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Fast Business Needs Fast Payments

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Business in the Middle East is speeding up. The availability and use of faster payment systems is enabling new business models to flourish, while making the in-house payments function as efficient as possible.

On February 8th this year, Uber and HSBC announced through a press release a payments solution that enables unbanked Uber drivers to request payment on demand through Uber’s platform. This allows them to have fast access to 100% of their earnings through HSBC’s transactional payment solution (ACH to wallets and beneficiary banks). Flexpay is an in-app solution developed by Uber that enables payment files to be triggered on-demand.

The new service, launched in Cairo, is crucial for Uber, which like other ride hailing platforms needs to attract drivers onto its platform. Without a fast, efficient, digitized business model, driver retention is at risk. “Egypt is one of Uber's fastest growing markets in the world, and this growth drives us to innovate and provide a convenient experience to drivers on the platform, which is why we proudly launched Flexpay to mobile wallets as another global-first from Egypt,” says Anabel Diaz, Uber Vice President and Regional General Manager for the Mobility Business in Europe, Middle East and Africa.

“What does a fast payment mean to our clients? It means better experience for customers and suppliers – and the ability to create new operating models” says Kyle Boag, Regional Head of Global Payments Solutions at HSBC in Dubai.

“For instance, an insurance company that can pay a claim straight away gives a great customer experience. Or if Uber can pay its partners [drivers] instantly, they are more likely to drive for Uber than any other ride hailing company. These are business problems that instant payments can deliver against.”

Digital business requires new payment paradigms. These are being developed not only by banks but also by governments and regional authorities in the Middle East.

The Gulf Cooperation Council (GCC) has launched a Real Time Gross Settlement system (RTGS) that allows for quick and efficient international payments between each of the members. It is led by the six Central Banks of the GCC (Saudi Arabia, UAE, Bahrain, Kuwait, Oman, and Qatar).

The Arab Monetary Fund has also launched its BUNA system that standardizes payments in both regional currencies and in international currencies such as the U.S. Dollar and Euro for all countries in the Middle East and North Africa.

Individual countries have also set up their own instant payment systems. Egypt’s National Payments Council went live with its national system for instant payments (called InstaPay) in March 2022.

Instant and fast payment infrastructure is enabling new digital business models to thrive. When this supply and demand come together, it is a seed bed for business innovation. Just look at what happened in India.

The Unified Payments Interface (UPI) in India launched in 2016 to allow inter-bank peer-to-peer (P2P) and person-to-merchant (P2M) real time payments. From small beginnings, it has scaled into a platform carrying $140 billion equivalent of transactions per month. Equally important, it is now embedded into the business models of companies small and large and is a key pillar of India’s digitisation strategy.

HSBC was one of the first global banks to go live with a UPI service for corporate and retail customers in India. HSBC foresaw that UPI would be a catalyst for payment innovation as it enabled the bank’s clients to push and pull funds real-time 24x7 from their customer’s accounts with the added flexibility of being able to conceal bank account details through the use of Virtual Payment Addresses, or Virtual IDs.

"If the instant payment system in Egypt - the first phase of which has just gone live - can have the same impact as it did in India, it could give a big uplift to commerce in the country," says Boag.

Further Innovations

It is not just new, instant payment rails that are speeding up the velocity of money. HSBC has launched several innovations that are accelerating corporate payments processes as whole.

HSBC is the first international bank globally to adopt Swift’s Payment Pre-validation in the UAE. This allows its clients to validate beneficiary accounts and match name details before making payments. This transparency greatly reduces the likelihood of error and fraud, both of which are key contributors to slow payments.

A further innovation for the Middle East is the Bank’s Virtual Debit Card, where clients can generate their own virtual cards. This gives them increased speed and control of their payments function. Another first for HSBC in the region is multi-bank cash concentration. This allows clients to enhance their working capital by doing daily cash concentration from other banks in the region, considerably speeding up a once cumbersome process.

This commitment to deliver client efficiencies led Oman Air to partner with HSBC on an innovative international payments process that increases efficiency and security.

Via a centralised treasury hub in Oman, HSBC’s Global Disbursement solution delivers simultaneous, multiple currency payments and an improved track and trace function for every transaction. This will allow Oman Air to process foreign currency payments through a single HSBC bank account. This reduces dependency on other third-party banks, reducing the costs of processing these payment types and the hours worked in doing so.

Further innovation is coming down the tracks. The roll out of the new ISO20022 global payments standard will bring with it a much-expanded set of data that will be contained in each payment instruction.

Starting in March 2023, ISO20022 will make the payments and receivables functions at companies much more efficient, speeding up reconciliation and approvals. “ISO20022 will help when it comes to the speed of money and efficiency," says Boag. "When you make a payment, you will be able to put in so much more data, which will allow customers to do many more things, more quickly, not least reconciliation."

HSBC is at the forefront of this payment innovation and is actively involved with SWIFT and key market infrastructures that are migrating towards ISO20022. The aim is to complete SWIFT cross border traffic migration in all countries and be compliant by the end of 2025. However, if a market infrastructure announces a domestic scheme migration before 2025, HSBC’s current migration strategies are flexible enough to move at the same pace.

Business in the Middle East is speeding up. New opportunities are arising out of the combination of faster rails, greater bank innovation and customer demand. Embracing innovation is key to harnessing these opportunities. HSBC is at the forefront of this trend enabling its clients to take advantage of the opportunities that the increased speed of money can bring.

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