Smart payment solutions have entered UAE and they are here to stay, creating a rise in digital payments.

The UBF (The UAE Banks Federation), a professional representative body comprising 49 member banks operating in the UAE, has announced that the long awaited Emirates Digital Wallet LLC, previously known as the Mobile Wallet project, a company owned by 16 shareholding banks and fully sponsored by The UBF, has reached its final development stage. This is a big step forward in the country's transition to a digital future and re-defining the lifestyle of UAE consumers and businesses while providing an effective and convenient way to receive, store and transfer money.

This change is much needed to attract and retain "digital natives" a whole generation born and raised in the digital world, which depends on this platform for all their needs, be it entertainment, finances or everyday services like taxis, bill payments, insurance selection etc.

The latest McKinsey Global Institute (MGI) report states that across the developing world, digital finance - financial services delivered via mobile phones, the internet or cards linked to a digital payment system - could be a route to boosting GDP and making the aspiration of financial inclusion a reality while providing benefits to individuals, businesses and governments. At present the full potential of digital finance remains untapped with almost two billion individuals and 200 million micro, small, & medium-sized businesses in emerging economies lacking access to savings and credit, while even those with access often pay a high fees for limited product choices.

According to MGI, digital finance could boost the GDP of all emerging economies by as much as 6% versus the traditional scenario, or $3.7 trillion, by 2025 - the size of Germany, while generating up to 95 million new jobs across all sectors of the economy. An estimated two-thirds of the growth would be from increased productivity of businesses & governments, one-third from the additional investment from inclusion of people and micro, small, &medium-sized businesses and the small remainder would come from time saved by individuals, enabling additional hours spent on work.

In contrast using traditional brick-and-mortar banks, financial inclusion improves slowly as a country's income rises and rather than waiting for a generation for incomes to rise to close the financial inclusion gap, providing digital financial services via mobile phones is the fastest route to reaching the majority within a decade.

As per MGI estimates, by switching to digital financial services individuals in emerging economies could save 12 billion hours a year. Emerging economies could sustainably release $2.1 trillion in new loans to individuals and small businesses and governments could gain $110 billion by reducing omissions in expenditure and tax collection.

Financial service providers could save almost $400 billion in direct costs by shifting from cash to digital payments because the cost of offering customers digital accounts can be 80- 90% lower than using physical branches. This would expand their balance sheets by as much as $4.2 trillion.

This in turn would help open up profitable new ways to enlist new customers thus creating trillions of dollars in new deposits. Whether these new deposits would go to banks or non traditional players is under debate. With digital finance, about 1.6 billion people, more than half of them women and many from the middle class will have the opportunity to access a financial account for the first time whereas for everyone else too, the convenience, cost and range of financial products available would dramatically improve. The valuable time spent physically at banks by town & city dwellers and the hours spent by rural residents in trips to nearby towns to access banks could be instead used for income-generating activities.

Hence banks need to be equipped to respond quickly to customer needs and to adopt new technologies and implement new tools and processes when they become available.

Regulations and compliance also need to evolve to allow for new innovation and timely change, constantly screening new technologies and integrating the necessary pieces into their IT architecture. To capture the economic opportunity via digital finance the focus should be on 3 vital points - widespread mobile & digital infrastructure; dynamic business environment for financial services, allowing space for competition & innovation yet limiting risk and digital finance products that meet the needs of individuals and small businesses.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.