Discusses the most common methods of payment, such as open account, letter of credit, cash in advance, documentary collections, factoring, etc. Includes credit-rating and collection agencies in this country. Includes primary credit or charge cards used in this country.
Last Published: 8/13/2019
The UAE can be a challenging place for American firms to do business, especially if they are unfamiliar with banking practices in the region.  Payment recovery tends to be slower than in the United States and Europe.  Payment delays of many months (sometimes years) are not uncommon.  

Trade financing has become increasingly common in the UAE, and most local and international banks offer services to small and medium-sized enterprises, allowing them to trade with local and international markets.  Commercial Letters of Credit (LCs) are extensively used as a means of payment in overseas trade.  The most commonly used types of LCs include: Sight, Deferred Payment, and Revolving.  Provisions of the Commercial Transactions Law (CTL) are complementary to the parties’ intentions and who often elect to be governed instead by International Chamber of Commerce (ICC) Uniform Custom and Practice for Documentary Credit.  According to the CTL, in absence of any clear indication, the LC is considered be irrevocable in contrast to international standards. 

Checks are an important payment instrument in the UAE for transactions of large amounts. The Image Check Clearing System (ICCS) introduced in 2008 greatly accelerated checks processing.  Bounced checks are considered a criminal offense and could be punished by prison sentences. 

Electronic fund transfers are also widely used in the UAE.  The Central Bank operates the UAE Funds Transfer System (UAEFT) the only Real-time gross settlement (RTGS) system serving retail and large value payments.  It also introduced the International Bank Account Numbers (IBAN) system for use by all bank customers in the country in November 2011.  The system is designed to minimize the risk of errors during cross-border transactions. 

In 1996, the Central Bank launched the UAESWITCH scheme which now connects the ATMs of all but three small foreign banks.  The scheme allows cardholders to withdraw cash from any of the 4,500 ATMs in the UAE, and through its connection to GCCNET, allows cardholders to obtain service at ATMs throughout the Gulf region. 

VISA and MasterCard credit cards are widely accepted by businesses and government services.  American Express, Diners and Discover are less widely accepted.  Small establishments only accept cash.  In 2016, the Central Bank mandated that all cards issued in the UAE must comply with EMV standards (Europay, MasterCard and Visa global standard for chip-secured credit cards).  Almost all the backend systems, all POS terminals, and more than 80 percent of cards in use are currently compliant. 

Various digital payments initiatives have emerged in the last few years (the government’s Mobile Wallet, Etisalat Wallet, Beam Wallet, NOL cards, Apple Pay, Google Pay and Samsung Pay), but they are not very widely used yet.  In 2017, the UAE Central Bank issued the "e-Payment Regulation" to facilitate the adoption of digital payments and regulating its infrastructure.  It is still unclear if virtual currencies are prohibited in the UAE. 

The three major global credit rating agencies (S&P, Fitch, and Moody’s) have regional presence in the UAE and rate most sovereigns (local and federal governments) with the notable exception of the government of Dubai and some of its GREs.  The Chambers of Commerce of Dubai and Abu Dhabi also offer customized credit reporting to their members.  The government owned Al Etihad Credit Bureau started operations in 2016 and began providing financial institutions with credit scores of entities and individuals.  Many international trade credit insurers and trade credit risk management providers are also present in the UAE.
 

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United Arab Emirates Market Access Payment