Market Trends of Saudi Arabia Payments Industry
E-commerce is Expected to Drive the Saudi Arabian Payments Market
- With the increasing number of smartphones worldwide and high-speed cellular networks in most countries worldwide, the e-commerce industry is growing. With that, mobile transactions are also expected to grow rapidly, providing a significant boost to the mobile payments market.
- During the COVID-19 pandemic, the e-commerce industry witnessed a significant rise owing to lockdowns worldwide. Customers were reluctant to purchase from offline stores due to fear of contracting the disease. People used electronic payment methods, including mobile payment, to pay for goods and services.
- As reported by PAYPERS News, urpay, a digital wallet based in Saudi Arabia, leveraged MoneyGram's API infrastructure and network to facilitate international transactions from the Kingdom. This collaboration, indicative of MoneyGram's growing influence in the Middle East, notably amplified its digital footprint in a key global remittance market. With this partnership, MoneyGram anticipates a surge in payment volumes processed through its platform, coupled with an enriched digital service portfolio.
- Saudi Arabia's e-commerce sector is poised for robust double-digit growth, with several cross-border e-commerce opportunities. A2A payments are gaining traction in the region, emerging as the third most popular e-commerce payment method, following credit cards and digital wallets. Notably, consumers in the Middle East and Africa (MEA) are increasingly favoring digital wallets. According to FIS, digital wallets, the second most popular online payment method in MEA with a 20% share, are further expected to expand, reaching a 27% share of the e-commerce transaction value by 2026.
- As per FIS, a financial services firm, the global point-of-sale (POS) transaction value dominated by cash is projected to plummet to under 10% by 2026. The pace and reasons behind this cash decline vary across nations, with Saudi Arabia exemplifying a notable shift. In Saudi Arabia, the surge in digital wallets, notably Apple Pay and STC Pay, has been pivotal in diminishing cash usage. Despite its historical reliance on cash, Saudi Arabia is swiftly transitioning to a predominantly digital payment ecosystem, with debit and credit cards, along with digital wallets, spearheading the transformation.
Understand The Key Trends Shaping This Market
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The Retail Sector is Expected to Register Significant Growth
- The retail sector is one of the top sectors in Saudi Arabia. As a result, the retail sector represents many opportunities for new business, trading, and investing. The payments market in Saudi Arabia is developing with the changing customer behavior. Trends such as mobile payments, internet banking, instant payments, and the government's growth initiatives are affecting the market.
- Citizens spend a significant share of money on categories that include food, beverages, clothing, footwear, cosmetics, body care products, furniture, appliances for the household, and leisure items, such as watches and accessories. Furthermore, various payment checkout solutions offered by top retail market players in the region are accelerating the growth of the retail sector.
- This continuous rise in the retail sector provides various opportunities for payment providers in the region to enhance their payment platforms and apps to cater to the increasing demand. Furthermore, the rising adoption of digital wallets and contactless payments by cards further provides lucrative opportunities for payment providers in the region.
- Digital wallets, spearheaded by domestic solutions like STC Pay by STC and mada Pay by Saudi Arabia’s Ministry of Finance, are swiftly capturing more shares of the e-commerce industry. SARIE, a part of Saudi Vision 2030 under the Financial Sector Development Program, aims to push non-cash transactions to 70% by 2030. Notably, non-cash transactions have surpassed cash transactions, marking a significant milestone.
- The credit landscape is diverse, with rising demand for alternative products like credit card-linked digital wallets, 'buy now pay later' (BNPL) services, and other point-of-sale (POS) financing options. In 2022, BNPL transactions accounted for 5% of the global e-commerce transaction value, a figure expected to climb to 6% by 2026. Similarly, POS financing, encompassing BNPL, retailer, and bank financing, held a 2% share of POS transaction value in 2022, a proportion projected to hold steady through 2026.
- According to the Saudi Central Bank’s (SAMA) report in April 2024, retail consumer electronic payments, a key KPI of the Financial Sector Development Program, surged to 70% of total retail payments in 2023, up from 62% in 2022. This uptick was fueled by a notable spike in payments processed through national systems, hitting 10.8 billion transactions in 2023, compared to 8.7 billion in 2022.
