Cross Border Payments in the Middle East: Gulf Cooperation Council Region by Richie Santosdiaz for The Fintech Times
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Cross Border Payments in the Middle East: Gulf Cooperation Council Region

In the Middle East there is the Gulf Cooperation Council region, commonly known by its acronym GCC. With fintech how is it fostering wider economic integration in that region?

The answer has been around cross-border payments. Prior to that, to take it a step back it is good to understand a bit more about the GCC region in the first place. It was founded in 1981 by Saudi Arabia, United Arab Emirates (UAE), Oman, Kuwait, Qatar and Bahrain. It is a political and economic alliance amongst the members.

According to the GCC, its basic objectives are:

  • “Effect coordination, integration and inter-connection between Member States in all fields in order to achieve unity between them
  • Deepen and strengthen relations, links and areas of cooperation now prevailing between their peoples in various fields
  • Formulate similar regulations in various fields including the following: 1. Economic and financial affairs 2. Commerce, customs and communications and 3. Education and culture
  • Stimulate scientific and technological progress in the fields of industry, mining, agriculture, water and animal resources; to establish scientific research; to establish joint ventures and encourage cooperation by the private sector for the good of their peoples.”

In a nutshell, the GCC, due to its shared history, language, religion and cultural links, have integrated via this economic and political alliance that is beyond just a free trade agreement but shy of a full economic and political union like the European Union (EU) or the United States of America.

This regional integration, which is a customs union, is similar to others across the world such as MERCOSUR in South America (Brazil, Argentina, Uruguay and Paraguay) for instance. Since coming into force in 2003, the GCC has eliminated tariffs between the member states and enforces a common tariff on imported goods across the region. Also, the citizens of the six member states can move across borders and have the right to employment.

How is fintech and wider digital at the forefront of future economic integration in the GCC? There are three examples.

Experimenting with Cross Border Settlements with the Aber Project

The Gulf Cooperation Council (GCC) consists of Saudi Arabia, the United Arab Emirates (UAE), Bahrain, Qatar, Kuwait and Oman
The Gulf Cooperation Council (GCC) consists of Saudi Arabia, the United Arab Emirates (UAE), Bahrain, Qatar, Kuwait and Oman IMAGE SOURCE GETTY

First, there is Project Aber between the Saudi Central Bank (SAMA) and the Central Bank of the UAE (CBUAE). Created in 2019, it was named Project Aber, which literally translates to ‘one who crosses boundaries’ highlighting the cross-border focus of the project. The Aber Project was created by both central banks to explore domestic and cross-border settlement via a single regional currency, with IBM as its technical partner.

The final results of the pilot project in 2020 were consistent with the results of similar pilots conducted by a number of central banks. These results showed that the distributed ledger technology would enable central banks to develop payment systems at both local and cross-border levels.

The project aims to work as a foundation for more studies and applications conducted by central banks and relevant international organisations, focusing particularly on various potential effects on monetary policies and the stability of the financial sector as well as the impact of various technical possibilities on organisational structures and the sector in general.

According to the report, the name also captures the cross-border nature of the project as well as the hope that it would also cross boundaries in terms of the use of technology.

The results are believed to be beneficial to the central bank community and the financial system in general. Specifically, the report results are expected to contribute to developing clear perceptions of the potential of this technology and its applications in the financial sector. It can further see future collaborations in the GCC as a whole where fintech and wider digital is the implementor.

A vision to connect all payments in the GCC with the Gulf Payments Company

Second, in the GCC there is the Gulf Payments Company, which was founded in December 2016, and aims to build and develop a system that connects all payments systems in the GCC countries. It is a closed joint-stock company headquartered in Riyadh, Saudi Arabia, and owned and financed by the GCC member states. According to Gulf Payments Company, besides their headquarters in Riyadh, they also have a branch in the UAE capital city of Abu Dhabi.

Their objectives, according to the Gulf Payments Company, are around four points:

  • Develop a comprehensive and flexible infrastructure for Gulf payments that provide various services and payment options to fulfil the market’s demand in compliance with payment laws and regulations
  • Establish a payment system to connect GCC payment and settlement systems and execute financial transactions between GCC member states
  • Implement and operate the Gulf payment system in a safe and stable environment
  • Cooperate with international organisations and authorities, and provide studies and recommendations related to payment systems.

In December 2020 they launched phase one of their ‘AFAQ‘ platform and commenced money transfers between SAMA and the Central Bank of Bahrain (CBB). AFAQ payment system offers a common regional platform that connects Real Time Gross Settlement (RTGS) systems of each GCC member state, whereby instant processing of financial transfers between the GCC states are executed by end of the day, including gross settlements. It also supports cross-border multilateral net settlement instructions submitted by various regional clearing systems.

AFAQ belongs to a regional infrastructure for the GCC payments that fulfil the market’s demand in compliance with payment laws and regulations. This system supports the settlement and financial transactions between member GCC nations while giving a full-fledged system for safe, efficient, and cost-effective cross-border payments, while leveraging cutting-edge technologies, in accordance with international standards and best practices. Ultimately, the system aims to enhance financial stability in the GCC and the Middle East region as a whole.

Gulf Payments Company is headquartered in Riyadh, Saudi Arabia
Gulf Payments Company is headquartered in Riyadh, Saudi Arabia IMAGE SOURCE GETTY

This year, the Central Bank of Kuwait (CBK) in March announced the start of implementing AFAQ in Kuwait, with the aim of executing money transfers in the local currencies of the GCC countries and other currencies in a short time and at low costs for customers and dealers within a safe and stable environment.

The former governor of CBK at the time, Dr. Muhammad Al-Hashel, stated via a press release that the start of the application of the system comes within the framework of the CBK’s efforts toward developing cross-border payment systems and adopting the latest technologies in a way that improves efficiency and reduces dependence on financial systems and external transfer networks, and contributes to reducing the cost of transferring customers. To note, the current governor of CBK is Basel Al-Haroon.

In terms of the future, according to the Gulf Payments Company, the second phase aims to include other currencies such as the USD and EUR that will enable the processing of cross-border payments besides just same-day settlement for the balances of central and commercial banks’ funds and financial centres.

Buna and the Arab World

In the wider Arab World, which of course includes the GCC, there is Buna by the Arab Monetary Fund (AMF). Buna is a multi-currency payment platform launched in 2020 that clears and settles cross-border payments in eligible Arab and international currencies across the Arab region and beyond, with links to major trade partners.

This is the first regional cross-border and multi-currency payment system that supports Arab transactions in trade, investment and financial transfers. Buna enables financial institutions and central banks in the Arab region and beyond to send and receive payments in local currencies as well as key international currencies.

By providing various participants to opportunity to take part, assuming they conform, comply and meet the criteria and conditions for participation, Buna adheres to international standards, principles and compliance requirements.

Successes of it have included, beyond its intended mission and objectives, key collaborations and/or partnerships that include the likes of NPCI International Payments Limited (NIPL), the international arm of National Payments Corporation of India (NPCI) and the Pan-African Payment and Settlement System (PAPSS), which is a key driver as a result of the African Continental Free Trade Area (AfCFTA).

To note, the GCC is a hotbed for wider economic development and diversification strategies that are looking to transform their economies for a future that isn’t solely reliant on oil revenues and one that will be diverse across a wide variety of highly skilled and diverse ones where the likes of fintech can help propel that.

To reflect – it is the national economic transformation and diversification strategies of their respective countries. All of the six GCC have their own variants of their wider strategies of some sort (Kuwait Vision 2035, Bahrain Economic Vision 2030, Qatar National Vision 2030, Oman Vision 2040 and Saudi Vision 2030).

The UAE, for example, not only has other national initiatives such as UAE Centennial 2071 and UAE Vision 2021 but also variants in their respective Emirates such as Abu Dhabi Vision 2030 and Smart Dubai 2021. As a whole, digital and also highly skilled solutions like fintech and wider entrepreneurship are helping drive this.

In the case of cross-border payments, the likes of the Aber Project, AFAQ and Buna are showing fintech and wider digital implementation in the GCC. This further solidifies the excitement of economic diversification happening across the region and wider Middle East and Africa. In summary, the future of Aber, AFAQ and Buna showcase a wider vision that can further drive economic development.


  • Executive Economic Development Advisor (Emerging Markets) | Contributor

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