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Sun 22 May 2011 09:08 AM

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Debt, credit cards obsolete within five years, says expert

Mobile payments are expected to replace plastic and cut down security risks

Debt, credit cards obsolete within five years, says expert
Debt, credit cards obsolete within five years, says expert
credit cards, credit crisis, credit card fraud

Debt and credit cards could be obsolete in the Gulf within
the next five years as banks offer mobile phone and e-commerce payment methods
to increase security.

High per capita income in the Gulf makes the region
particularly vulnerable to online banking fraud, which could be reduced with
the introduction of mobile banking.

“By 2016, we should expect to see plastic being replaced by
the mobile phone. It is already there; it is just a question of getting rid of
plastic and putting the payment application on your phone,” said Sriram
Natarajan, chief operating officer of global services firm Quatrro.

“When it comes to getting into e-commerce, which is really
boundary-less, that’s when this region is at a higher risk for the simple
reason that your credit limits and the sheer power of the cards is much higher
here than in Asia, for example. In the online space this region is a lot more
vulnerable.”

A more sophisticated banking system in the UAE means it
could be the first Gulf state to make the switch from plastic to mobile
payments.

“The UAE has always been ahead of the game. The
infrastructure has been set up so it should not be very difficult for the UAE
to at least lay the Middle East foundation for a mobile payment sector.”

A five-year property boom in the Gulf state sparked a credit
boom in 2007 and 2008, pushing the country’s compound annual growth rate up to
an average 30 percent.

MasterCard in January reported an 11.5 percent increase in
year on year growth in the number of credit cards issued in the UAE in the
third quarter of 2010. Credit card issuance in the Gulf state is slightly
higher than the national average of 10.2 percent, according to the real-time
payment processing firm.

In spite of the high rate of credit card issuance, mobile
payments could be quickly adopted in the UAE, which has one of the highest
mobile phone penetration rates in the world at around 200 percent.

“Everyone has a mobile phone, the applications are getting
cheaper by the day and the phones are getting more sophisticated so it’s just a
question of uploading a payment application on the phone,” said Natarajan.

Lenders in the region will need to look at investing up to
60 percent of their mobile banking budgets on security for mobile payments, he
added.

“Most of the investment in this technology is not going to
be so much about getting the basic transactional convenience, it’s going to be
more on the security side. Perhaps 50-60 percent or even more should be on
security and safety.”

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tarik 9 years ago

“The UAE has always been ahead of the game."

I am not sure if Mr Sriram aware about the banking system in the gulf . In KSA for example all banks provide internet and mobile banking (many in UAE DON'T ) also in KSA you can pay for your credit bank and any other bill from any bank online (same time credited ) by a centerl payment system called sadad (not al ansari or UAE exchange) . All banks in KSA provide you with phone pin confirmation for your online transactions while only 2 banks in UAE do this . Finally KSA banks don't charge you for ATM transactions.

Vlad Solodovnyk 9 years ago

End of credit cards does not necessarily mean end of debt: nothing stops mobile banking from offering debt as product.