Rising trend of digital payments could yield a benefit of Dh8 billion annually and create thousands of jobs
Dubai could yield a benefit of $2.188 billion (Dh8 billion) annually and generate thousands of jobs by increased use of digital payments, according to a newly-released report.
Conducted by Roubini ThoughtLab and commissioned by Visa, the "Cashless Cities: Realising the benefits of digital payments" report ranked Dubai among digitally maturing cities of the world.
"Dubai is developing the use of smart receipts - digital receipts that can be directly stored in a mobile device - that will replace paper and e-mail receipts to enhance transparency in retailing, boost consumer confidence, and improve personal financial management," the report said in a note about the emirate.
The emirate could see 18,900 jobs being created as catalytic impact during 2017-32 and net impact of 3.1 per cent to its gross domestic product. The increased adoption of digital payments will benefit wage growth by 0.05 per cent and productivity growth by 0.08 per cent in the emirate.
Hadi Raad, Visa Head of Digital Solutions for Central and Eastern Europe, Middle East and Africa, said Dubai has made rapid progress in the past few years in its vision towards transforming into a fully smart city. The government understands the real economic benefits to be gained from increased digital payments - supported by the recent Moody's Analytics study that found that increased card usage contributed 0.23 per cent to UAE's GDP growth from 2011 - 2015, and has since implemented several smart solutions within its public infrastructure.
Be it the Dubai Blockchain Strategy, which aims to leverage blockchain technology for secure government transactions, or the DubaiNow app that consolidates all utility and government services payments in one app, the public sector has embraced innovation as a pathway for sustainable growth, he added.
"We are also seeing global and local brands launching digital wallets to satisfy the consumers' appetite in the UAE for mobile payment solutions. Recent examples include Emirates NBD and Mashreq Bank launching their own digital wallets - Emirates NBD Pay and MashreqPay, respectively, and global brands like Samsung launching Samsung Pay earlier this year in the UAE, and Apple, which recently announced plans to launch ApplePay here," he added.
The private sector has also reflected this ethos with current estimates of Dubai's eCommerce sector set to grow up to $10 billion by next year. Amazon's recent acquisition of Souq is indicative of the confidence leading brands have in the UAE's eCommerce market. Moreover, significant investments are being made into smart financial and commercial services to accommodate the 30 million visitors during Expo 2020.
Raad stated that the common link between all these milestones is the function of digital payments: smart money serves as the foundation of a truly smart city, making the role of e-payments more significant than ever in enabling the government's vision, supporting economic growth and job creation and transforming Dubai from cash-dominant into a cashless society.
Be it public or private sector, Dubai is fast moving towards adopting digital solution in every sphere of life. Dubai aims to makes the public transactions paperless, hence, has announced to issue its last paperless transaction by the government in 2021.
The UAE Central Bank earlier this year issued new regulations to facilitate robust adoption of digital payments across the UAE in a secure manner.
UAE leads region
A study released on Sunday by Payfort, an Amazon company, revealed that the online transactions increased by 21 per cent year-on-year in the UAE in 2016. The report, which covers the Arab region, stated that the top regional countries in terms of dollar value and growth in value was the UAE with $12.4 billion (Dh45.5 billion) of online transactions. Meanwhile, the UAE was the fastest growing country in the entertainment and events sector, showing 36 percent growth in online payments.
"Despite the enormous growth in the region's online payments and usage of e-commerce, security fears remain prevalent among consumers. Although we now see a greater willingness to make online transactions, consumers are increasingly aware of the risks of fraud and other cybercrimes. They are also increasingly demanding, seeking faster and easier checkouts," said Nardeen Abdalla, marketing director of Payfort.
According to Sirish Kumar, CEO and co-founder, Telr, the UAE is extremely well-placed for the move tocashless transactions. There is an extremely high penetration rate for smartphone usage - at over 80 per cent, the world's highest - supported by a young, technologically adept population and world-class infrastructure.
"The government could enable the commercial sector to take the lead in driving awareness and adoption ofcashless payment methods - but this comes with a risk of a highly fragmented landscape evolving as a result as each player fights to make their own platform the preferred one. This has a negative effect on the consumer, as the ease and convenience of seamless cashless transactions is reduced. Instead, however, the government has itself chosen to take an active role in creating the framework for a cashless economy, and thereby driving consumer adoption," Kumar said.
He pointed out that the Emirates Digital Wallet is a great example of this - sponsored by the UBF and being developed centrally with involvement from 16 UAE banks.
"Similarly, the provision of government and local authority services is being actively shifted online. The Roads and Transport Authority (RTA) is a striking example of this, providing their customers with the ability to link their Salik and parking accounts to the app, and pay for these and a range of other RTA services through the app, with for instance, their personal nol card. These types of initiatives help the UAE's residents gain an appreciation of the benefits of operating in an online and cashless space. Their expectations around the quality of experience increase accordingly, and the commercial sector becomes obliged to respond," he added.
Paolo Gagliardi, Chief Business Officer of the UAE-based financial technology startup Trriple, said once fast, secure, and easy-to-use digital payments become mainstream, that means 'cash is king" no more. "Using digital payments, consumers and merchants can save time and money, and gain real-time insights on transaction history and spending trends."
Trriple estimates that about 80 per cent of the UAE's transactions are done in cash, which can be expensive to produce and secure, and often inconvenient to use. However, if the Middle East captured its full digital potential, and made digital payments widespread, then the region could add $95 billion in GDP by 2020, according to a recent report by by the consultancy McKinsey.
The study by Visa estimated that increasing digital payments across the 100 cities could result in total direct net benefits of $470 billion per year.
On average, these net benefits represent slightly over 3 per cent of a city's current GDP. This study also finds that on average, across the 100 cities, increased usage of digital payments could add 19 basis points to a city's GDP and support over 45,000 additional jobs per year per city, while worker productivity and wages could increase by 14 and 16 basis points per year per city, respectively.
To put the GDP growth number in perspective, the 19 basis points increase in economic growth per year across the 100 cities translates to nearly $12 trillion of total additional economic activity over the next 15 years - an amount exceeding China's 2016 GDP.
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