The transformative impact of instant payments
Instant payment platforms are the catalysts for real-time economic interactions
The digitisation of payments is one of the 21st century’s most innovative trends. In a global economy once dominated by cash transactions, the rise of card and contactless payments – on and offline – has resulted in paper money’s long-term and seemingly terminal decline.
In April, De La Rue, the world’s largest commercial printer of banknotes, said that cash levels were at their second-lowest-ever level and warned that its profits would be impacted as consumers abandon physical money.
It is easy to understand the attraction of digital payments. They offer a more convenient alternative to hard cash by facilitating real-time transactions.
GlobalData predicts that the total value of instant payments worldwide will reach $158tn in 2025, growing at a compound annual growth rate of 12 per cent from $100tn in 2021. This strong growth underscores how digital payments will influence the future of financial transactions.
Companies, websites and financial institutions that do not offer comprehensive payment solutions risk losing out. Many countries are introducing instant payment systems as the world moves towards faster and more convenient financial transactions.
However, adopting instant payment platforms (IPPs) is more than a technological convenience; it has significant economic implications, too. An example is China’s transformation from a cash-dependent economy to a digital one, according to Victor Penna, executive vice-president and co-head of Global Transaction Banking at Mashreq.
“A few years ago, not having cash in China meant you could not take a taxi or pay for lunch. Interestingly, the adoption of digital wallets began with small transactions like exchanging gifts during the Chinese New Year.
“Soon after, Alipay and WeChat Pay gained popularity, allowing users to instantly pay for various goods and services, from shopping to transportation and charitable donations. And, within a few years, Alipay’s user base has crossed 600 million, while WeChat Pay boasted 1.3 billion users on its platform.”
Penna’s comments came at a Mashreq instant payments roundtable in November that brought together experts to discuss opportunities to streamline transactions, foster financial inclusion, reduce reliance on cash and drive innovation in the financial sector.
Drawing insights
Asian countries are leading the adoption of domestic instant payment systems. Consumers in Asia are accustomed to instant payments as their mobile wallets are built directly on this infrastructure, which
makes them more suited for retail transactions.
This approach has led to the rapid adoption of the technology by merchants and consumers. This is why India and China jointly represent more than 70 per cent of the total volume of global instant payment transactions, according to GlobalData estimates.
India’s Unified Payments Interface (UPI) is another example of how instant payments can foster financial inclusion. Launched in 2016, UPI allows users to link their bank accounts to a mobile app and make instant peer-to-peer and merchant payments. Its widespread adoption has enabled millions of unbanked and underbanked individuals to access digital financial services.
In 2021, India’s instant payments transaction volume reached 39.8 billion transactions. According to GlobalData’s Payment Instrument Analytics, this figure is expected to reach 86 billion by 2025, highlighting the platform’s continued impact on expanding financial accessibility.
“Instant payments are opening the door to financial inclusion by bringing unbanked and underbanked populations into the formal financial system. This is driving economic growth and strengthening the region’s position in the global economy,” said Jan Pilbauer, CEO of Al-Etihad Payments.
Other notable examples of the global shift towards advanced payment systems include Sweden’s mobile payment system Swish, Singapore’s Fast payment system and Australia’s New Payments Platform.
In contrast, in some Western nations such as the UK and France, instant payments are only available through banking apps, which limits their use to account-to-account transactions.
Middle East momentum
The Middle East has recognised the transformative potential of instant payment systems. National agendas in the region prioritise technology and innovation in order to diversify the economy and reduce dependence on oil.
As a result, Middle East governments, particularly the UAE and Saudi Arabia, have taken proactive measures to drive digital transformation in their financial sectors. The UAE recently launched an instant
payment platform to offer consumers, businesses, corporate and government entities a digital payment experience that enables transactions to be processed instantly and securely.
In October, Al-Etihad Payments, a subsidiary of the Central Bank of the UAE (CBUAE), launched the emirate’s first instant payments platform Aani. Established as a national platform to process digital payments and manage retail payment operations, Al-Etihad has enabled the CBUAE to focus on regulation.
With the Aani app, users can transfer money instantly using the recipient’s phone number, request money and split bills. Al-Etihad Payments is also working with Magnati, Mashreq/Neo Pay and Network
International to enable QR-based merchant payments.
The newly launched payments platform marks a significant step in reducing reliance on physical cash and cheques, and making financial transactions quicker, more accessible and environmentally friendly as the UAE transitions to a digital, paperless economy.
“The Aani platform not only promotes the adoption of digital payment methods but also aligns with the UAE’s broader vision of fostering innovation, efficiency and economic modernisation,” Pilbauer told senior executives at the Mashreq Future is Now roundtable in Dubai.
“It supports QR codes, facilitating hasslefree, cashless payments. We will add more features such as real-time direct debit and electronic cheques soon.”
The UAE had a similar system called Immediate Payment Instruction (IPI), noted Pilbauer. “IPI debuted in 2019 as an interim real-time payments solution. It allowed users to make an immediate payment in dirhams to another bank account in the UAE, but only for a limited number of hours during the working week.
“Additionally, the transfer amount was limited to AED25,000. With Aani, the transaction limit has been increased to AED50,000, and the processing time has been reduced to 10 seconds.”
Aani has already been integrated into the channels of eight licensed financial institutions (LFIs), including Mashreq, Abu Dhabi Commercial Bank, Al-Fardan Exchange, Emirates NBD, Finance House, First Abu Dhabi Bank, Habib Bank AG Zurich and National Bank of Fujairah.
Banks have the infrastructure, credibility and experience to offer a stable launchpad for instant payments with minimum downtime and interruptions. They are also well-versed in regulatory requirements and can accommodate growth in user demand as new functionalities are developed.
Collaboration with financial institutions was crucial for launching the new platform, Pilbauer noted.
“Our clients trust these institutions. By working with licensed financial institutions, we know people will send and receive money with confidence. This collaboration adds credibility and reliability to our platform, making it a trusted option for users.”
The mobile app can be accessed through the existing channels of CBUAE’s partner LFIs.
“We plan to integrate the rest of the country’s LFIs by the end of next year.”
Committed to transform
The benefits of instant payments are clear for both consumers and merchants. For consumers, payments and transfers that used to take days are cleared almost immediately. For businesses, instant
payments mean money is received earlier, which provides liquidity to engage in further business activities.
The UAE’s instant payments system is integral to the CBUAE’s Financial Infrastructure Transformation (FIT) initiative that was launched in February 2023.
The FIT programme aims to support the financial services sector, promote digital transactions and enable competitiveness through innovation and collaboration. By providing adequate support for instant payment initiatives, policymakers can ensure these systems are seamlessly integrated into the national infrastructure.
Backed by the right frameworks and mandates, instant payments have the potential to transform the UAE into a hub for financial innovation.
Timely decision
The UAE has adopted a deliberate and considered approach to introducing instant payments.
Given that the timeline for launching an instant payment scheme is crucial for its success, the UAE’s strategy has been well-timed and has substantial implications for the nation’s economy.
“While some countries rushed to implement instant payments, the UAE has taken time to ensure that its infrastructure is technologically mature and secure,” said Nameer Khan, chairman of Mena Fintech Association. Khan highlighted the region’s commendable reduction in the time taken to adopt the technology.
“I believe we are progressing in the right direction for this technology to become a universally adopted platform. It is very encouraging to see the rapid reduction in the timeline for technology adoption in this region, reducing from 18 months to just three.”
However, economic contexts evolve. Adapting instant payment systems to changing local economic conditions is crucial, and this involves technological upgrades, revised regulations and expanded services.
Khan cautioned that in order to drive user adoption, there is a need for close collaboration across the ecosystem, from government to financial institutions, consumers to businesses.
“Technology, for the sake of technology, is no good. Many of our conversations and expectations today are based on our existing knowledge. This means we must reset our perspectives and re-evaluate to understand the ongoing developments and take action.
“For these payment platforms to work, all parties in the ecosystem must promptly embrace such platforms for maximum economic impact,” Khan added.
