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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Ken Research
Ankur Gupta, Head Marketing &
Communications
+91-9015378249
