted to the role almost two years ago. “We will work with our partners to implement the programme, achieve its goals, accelerate the adoption of digital services in the financial sector and attract the best talent.”

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UAE’s CBDC experimentation

The commitment to a digital dirham comes as a growing number of nations worldwide confirm plans to launch, or at least consult on, issuing a CBDC. Nations including Nigeria (with its eNaira) and Jamaica (with Jam-Dex) are already live with CBDCs. China is continuing to motor ahead with its rollout of the digital yuan, while India has begun digital rupee pilots.

The CBUAE has run a wholesale CBDC proof-of-concept with the Saudi Central Bank to settle domestic and cross-border transactions using central bank money via distributed-ledger technology. The two central banks published a 93-page report on their joint-initiative, known as ‘Project Aber’.

The UAE’s central bank has also experimented with cross-border CBDC in collaboration with the BIS Innovation Hub’s Hong Kong centre, Digital Currency Institute of the People’s Bank of China, Hong Kong Monetary Authority and Bank of Thailand. ‘Connecting Economies Through CBDC’, published in October 2022, details how BIS and the four central banks completed a successful pilot of real-value transactions on cross-border CBDC platform ‘mBridge’.

‘We the UAE 2031’ was launched in November 2022 as a successor to the ‘UAE Vision 2021’. The new plan contains objectives including doubling gross domestic product (GDP) from AED 1.49 trillion (about £337bn) to AED 3 trillion (about £678bn) and generating AED 800 billion in non-oil exports.

The UAE’s capital is Abu Dhabi, while its most populous city Dubai is a well-known international hub.

FURTHER READING

‘UAE launches AI and coding licence in Dubai’ – our news story (3 March 2022) on the UAE Artificial Intelligence Office giving its backing to Dubai International Financial Centre (DIFC)’s launch of an artificial intelligence (AI) and coding licence for companies (the ultimate aim of the licence’s introduction is to woo AI investment – in the form of companies and coders – to locate in the UAE, whose vision for artificial intelligence was set out in its National AI Strategy 2031)

‘Indonesia and UAE central banks ink payments partnership’ – our news story (22 November 2021) on the CBUAE and Bank Indonesia signing an agreement to boost co-operation on digital financial innovation and payment systems

‘China and UAE join HK-Thai explorations of cross-border digital currency payments’ – our news story (24 February 2021) on the CBUAE, as well as China’s central bank, teaming up with the equivalent authorities in Hong Kong and Thailand (as well as the BIS) to investigate the potential for CBDC use in cross-border foreign currency payments