UAE residents will be able to make use of Direct Debit payments to settle everything from mortgage installments to credit card bills in a matter of weeks.
The news comes after it was announced the nationwide rollout of the new system is imminent. The UAE Central Bank said on Tuesday that the Direct Debit system will take effect from June 15 - and is designed to "eliminate the need to sign several post-dated cheques for installments upon obtaining a loan or finance".
In a statement the central bank said the new facility will "enable customers to make regular, automatic payments from their bank accounts towards mortgage loans or credit card payments or personal loan installments".
The system relies on a bank account holder authorising individuals or institutions to directly take payment from their account for various types of transaction. The website of Direct Debit payments in the UK trumpets the tool as a "simple, convenient and safe automated payment method that is preferred by over half of all UK bill payers".
The system is generally agreed to have a number of advantages over the standing order system that many UAE bill payers may be familiar with at present - not least that once a Direct Debit arrangement is set-up, payment can be made instantly, without the need for any period for a payment to 'clear'. It is also said to be cheaper for businesses to use than many alternatives.
The UAE Central Bank said the move was part of a government strategy to "enhance electronic systems and improve services to banking customers in the UAE".
It called it "a step in the right direction towards increasing the efficiency of our banking system".
"Our current intention is to establish a more convenient retail banking system that will create more stable and progressive economic development," the regulator added. It remains to be seen whether the introduction of a system that supercedes the use of post-dated cheques for certain transactions will see such paper promises quickly become obsolete across the board - such as in the case of paying for rent. The UAE system of obliging residents to submit post-dated cheques for certain transactions has been the subject of criticism - not least from those who have spent time in prison after such cheques were said to have 'bounced'.
However, the benefits of the new system for financial institutions and individuals alike seem clear, with the central bank saying Direct Debits would allow "banks to reduce their reliance on post-dated cheques" and ordinary account holders to "plan their expenses more efficiently".
© 7Days 2013
