The changing face of the UAE’s workforce has brought just as much change to its rate of financial inclusion, alongside the opportunity for fintechs to make a lasting difference in how the region’s increasing demographic of modest-income workers experience finance and financial services.
In this guest authored piece for The Fintech Times, Wael Fakharany identifies how the workforces of the UAE and the wider MENA region are changing; discussing the benefits of financial inclusion and digital literacy and how they can be furthered, and the role of human resources (HR) in advocating that shift.
Fakharany is the managing director at Edenred UAE. Headquartered in Dubai, the payroll management provider specialises in its payroll solution service, which is accompanied by its ‘C3Pay’ payroll card.
Dubai has moved to an increasingly cashless society, especially since the onset of the pandemic. From crisis to recovery and the reopening of economies, businesses have witnessed a profound change in consumer behaviour, evolving day by day.
There has been a significant shift towards accessing financial services via fintech platforms among skilled workers. Expanding this technology to everyone requires higher levels of digital financial literacy. Countries like the UAE, which have had an accelerated transition from cash to digital financial services, create significant gaps in digital financial literacy in more vulnerable populations.
McKinsey & Company revealed that the number of consumer digital payments transactions in the UAE increased at an annual rate of more than nine per cent between 2014 and 2019, compared to around five per cent in Europe.
Ninety per cent of surveyed payments practitioners predicted that at least half of the new users would continue with digital payments, and more than half of the respondents said strong non-cash payments growth will continue until 2026.
The advent of technology blooms new skill demands in the job market while also revolutionising how individuals interact. In the UAE, the total labour force was at 6.38 million in 2020, according to The World Bank, of which 80 per cent is foreign/expatriates. Globalisation, better connectivity and ease of communication have brought diversity to the labour force.
While access to the internet and the adoption of smartphones are widespread in the country, digital literacy and financial inclusion amongst modest-income workers is an area that will contribute positively to the UAE economy.
Better financial access means more people connect to the formal financial system, make productive investments and build assets mitigating shocks related to emergencies, illness or injury.
How can we drive financial inclusion?
Financial inclusion refers to making financial products and services accessible and affordable to all individuals and businesses, regardless of their net worth or company size. It has been identified as an enabler for seven of the 17 UN Sustainable Development Goals and is increasingly regarded as a tool to assess well-developed societies.
It includes providing tools to gain access to credit, grow a business, buy a home, save for a child’s education, or plan for health and retirement. With innovative and clear-sighted policies, fintech innovation can change the way people transact. The future of finance is brightest when it provides valuable services to the broadest swath of society and the economy. Financial inclusion has been linked to reducing poverty and increased prosperity as it aids inclusive growth, economic development and financial deepening.
The financial inclusion rate for the Middle East and North Africa (MENA) region stood at 20 per cent at the end of 2019, according to the MENA Financial Inclusion Report 2020.
A breakdown of critical categories found that 36 per cent of the region’s population has access to financial services and 24 per cent access payments facilities. Meanwhile, only nine per cent have access to credit and 12 per cent to savings. In the region, the UAE has the highest financial inclusion rate at 46 per cent, followed by Bahrain at 39 per cent and Saudi Arabia at 31 per cent.
Financial inclusion alone is not enough. There is tremendous work needed around financial education to ensure the unbanked population can access financial facilities and knows how to use them. From digital payments, international money transfers (remittances), peer-to-peer transfers and more, bringing awareness to the existence of these services is the first step.
Next, they need to be aware of the risks like hacking, phishing, fraud, etc., to safeguard themselves against cyber-attacks.
This calls for a multi-dimensional approach to financial inclusion and lays out a framework for how the UAE and its companies can link financial literacy to digital literacy. These initiatives have gained an important position in the policies of the UAE.
With the UAE Vision 2021, the country aimed to diversify its economy and revenue beyond oil and enable its long-term economic and social development. A core component of this vision is the need to create a globally competitive workforce that is future-ready and equipped with future skills.
To build on the initiatives launched by the government to reduce the knowledge gap, Edenred UAE conducts training sessions for modest-income workers to educate them on topics such as personal finance management, fraud prevention and cost savings through leveraging digital financial services.
It also offers personal assistance via a WhatsApp support channel.
How can HR impact financial inclusion?
Payroll directly impacts the employee experience every single payday. A MetLife study released in 2020 found that employees are more concerned about their finances than any other aspect of their well-being. When salary payments are accurate and on time, it keeps an employee happy.
Despite advancements in technology, payroll processing still takes up time and effort. Any delays or errors on payday cause employee dissatisfaction, which spirals and harms the workplace.
Providing 24/7 online access to employees’ finances ensures a level of financial wellness. Additionally, fine-tuning payroll practices will make it easier for employees to interact with the system and employers will land up with considerable benefits, including greater productivity and reduced costs.
Considering financial wellness as an employee engagement strategy will help bolster engagement and boost the bottom line.
An inclusive and collaborative approach to closing the digital gap through education, engagement and participation of modest-income workers is crucial for the long-term prosperity of the UAE. The beneficial impacts for the people, businesses, economy, the country and finally, the region are tremendous.