.svg)
United Arab Bank (UAB) has become the latest bank to join Buna, a cross-border payments platform owned by the Arab Monetary Fund (AMF).
As part of the agreement, UAB will launch a cross-border, multi-currency settlement service using the Buna platform.
In a press statement, UAB said the tie-up will allow it to offer corporate and retail customers a faster, more transparent and more cost-effective way to send money overseas.
The business-to-business (B2B) focus of UAB and its regional alignment, particularly among Arab-speaking countries, positions it ideally to take advantage of this new payments platform and to enhance the services it offers its customers.
Founded in 1975 as a joint venture with French bank Société Générale, a large proportion of UAB’s customers are corporate clients based in the commercial and industrial centres of the UAE’s seven emirates.
At present, more than 80 percent of UAB’s loan book comprises corporate lending, mostly to small and medium-sized enterprises (SMEs), according to a Fitch Ratings report published in May.
UAB also focuses on providing treasury and trade finance services to importing and exporting clients, including instruments such as letters of credit, guarantees and invoice discounting.
Shirish Bhide, CEO of UAB, said “This strategic collaboration is in line with UAB’s mission to play a pivotal role in supporting the growth of trade and investments in the Arab region as it opens up opportunities for our clients to cooperate more dynamically with their partners at the regional and international level.”
Through improving real-time payments connectivity and interoperability, Bhide said joining the new platform will help further develop “trade and financial exchanges in the Arab region”.
Since 2007, Qatar’s Commercial Bank (QSC) has held a 40 percent stake in UAB, making it one of the only cross-border banking ventures among Gulf Cooperation Council (GCC) members, and the first between Qatar and the UAE.
Buna continues to expand
UAB’s joining of the Buna platform follows a similar announcement from Dubai Islamic Bank (DIB), the largest Islamic bank in the UAE.
As reported by VIXIO last week, DIB said that joining Buna would allow it to offer new products such as retail and interbank transfers and remittances at lower prices, complementing its digital transformation strategy.
The arrival of the two UAE banks follows the completion of Buna’s first full year as a live and operational payments system.
A few days before the beginning of 2021, Buna executed its first live payment in Emirati dirhams, after successfully processing a transaction between Mashreq Bank in the UAE and Banque Misr in Egypt.
In April 2021, this was followed by the establishment of the Arab Regional Payments, Clearing and Settlement Organization (ARPCSO), a supranational entity incorporated in the UAE and owned by the AMF to operate the Buna platform.
Since then, Buna has grown to support real-time, 24/7 settlement in six currencies, namely the Emirati dirham, Saudi real, Egyptian pound, Jordanian dinar, US dollar and the euro.
By year-end 2021, according to Buna’s first annual report, 135 financial institutions were at various stages of the onboarding process to join the platform.
Among these institutions, 57 have already signed the participation agreement and 35 were already fully operational.
To date, it has also secured the support of three Arab central banks in Egypt, Tunisia and Iraq.
Focus on interoperability
Delivering interoperability between payment systems is a major goal of Buna, both within the Arab region and with other areas.
In 2021, Buna signed memoranda of understanding (MoU) on interoperability with both Visa and Mastercard, and signed similar agreements with entities such as the African Export-Import Bank (Afreximbank) and India’s NPCI International Payments Limited (NIPL).
In September 2021, Buna completed a joint experiment with the Banca d’Italia demonstrating that real-time, multi-currency interoperability could be achieved with Europe’s Target Instant Payments Solution (TIPS).
The experiment simulated the payment of €1 by a current account holder of Italy’s Banca Intesa Sanpaolo to a customer of Jordan Ahli Bank, who received the money in Jordanian dinars.
During the experiment, a number of cross-currency transactions were settled in both TIPS and Buna’s instant payment service.
Intesa Sanpaolo’s TIPS account was debited in euros, while Jordan Ahli Bank’s Buna account was credited in dinars.
The average end-to-end response time for these transactions was approximately 15 seconds.
“The proof of concept we conducted with TIPS is an important achievement of 2021,” said Buna CEO Mehdi Manaa in the annual report.
“This success can be first measured against the ease and efficiency of implementing the interconnection between the two systems in just a few weeks.
“The speed of the payment execution represented a second and very important element of this success.”
