Saudi Arabia reaps technology transformation benefits to ‎digital banking sector

The Saudi banking sector has witnessed great developments in recent years, the title of which was digital transformation and the employment of smart applications to support customer services in withdrawals, transfers, deposits, and payment of bills and fees. Vision 2030 and its programs in general, and the progress made in the financial sector development program in particular, in which the financial technologies axis represented a cornerstone.

The beginning was with the infrastructure of the telecommunications sector, as the Kingdom achieved the first rank in the Middle East and Africa and the ninth among the G20 countries in the Digital Regulatory Maturity Index, issued by the International Telecommunication Union. The Kingdom ranked sixth in the world among the countries with the fastest data download speed in the fifth generation networks. As for the communications infrastructure index, Saudi Arabia jumped 40 places to rank 27 in the world.

In a step that reflects government support towards digital transformation in the banking sector, the Saudi Cabinet approved in 2021 the licensing of two local digital banks by converting (stc pay) to become a local digital bank to conduct banking business in the Kingdom with a capital of 2.5 billion riyals under the name “STC Bank”, in addition to the approval of an alliance of a number of companies and investors led by Abdul Rahman bin Saad Al-Rashed and Sons Company to establish a local digital bank with a capital of 1.5 billion riyals in the name of the Saudi Digital Bank.

The launch of the Saudi Central Bank of the instant payments system “Saree” represented a new shift for the digital banking sector in the Kingdom, as it represents an added value and quality for the capabilities of the national payment infrastructure and to keep pace with the journey of development witnessed by the national payments sector in the Kingdom.

The launch of the accelerators program to support the growth of emerging financial technology companies (Fintech) represented a major impetus for the sector, as the program was designed to transfer best practices, tools and resources available to emerging companies in the field of financial technology to develop them and expand their existing business in the Kingdom.

In the framework of supporting and encouraging financial technology companies, 2021 witnessed the licensing of 5 technology companies, bringing the number of these companies operating in the Kingdom to 18 companies, 14 of which provide payment services, and 4 companies working in the field of insurance and financing. In addition, 34 financial technology companies have been authorized to work under the umbrella of the legislative experimental environment within the Saudi Central Bank to provide innovative solutions.

And as a culmination of the Kingdom’s steps towards digital transformation in the banking sector, the share of electronic payments in the retail sector – retail (Retail Payments) achieved 57% by the end of the year 2021 of the total available payment operations, including cash, in the Kingdom, exceeding the target percentage. Within the financial sector development program, one of the Kingdom’s Vision 2030 programs, which set 55% by the end of 2021, while it aims to reach 70% by 2030.

The Kingdom also recorded the highest rate of adoption of payments via Near Field Communication (NFC) technology, at 94%, ahead of the countries of the European Union, Hong Kong, Canada, and countries in the Middle East and North Africa region.

The data of the Saudi Central Bank (SAMA) show the significant shift towards electronic payment and e-commerce in the Kingdom, as e-commerce via mada cards recorded a growth of 83% in the number of transactions during the first 8 months of this year compared to the same period last year to reach To about 205.2 million transactions, while its value increased by 75% to reach about 44.2 billion riyals. Over the past three years, the data shows a growth in the number of operations by 811% in 2021 compared to 2019, and its value increased by 625% during the same period.

For its part, the Capital Market Authority supported financial technology by creating a legislative and regulatory environment for financial technology products in the financial market, as it worked on continuous development to attract innovative business models and emerging technologies that open new horizons to facilitate financing and stimulate investment.