The United Arab Emirates is taking steps to become a fully cashless economy by 2025. The country has already been ranked as the top cashless economy in the Middle East and eighth in the world.
The ranking is topped by Canada, the Cashless Countries report by UK-based price comparison website money.co.uk found. Hong Kong is the world’s second-most cashless economy, followed by Singapore, according to the ranking.
The research findings were based on data from the World Bank, debit and credit card providers, and e-wallet operators for the analysis.
In 2019, the UAE was ranked 20th in the world as 60 percent of all consumer payment transactions in the UAE were non-cash payments, according to Euromonitor International. It also said that Dubai was ranked first in the digital connectivity index globally.
The UAE is also likely to become the first cashless country in the world, with 83 percent of the country’s population owning a debit card, according to World Bank data and four major e-wallet providers in operation, the research said.
According to World Bank, the UAE has about 61 automated teller machines (ATMs) per 100,000 adults, much more than the world’s average of 43 ATMs. The central bank digital currency (CBDC) could be launched in the UAE and Saudi Arabia in the next two to five years.
Cashless Dubai
As part of its transformation into a fully smart environment, Dubai has announced the formation of a Cashless Dubai Working Group in November 2020.
The Group brought all stakeholders together to set an action plan to convert all payments in Dubai into secure and seamless cashless transitions across all sectors. It is also tasked with outlining a roadmap for a calculated transition towards a cashless society by 2025.
Since Q1 2020, the pandemic and the UAE government’s initiative to develop the fintech industry changed consumer behaviour. This has resulted in the rise of digital payments in the country.
In its inaugural meeting, the Working Group launched the Dubai Cashless Framework Report, developed by Smart Dubai and the Dubai Department of Finance to promote the use of smart payment platforms for all transactions to phase out the use of physical cash.
A survey conducted by Standard Chartered showed that 47 percent of the UAE respondents preferred making online payments over in-person card transactions or cash payments.
Almost two-thirds of people in the UAE (64 percent) expected the country to become fully cashless by 2030.
The survey also found that 73 percent of the people believed that the pandemic has made them more positive about online shopping. However, prior to the pandemic, 72 percent of consumers preferred to shop in-person versus less than a third online.
However, some sections of the population in the lower income group employed in sectors such as construction, manufacturing and trading do not have access to bank accounts and they still depend on cash payments though the vast majority of the people are favourable to digital transactions.
Another report by Fintech Consortium, Bahrain Fintech Bay, and Jordan Fintech Bay, in the GCC region, said that the UAE has the highest financial inclusion rate at 46%, followed by Bahrain (39%) and Saudi Arabia (31%).
UAE miles ahead
Another reason for the UAE being much ahead compared with other economies in the region is the smartphone penetration, which stood at 91 percent and 92.17 percent of people are mobile internet users.
This makes the job for financial institutions like banks and fintech firms easier to develop new products and bring the benefits of IT to the doorsteps of the citizens. Even the legal framework and policies put in place by the government helped the Emirates in moving ahead to reach the target.
A study by Visa on cashless cities three years ago showed that Dubai can benefit from catalytic impacts and economic growth between 2017 and 2032 as well as time saved by consumers and businesses making greater use of digital payments.
The study predicted a US$2.2 billion (over AED 8 billion) worth of direct annual net benefits for consumers, businesses and governments from going cashless. The estimated gains for consumers will be US$0.2 billion, while businesses will gain US$1.5 billion and the government will have US$0.5 billion when a city moves to an achievable level of cashlessness.