UAE to launch direct debit banking from Oct 5

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Direct debit banking allows customers set up regular, automatic payments from their bank accounts towards mortgage loans and personal loan installments.

Direct debit banking allows customers set up regular, automatic payments from their bank accounts towards mortgage loans and personal loan installments.

The first phase of the UAE’s move towards direct debit banking is set to begin on Saturday, October 5 after the Central Bank confirmed it had completed the registration process for banks and finance companies.

The system, which was first flagged in April, will also soon be mandated for all loans and finances and will be available for services such as electricity, water, telecom, credit card dues and insurance premiums, the UAE Central Bank said.

Direct debit banking allows customers set up regular, automatic payments from their bank accounts towards mortgage loans and personal loan installments.

At present, the absence of such a system means post-dated cheques are frequently used in the UAE as guarantees by businesses and individuals.

For foreign nationals, bouncing the cheques is a criminal offence rather than a merely civil one, causing some foreigners to be jailed.

The UAE's tough penalties for defaulting on cheques were relaxed for local citizens last October after a royal decree was issued.

In a statement issued on Tuesday, a senior official at the UAE Central Bank said the direct debit system would save time and effort for both clients and banks.

“Our current intention is to establish a more convenient retail banking system that will create more efficient and progressive economic development,” he said.

“The introduction of the direct debit system is a step in the right direction towards increasing the efficiency of our banking system, and elevating it in line with the global best practices, thus strengthening the country’s status as a global financial hub.”

The Central Bank said in the near future the direct debit system would be mandated for all loans and finances being advanced by banks and finance companies.

A gradual implementation approach was envisaged to achieve this, commencing with all post-dated, cheque-backed loans and finances to individuals moving to the direct debit system.

It said the next phase of the system would facilitate payments towards services such as electricity, water, telecom, credit card dues and insurance premiums.

“With the proper adoption of the direct debit system by service providers a substantial reduction can be achieved on the need for paper based payment instructions for recurring payments,” it said.

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Posted by: John

Welcome to the 20th century ;)

Posted by: David

Good point by 'Concerned'. I think we all DO tend to forget that the country was formed in 1971 and has made tremendous strides although perhaps not all are positive. I think for many people, though, it's just frustrating how long some things take to arrive here when they have been well tried, tested and proven in other countries.
That being said, it's a great move and I hope we can look forward to many more positive changes ahead of us.

Posted by: Ali

That's no reason to think that we should delay such initiatives. Saudi doesn't have any where near the number of expat bankers and yet their banking system is far ahead of the UAE's. Bahrain is a similar story. It's all about leadership... But, yes better now than later.

Posted by: Telcoguy

1) No legacy, starting from a clean sheet should have prevented many of the issues you find in older places (ie cities not able to accommodate traffic)
2) A country formed in 1971 does not mean that they need to start learning from zero, there has been banking services for quite some time, the smart thing would be to leap frog. That is why you have for example plenty of innovation on mobile internet coming from Africa
3) Even if we could take this as an excuse for the lackluster performance of many industries here you can not have it at the same time with the "Dubai the best rah rah rah" One way or the other
4) Furthermore according to this logic Emirate's fleet should be coming straight from Count von Zeppelin factories. Clearly this is not the case.

Why one industry manages to leverage their local advantages, the lack of legacy and a technology leapfrog and others can not? I see only two possibilities, either serious management issues or a political decision

Posted by: alex

I'm disappointed that there aren't the usual ludicrous ?this is an example of the way in which the UAE leads the world? etc etc comments like when Etisalat introduced per-second billing 20 years after first-world operators.

Posted by: Tristan

A great move at last in a cash king economy ! This will bring fluidity in all sorts of transactions, reduce queues at counters ... but it will take time to people to get used to it.

Posted by: Shawarma

Yeah, finally they are on track, having caught up with the 80s. Another 3 more decades and they will be upto speed.

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