Bank initiative seeking to remove Dh65.4 billion in cash from UAE streets

Maki Vekinis, the managing director of Emirates Digital Wallet, wants to take Dh65.4 billion off the streets of the UAE - not in a daring heist but by replacing notes and coins with digital money for the benefit of residents and banks and the over 1 millions residents who don't have bank accounts.

"There is a new cashless payment system launched almost every week somewhere in the world but none of them seriously aim to remove the use of cash throughout the economy, none of them have the buy in of the leading national banks and none have the strong backing of government," says Mr Vekinis, a veteran banker.

Shopkeepers will lose less money when transferring cash and will pay fewer fees while greater efficiency will be brought to all financial transactions even down to basic ones such as tipping.

"Quite apart from the greater security that removing cash from economy brings to everyone, it will also put the UAE head and shoulders above any others in terms of sheer ambition and determination," says Mr Vekinis.

The lenders behind Emirates Digital Wallet are First Abu Dhabi Bank, Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Mashreq Bank, Dubai Islamic Bank, Commercial Bank of Dubai, Rakbank, Union National Bank, Al Hilal Bank, Sharjah Islamic Bank, Al Masraf, Bank of Sharjah, Invest Bank, United Arab Bank, National Bank of Fujairah, and National Bank of Um Al Quwain. The initiative is regulated by the Central Bank of the UAE and operated in partnership with Electronics Document Center, a joint venture between Emirates Post Group and ABBA electronics.

The plan, Mr Vekinis says, is to roll out the Emirates Digital Wallet app this year, under the trade name Klip. The Klip app can be used to pay for any goods and services at merchants that have point of sale systems issued by partner banks and can be done without the need of a bank account. Credit card and debit cards can also be linked to the digital wallet. Money can be sent and received from the digital wallet and selected Cash Deposit Machines will allow deposits into the digital wallet. Banks other than those behind the venture will be able to offer the app to their own customers, the executive says.

As well as making financial transactions more efficient and secure, the initiative is seeking to bring about 1.3 million unbanked residents of the UAE into the financial fold because the digital wallet doesn't require a bank account and will help them to make essential financial transactions such as paying for groceries.

"Top of the list for the unbanked, by some margin, groceries, followed by remittances, travel and rent," Mr Vekinis says.

"The reason groceries come above remittances is because of frequency rather than value of payment. But the banked use their cash more in other ways. Transport comes top for them and combined with money used while travelling abroad, this makes up their favourite use of bank notes and coins.

The Emirates Digital Wallet project comes as banks in the UAE become more digital, a task made easier by the fact that this country has one of the highest smartphone penetration rates in the world at around 80 per cent.

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In recent years UAE lenders have been accelerating the shift from a traditional branch model to one based more on online banking. Lenders including Mashreq, HSBC and Abu Dhabi Islamic Bank have been investing in artificial intelligence and partnering with fintech companies to become more nimble and lessen their reliance on human resources. Emirates NBD, Dubai’s biggest bank by assets, said in July it plans to spend Dh1 billion on technology over the next three years to help reduce costs.

Going digital has been a win-win situation for banks, with customers getting convenience and speed while banks save money. About 800 million customers globally use mobile banking, and that is expected to more than double to 1.7 billion users in the next couple of years, according to bank executives.

"The Emirates Digital Wallet is the latest example of technological innovation within the UAE’s banking industry, which continues to act as an engine of growth for the wider economy," says Mazin Turjuman, head of digital and innovation at Abu Dhabi Islamic Bank and a member of the UAE Banks Federation digital committee.

"The UAE has extremely high smartphone penetration yet most payments are still made in cash," says Mr Turjuman. "The Emirates Digital Wallet will help to correct this imbalance while bringing significant benefits to customers and businesses. It makes transactions more time efficient and convenient, as well as reducing unnecessary cash handling costs and minimising the risk of fraud."

Emirates Digital Wallet is also part of efforts the UAE has been making in recent years to push digital, especially after the smart government initiative announced by Sheikh Mohammed bin Rashed Al Maktoum, Vice President and Prime Minister of the UAE, in 2014. Increasingly governments in the Arabian Gulf are investing in digital technology, especially blockchain, as a way to diversify away from relying too heavily on oil revenues.

Smart Dubai said last March that the move to blockchain, involving the use of highly secure distributed electronic ledgers, is expected to improve the delivery of basic government services, saving over 25 million productivity hours per year.

"The launch of Emirates Digital Wallet is a continuation of the ongoing tradition of banking innovation and has the potential to introduce a society-wide cash transformation to digital," says Abdul Aziz Al Ghurair, the chairman of the UAE Banks Federation and chief executive of Mashreq Bank.

"It will provide a strong boost to the UAE's effort to build an inclusive digital payments eco-system that will benefit all stakeholders including consumers, businesses and banks and set the path for the country's transition to a cashless future."