Saudi Arabia served as the hub of the ancient world, with some of the earliest trade routes traversing its territory. Currently, Saudi Arabia is trying to become a significant worldwide trading center. This time the foundation will be digital technology. It aims to reduce its dependence on oil earnings.
To create a more sustainable future for the country, the Saudi government is advancing with diversification in light of global climate objectives and the oil industry’s hazy long-term prognosis. The country’s “Vision 2030” framework outlines this economic and social development.
Digital Payments in Saudi Arabia
Digital payments were widely utilized before the pandemic. The use of cards for transactions in Saudi Arabia increased by over 70% between February 2019 and January 2020. The adoption was accelerated by COVID-19, with digital payments increased by 75% and cash withdrawals declining by a third in 2020.
When the coronavirus first surfaced in Saudi Arabia, the government quickly responded by outlawing COD and forcing POS equipment from offline merchants to accept debit and credit card payments, which caused a sharp decline in cash transactions. This one action led to an explosion of new fintech businesses in the internet and offline market-focused digital payments space.
The Fintech Saudi Report showed that 82 fintech businesses were incorporated in the country in the first half of 2021, up from only 10 in 2018. According to a report by the Saudi Central Bank, electronic payments surpassed cash usage in Saudi Arabia for the first time in 2021. It accounted for 94% of all payments. Across all economic operations, the number of electronic payments rose to 62 percent in 2021 from 44 percent in 2019.
Research by the Saudi Central Bank (SAMA) showed that digital payments had become the preferred payment method in Saudi Arabia. In 2019, 57% of all transactions were made electronically. The report also noted that these transactions account for 94% of all payments processed when expressed in terms of value. When expressed in terms of volume, the proportion of digital payments rose to 62% across all industries in 2021.
Future of Digital Payments in Saudi Arabia
According to a Visa report, the monarchy is one of the top five nations that have embraced digital payments. According to the survey, Saudi Arabia’s use of contactless payments increased from 4% in 2017 to 94% by the end of 2020, ranking first in MENA, above the average for the EU, and ahead of Hong Kong and Canada.
In the area of digital payments, the total transaction value is anticipated to reach $49.0 billion in 2023. By 2027, it is anticipated that the total transaction value will increase by 12.53% per year (CAGR 2023–2027), reaching a total of US$78.40 billion.
Digital payments look promising in Saudi Arabia. With all the developments the government is putting in place, it will not be surprising to see a positive change in the country’s financial sector and the overall economy.