Ahead already

When it comes to cashless transactions, Dubai has been ahead of the curve. 90% of the residents use digital banking, and an astonishing 100% use ATMs. Cash on delivery for shopping online / e-commerce payments has decreased from 46% to 21%. The government is spearheading the movement aiming for a 100% cashless economy by signing a deal with Visa, thereby moving one step closer to turning their dream into reality.

Businesses love it

Businesses and retailers love this shift to a cash-free world as their revenues and footfalls have increased. 66% of businesses said they saw an increase in revenues, and another 63% said they saw a 27% increase in customer acquisition. Restaurants love it as their percentage of cashless transactions has doubled for the last three consecutive years. 80% of merchants in the country already have some kind of cashless transaction option in their establishment.

We Too Are Ready

The stage is set for UAE to go cashless – and the financial and reputational reward is large. We at Unity Infotech have indispensable expertise in financial and banking solutions with clients and business partners across the Middle East. We are here to accelerate the dream of UAE becoming cashless. As an automated payment solution provider for banks and financial companies, we have a vast array of solutions catering to financial institutions, banks of all sizes and applications related to banking and finance.

Cross-border payments can take days to complete and involve fees of up to 10 per cent. Transferring money across international borders often involves sending money to people via money transfer operators & banks and is known as remittances which is the key to the banking business. The trend of digitization of services and processes is pushing financial companies to rethink their business models and strategies.

Blockchain is redefining how people access money and businesses transact around the world. This is an innovative payments solution that banks can look forward to solving in any global payment transaction involving a currency conversion. It changes how we verify, access and transact data with one another. This is designed to enable trustless electronic transactions between two parties without depending on a central authority for verification. The technology, uses a concept called “proof of work” to authenticate transactions. It promises low-cost financial transactions and near-real-time settlements.

Institutional payments these days, such as global corporate payrolls or FX, transfer through correspondent banking and SWIFT. Block-chain technologies have dramatically reduced the cost and time in international payment.

Potential Benefits of Blockchain payments:

Faster settlement of Cross-border payments

Currently, financial institutions rely on multiple correspondent banks to provide access to global currency corridors to service cross-border transactions. There is a lot of uncertainty in delivery and funds settlements with multiple potential points of failure and limited transaction visibility. This can result in frequent errors and longer transaction settlement times, especially when parties are across different time zones.

In addition, banks absorb significant costs to service global payments, such as payment processing, treasury operations, FX, liquidity and compliance.

Reduction of Fraud

One of the main challenges facing the banking industry today is the growth of fraud and cyber-attacks. Traditionally, bank ledgers have been created within a centralized database. This model has been more susceptible to hackers and cyber-attacks as all the information is located in one place – usually secured behind outdated legacy IT systems. In contrast, as the blockchain is decentralized, it is less prone to fraud.

By using blockchain, there would be real-time payment execution and complete transparency, enabling real-time fraud analysis and prevention.

Block-chain is a fraud and risk compliance solution that addresses some of the most critical problems with current anti-money laundering procedures.

Reduce Complexity & Cost

One of the main issues that blockchain can tackle is the high complexity of payments networks due to the fragmentation of the financial industry, making it impractical for individual banks to deal directly with all other banks on the planet.

Millions of dollars are spent each year reconciling ledgers between banks. Blockchain as a distributed ledger solution can handle the volume of transactions between the banks, and costs can be greatly reduced.

Case studies of blockchain in Banking Industry

Emirates NBD: Dubai’s largest bank, Emirates NBD, decided to use blockchain to tackle the sizable challenge of cheque fraud

A study found that “Fraudsters apply sophisticated printing technologies to simulate cheques, such as counterfeiting and forgery, as well as fraudulent alteration, which causes financial, reputational and legal risks. As the group issues close to one million cheques every month, representing 30 per cent of total UAE clearing volumes, it is more likely to be susceptible to fraud”. Hence, blockchain was explored as a mechanism to counter this risk.

By applying a QR code on every page of a new chequebook and applying blockchain as a tamper-proof verification layer, the bank found an innovative solution to tackle cheque fraud.

The UAE Trade Connect: (Etisalat Digital and a consortium of eight banks) is using the blockchain to curb the practice of using the same invoice to avail financing from multiple banks. The financial implication of the problem is an estimated 3.75 million fraudulent transactions in the UAE annually. The new solution is capable of addressing US$435 million in potential losses.

China Construction Bank: Of the 26 publicly listed banks in China, 12 have already adopted blockchain technology for various use cases within their systems.

China Construction Bank stated that cross-bank and cross-border loan issuances for small businesses were now running on a blockchain-based platform. They have also claimed that this platform had processed over USD 251 million worth of transactions.

JB Bank provides an easy login service based on the Open Keychain technology of Blockchain for the New Smart Banking App, the new mobile banking version. Customers can simply log in by installing the Blockchain Certificate in the JB Bank banking App and then enter the password for the certificate. It is learned that JB Bank plans to apply Blockchain-based authentication services to all online financial services.

The Smart Easy Login service applied to the mobile banking App of JB Bank is limited to increasing the convenience of the mobile App banking service with the Open Keychain technology of Blockchain.

Other block chain implementations

ALFA Bank from Russia, Yes Bank from India, UOB (United Overseas Bank) from Singapore, CommonWealth Bank from Australia, and LatiPay from New Zealand are a few banks that have collaborated with a US-based blockchain company

Axis Bank, RAK Bank, & Standard Charter Bank have connected with another blockchain network.

Emirates Airlines has used the blockchain for its loyalty program since March 2019. Benefits include greater transparency, enhanced security, reduced fraud, and improved customer experience.

Summary

Blockchain provides cost-efficiency, faster settlement, security and transparency in the payment area because of its decentralized, secure and immutable nature. It can also create better financial products, creating more competition and innovation.

Many still do not trust the technology, mostly because of the regulation inconsistencies. Nevertheless, benefits exist, and it is time before the big players start using them. The technology’s full potential can only be tapped if everyone adopts it. It has to be all or nothing.