Central Bank launches blueprint with lenders, telcos to expand UAE mobile commerce

The UAE Central Bank agrees a roadmap with banks plus Etisalat and du to make a wider range of financial transactions via mobile phone possible.

The UAE has one of the highest mobile phone penetration rates in the world, estimated at just under two devices per person. Jeffrey Biteng / The National

The Central Bank has agreed with banks and telecoms companies on a road map for improving mobile phone banking services in a bid to raise the value of mobile transactions in the UAE.

A technical working group including representatives from the regulator, local banks, Etisalat and du has been launched to look at ways to make it easier and cheaper for customers to make financial transactions on their mobile phones.

It follows a meeting of the entities at the Central Bank in Abu Dhabi on Sunday, according to a statement from the regulator.

With nearly 14 million mobile phones in use - a ratio of almost two devices per individual - the country has one of the highest mobile penetration rates in the world. Yet many banks have yet to keep up with the increasing migration to mobile banking services in the developed world.

"Banks should be allocating more resources to mobile banking as it is not that great a leap from online banking services and it can allow banks to grow quickly without the need to expand their branch network," said Chiradeep Ghosh, a banking analyst at Sico Research in Bahrain.

During the meeting, the Central Bank urged Etisalat and du to lower the cost of "core systems and telecommunications services" to enable customers to make payments and other transactions on their phone more cheaply. It also asked the two telecoms companies to cut their charges for data transmissions and SMS.

Etisalat and du vowed to offer a more user-friendly, high-capacity email system to enable more efficient bill payments. The Central Bank said it would develop a common payment system to link the services.

The regulator said it would also urge banks to send SMS transaction confirmations on credit cards and bank accounts as a way to reduce fraud.

The Middle East's contribution to mobile transactions is set to be worth US$27.6 billion by 2017, accounting for about 4 per cent of the global value, according to forecasts released by the research firm Gartner last week. The region accounts for only 1 per cent of the global value at present.

While money transfers are the main driver of this growth, payments between business to business and business to consumer will also play a key role, according to analysts.

"The potential is in money transfer and using mobile wallet to transfer money between people," said Sandy Shen, the research director of consumer services at Gartner.

"It requires business collaboration between banks, telecoms and merchants to grow."

The Central Bank's meeting follows the launch last month by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, of a government campaign to raise the number of services available via mobile phone. The mGovernment scheme aims to roll out mobile services across all government departments within 24 months.

Nobody was available to comment further from the Central Bank or Etisalat and du yesterday about the meeting.

The meeting was attended by SultanAl Suwaidi, the Governor of the Central Bank, Ahmed Abdul Karim Julfar, the chief executive of Etisalat, Osman Sultan, the chief executive of du and Tirad Mahmoud, the chief executive of Abu Dhabi Islamic Bank, who represented the UAE Banks Federation. The UAE Banks Federation appointed Emirates NBD, National Bank of Abu Dhabi, Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Commercial Bank of Dubai and Mashreq to sit on the technical working group, according to people familiar with the matter.

The UAE lags behind many other countries in its use of mobile banking services - a key drag on its global competitiveness. Etisalat has offered SMS banking since 2010, which has been utilised by Abu Dhabi Islamic Bank and Emirates NBD to offer a free mobile transaction service to its customers including utility bill payments and account transfers, though no bank has been able to allow payments to other third parties such as retailers.

Etisalat has offered SMS banking since 2010.

"Technology is an enabler and can allow a bank to function better. Mobile banking can be a driver of growth and business opportunities," said Philippe De Backer, a partner and director at Bain and Company, the consultancy firm.

Some of the fastest developments in mobile banking have been made in Africa, where the lack of bank infrastructure has encouraged financial firms to make use of mobile phones instead.