Cross Border Payments - The UAE perspective

Becoming a hub for international trade and e-commerce requires bold steps forward. For example, the UAE and KSA have worked hard to encourage multicultural diversity and business-friendly policies. 

And it’s paying off. 

These initiatives attract millions in spending from tourists, investors, and expatriates. That said, there are always areas for improvement. Let’s take a look at the UAE as an example. 

Did you know that foreign card usage accounts for around 37% of online transactions? While impressive, don’t let this fool you. What this number shows is the region’s need for cross-border commerce.

It creates both a challenge and an opportunity for e-commerce businesses and operations professionals. The solution? Providing merchants with seamless international payment options.

In this guide, we’re going to go over the current state of payment acceptance in the UAE, what the future might bring, and some actionable tips merchants can use to navigate the challenges of cross-border payments.

Here and Now: The Current Landscape of Cross-Border Payments in the UAE

Before we go any further, it’s important you understand what’s currently going on and the challenges merchants face.

UAE: The Current Landscape

To keep the title of global business hub, you have to constantly find innovative solutions. Since international consumers make up a large percentage of transactions, offering diverse payment methods—like digital wallets, multi-currency checkout, and digital currencies—helps meet consumer needs.

Collectively, payment gateway technologies are doing their best to solve this problem. Partnering with global financial institutions is one of the more common approaches to enabling cross-border commerce, making it easier for merchants to accept payment worldwide. However, we want to dig deeper into whether the challenges are really being met: 

Current Challenges for Merchants

While there are advancements with cross-border acceptance, there are also challenges. Some are:

1. Currency conversion costs: Conversion fees and fluctuating exchange rates fall on the merchants.
2. Fraud prevention: International transactions have a high risk of fraud and need advanced security. 
3. Compliance obstacles: Multiple regulations create a compliance headache for merchants.
4. Payment method delivery: Consumers from different regions have their payment preferences, whether it’s credit cards, digital currencies, or QR codes.

Acknowledging these challenges is the first step to addressing them. By doing so, e-commerce businesses can thrive and stay competitive.

How Payment Gateways Simplify International Payments in the UAE

Are there challenges in the UAE with payment gateways? Yes. But the UAE is well-equipped to tackle them head-on. These are their three main strategies: 

1. Advanced Integration with Global Systems

At this point, we take it for granted - however global availability of card schemes (Mastercard, VISA, AMEX) does make the life of a merchant simpler. While it may not always be the most optimal form of acceptance, the card schemes offer a “worst-case” backstop meaning the large majority of your customers will be able to buy from you. More recently, this has expanded beyond just the card schemes, now merchants can offer UnionPay for Chinese consumers or RuPay for the Indian market.

2. Leveraging Local Partnerships

UAE payment providers are partnering with international organisations to close the gap between consumers and merchants. Here’s an example. 

Network International partnered with NPCI International to introduce UPI QR payment acceptance in the UAE. Unified Payments Interface is a popular form of payment used in India, providing merchants with the ability to offer instant, low-cost payments to customers from the subcontinent. More on this below.

3. Enhancing Security and Fraud Protection

For cross-border payments to really work, consumers need to trust the system. To build this trust, providers have to protect transactions with fraud detection tools like: 

• Tokenization
• Biometric authentication
• Machine learning algorithms

When consumers feel their transactions are secure, they’ll feel more comfortable using payment gateways.

What Does the Future Hold for Payment Acceptance?

As cross-border payment continues to evolve, a question on everyone’s mind is what the future looks like for payment acceptance. Let’s look at the two emerging trends:

UPI Acceptance is Changing the Game

UPI-based QR codes have the power to shake up the way international payments are used in the UAE. Though it’s a major payment method in India, UPI can be a game changer for UAE merchants by:

1. Providing instant payment: Merchants are able to receive funds almost instantly, reducing cash flow issues.
2. Being cost-efficient: UPI transactions come with lower transaction fees.
3. Improving customer convenience: Indian tourists and expatriates (a large population in the UAE) can use this method when travelling abroad.

Accepting UPI as a payment method is a big step forward. Not only does it show the UAE’s openness to localised international solutions, but it signifies a sign of growth.

Say Hello To Digital Currencies and Blockchain Technology

Digital currencies are popular worldwide, so why wouldn’t states like the UAE accept them as a form of payment? 

While some countries are slow to accept digital currencies, The Central Bank of the UAW (CUBAE) has partnered with the Saudi Central Bank to launch Project Aber. It aims to integrate blockchain and ledger technology into financial transactions for both countries.

Digital currencies have their advantages:

• Faster transaction time: Transaction times are immediate.
• Lower costs: Removes third parties, which reduces transaction fees for consumers and merchants.
• Enhance transparency: Blockchain’s ledger provides a secure and transparent transaction history.

When fully implemented, this will transform cross-border payments by reinforcing the acceptance of digital currencies and validating their reliability as a payment method.

Practical Tips for UAE Merchants

As a merchant, you want to stay competitive by providing a variety of payment methods. Here are some best practices to follow to enhance your payment acceptance capabilities:

• Partner with reliable gateways: You want a payment provider that offers cross-border transactions. That said, make sure they offer features like:
• Optimise for mobile payments: Here’s the reality: The UAE has 91% smartphone usage among its population of locals and expatriates. So, mobile payment is a must. Also, make sure it’s compatible with:
• Have a clear FX strategy: to help minimize currency costs each month. This typically involves bank accounts in different currencies and close banking relationships to help secure the best rates.
• Know the regulations: You want to make sure you’re staying compliant with regulations. Pay attention because you’ll need to follow local and international laws.
• Keep an eye on upcoming trends: Want to stay ahead of your competition? Stay updated on things like UPI expansion and digital currencies.

The Payment Partners: Enabling International Payments

Cross-border payments are a game-changing payment method for businesses looking to modernise and enter the global market with a bang. 

With their ability to provide instant payments, reduce transaction fees, and improve overall customer experience for international consumers, cross-border payments are a necessary requirement for merchants across multiple industries. At The Payment Partners, we support customers in designing and implementing their cross border payment strategies. Our partners include technology providers and FX brokers for customers trying to manage sizable currency risk.

As the UAE continues to grow in diversity and as an international trade and e-commerce hub, offering cross-border payment will help you take that next step forward with your business.

Have you partnered with payment gateways for cross-border payments? Comment below to tell us your thoughts!