HOW SAUDI ARABIA CARDS AND PAYMENTS MARKET IS POSITIONED?
Saudi Arabia cards and payment services market which has been dominated by cash witnessed advancement towards digital transactions both in terms of number of transactions and volume in the recent years. Saudi Arabia has gradually invested in the service sector to reduce the high reliance on oil.
Saudi Arabia is making huge investments in digital technology in order to transform the financial industry. Consumers now are more digitalised and technology-oriented and are moving towards mobile and online payments. Also, the mobile and online payments have also been the priority of Saudi Arabia’s government and the financial entities who seek consumer satisfaction.
The total number of cards in circulation was witnessed to increase from ~ as of 31st December 2013 to ~ as of 31st December 2018, thus displaying a five year CAGR of ~%.
The increase in online shopping in Saudi Arabia has made the country an intensely lucrative market to invest in. The investment in e-commerce will also drive the change in the way payments are made online.
Banks in Saudi Arabia have started offering Islamic credit cards which have shariah compliance, so as to attract citizens. This has provided a much needed boost to the use of credit cards in Saudi Arabia as Islam forbids the receipt or payment of interest.
HOW IS SARIE MARKET IN SAUDI ARABIA POSITIONED?
SARIE commenced in Saudi Arabia in May 1997 and provides mechanism for all Saudi commercial banks to make and settle payments in Saudi Riyals (SAR). SARIE provides the basis for improved banking products and services and is the foundation for the payment system strategy of Saudi Arabia. The usage of SARIE system has been steadily growing with the number of transactions increasing at a CAGR of ~% from 2012 to 2018.
SARIE MARKET SEGMENTATION
By Type of Transactions (Customer Payments, Interbank Payments and Others: The customer payments dominated the SARIE market with a share of ~% in terms of number of transactions in 2018. However, interbank payments dominated the SARIE market in terms of revenue generated with a share of ~% in the year 2018.Most of the large value transactions take place through banks, similar to RTGS. Also the transaction for allocation of loans and its payment is also done via SARIE. Therefore, the share of interbank payments in terms of volume is the highest through SARIE.
HOW IS PAPER CLEARING MARKET IN SAUDI ARABIA POSITIONED?
The Paper Clearing System (PCS) governs how all paper-based payment instruments, such as cheques work. In Saudi Arabia all cheque clearings are operated by SAMA. The use of cheques have been decreasing at a negative CAGR of ~% from 2012 to 2018 primarily due to the increasing use of internet by population of Saudi Arabia, leading to increased use of electronic payment methods such as SARIE, SPAN (ATM and POS) and SADAD.
PAPER CLEARING MARKET SEGMENTATION
By Type (Commercial & Personal Cheques and Interbank Cheques), 2012-2018:
The commercial and personal cheques accounted for ~% volume share of the total cheques drawn in 2018. The average value per transaction of a commercial and personal cheque is around SAR ~ in 2018. Interbank cheques accounted for ~% volume share of the total cheques drawn in 2018. The average value per transaction of an interbank cheque is around SAR ~ in 2018. About ~% of the cheques are deposited by the customer at the branch of the paying bank and therefore are not involved in the interbank clearings.
By Regions, 2018: Approximately ~% by number of transactions and ~% by transaction volume of all the clearing house items are processed in the three regions. Riyadh has the highest number of transactions in terms of number as well as the volume because Riyadh being the capital city of Saudi Arabia has the highest number of bank branches among all the cities of Saudi Arabia. Jeddah is Saudi Arabia’s commercial capital and the city also has a lot of industries, therefore the volume of paper clearing transaction is more in the region.
PENALTY FOR BOUNCED CHEQUES
Issuing a bad cheque is a crime in Saudi Arabia. Article 118 of the law of commercial paper states that:
An imprisonment sentence for a term not more than ~ years and a fine not exceeding SAR ~ or either of these two penalties shall be served by a person, who in bad intentions commits any of the following acts:
- If he issues a retractable check which has no current cashable payment consideration or when it has a consideration but its value is less than the amount mentioned in the cheque. If he regains, after issuing the check, all or some of the consideration in such a way that the remaining amount is not sufficient for the check value.
- If he tells the drawee not to cash the check.
- If he deliberately writes the check or signs it in such a way that prevents it from being cashed.
- If he endorses or signs for a third party a payable check, despite knowing that it does not have consideration sufficient for the check value or it is not cashable.
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Ankur Gupta, Head Marketing & Communications