Real-Time Rails Can Unlock New Value Creation Opportunities for UAE Financial Organisations

Craig Ramsey, Global Head of Real-time Payments, ACI Worldwide offers a view of the opportunities and benefits the UAE can look forward to with the advent of Instant Payments Platform.

With their proven ability to drive economic growth, as well as a host of other benefits and conveniences for businesses and consumers, real-time payments are surging in popularity. More than 60 countries have either implemented real-time systems or are working towards a launch. The United Arab Emirates (UAE) is set to join this group, with its Instant Payments Platform (IPP) set for early 2023. ACI Worldwide’s “Prime Time for Real-Time” report predicts that the UAE will experience a 36.5% CAGR in real-time transactions from 2021 to 2026.

Real-time payments are already available to a large portion of the global population. And as the vision for even greater availability and inclusivity becomes a reality, the movement to a global-payments ecosystem will be complete and every individual and enterprise will have access to fast, open, digital transactions. While the most obvious use case for real-time payments may be person-to-person (P2P), customers making payments to businesses (C2B) is where most of the innovation is likely to occur, and business to business (B2B) use cases such as leveraging Request for Payment along with e-invoices for collections also hold the potential to deliver immense value to organisations. There are many examples of this around the world, from Sweden, where real-time payments are used in local coffee shops, to the UK and its use of the technology for one-off bill payments. In Brazil, B2B models allow businesses to pay their suppliers in real time.

When the UAE’s IPP goes live, all these use cases and more will be available to the country’s growing economy. Here are some of the ways in which financial institutions in the country can leverage real time rails to create value for customers and thereby enhance their competitiveness.

Request for Payment (RfP)

One of the main applications of real-time payments is in the high-volume biller space. Request for Payment (RfP) schemes which have launched in the US and UK, are set to launch in Europe later this year. RfP services allow billers to send electronic requests for payment, to which customers can respond securely through their smartphones. RfP offer the opportunity for banks and financial intermediaries to add value for mortgage companies, credit card companies, utilities, and many others. For the UAE’s retail and eCommerce sectors, RfP can smooth shoppers’ experiences and secure all important cash flows for retailers.

RfP services give an impressive degree of control over billing workflows and improve cashflow and liquidity management. They reduce chargebacks, increase visibility of incoming payments, enable faster notification of incorrect account details, and simplify the reconciliation of payments to customer bills. Retailers enjoy not only these benefits, but also lower acceptance cost vs other modes, reduced fraud, and the ability to deliver better customer service, improve customer loyalty and attract new customer segments. RfPs also add benefits for payers, who can now control the timing of the payment and as demonstrated in markets such as the UK, have the ability to choose their preferred mode of payment as well — something today’s direct-debit systems do not allow. The customer experience becomes more positive as a result, and bounced payments, which have associated costs for the receiving party, can be greatly minimised. RfP is also open to SMEs through scalable, automated services offered by banks. And businesses of all scales can eliminate hours of admin, freeing up staff for more creative endeavours.

Addressing corporate inefficiencies

As the region’s enterprises look finally to a post-pandemic horizon, they will be eager to eliminate legacy inefficiencies to compete and thrive in the economic recovery that is to come. One of the greatest of these is in accounts receivable and payable departments, where reconciliation processes of incoming payments to outstanding invoices remains manual. Additionally, many businesses have multiple accounts spread across various banks, countries, and currencies. The high data standards of real-time payment systems address these inefficiencies by providing invoices and payments that map to the needs of the corporate customer.

Whether a corporation sends individual payments or a batch, the richer data standards mean more invoice and reconciliation information is bundled with each payment, adding accuracy, efficiency, speed, reliability, and transparency to every link in the transaction chain. With improvements to accounts payable comes enhanced cashflow and liquidity management. Elimination of payments inefficiencies carries over into factories and warehouses, allowing faster delivery for end-customers, more efficient inventory management, modernisation of supply chains, and the freedom to unlock working capital to conduct business more efficiently.

Acting on insights

With better visibility, businesses can take advantage of tailored services such as micro business loans that match information on incoming and outgoing payments, outstanding invoices, or seasonal sales trends, and potential charges for corporate customers for late payments. They can also proactively address liquidity gaps through bridging loans, giving corporations better control over banking costs.

Using data analysis to identify supply chains and trade corridors gives financial institutions the opportunity to customise the products they offer to corporations or to connect them to selected partners that may be able to serve them better. One example of this is factoring. SEB and Swedish fintech firm Capcito use APIs to connect with one other to offer financing to corporate customers based on outstanding invoices.

Greater coverage

SMEs are often underserved in the corporate banking world due to the high costs associated with serving them. This is because data collation and analysis has traditionally been a manual process for the smaller business. Real-time payments will allow SMEs improved access to services and help banks by giving them access to new sources of revenue through new and innovative use cases.