The Growth & Impact of Digital Banking in Saudi Arabia

As the world becomes increasingly digitised, so too does the way we bank. In Saudi Arabia, the banking sector has undergone a digital transformation in recent years with new technologies and services being introduced to make the banking experience more convenient and efficient for customers.

By 2024, the number of people who use digital banking apps is projected to reach 2.5 billion. In Saudi Arabia specifically, banks are planning to make significant investments in digital over the coming years. Between 2017 and 2019, fintech transaction values have increased 18 per cent year-on-year in Saudi Arabia and are expected to reach USD$33 billion by 2023. This is in line with the Saudi Vision 2030, which aims to make the Kingdom a global investment powerhouse and diversify its economy away from oil.

How KSA’s Digital Banking Sector is Evolving

When it comes to banking, Saudi Arabia is considered a late adopter of digital transformation compared to other countries in the world. However, in recent years, the Kingdom has made great strides in its journey towards a digital future.

As part of Vision 2030, there has been a focus on developing the digital infrastructure and capabilities of Saudi businesses. This has been evident in the investments made by the government and private sector into fostering a healthy digital ecosystem for banking and financial services. Last year, the government granted its first digital banking licences to two locally established banks.

STC Pay was launched by telecoms provider STC in 2018 and is one of the most popular digital banking apps in Saudi Arabia. The app offers a range of features such as the ability to pay bills, send money, and make online purchases. Users can also take advantage of special discounts and offers from STC and partner businesses.

The second digital bank that was approved by the Saudi Monetary Authority (SAMA)

was Saudi Digital Bank, which was created by Abdul Rahman bin Saad al-Rashed and Sons Company — one of the most well-respected construction and real estate businesses in the Kingdom. The bank offers a host of digital services such as personalised banking, mobile payments, and money transfers.

Since the launch of these two digital banks, several more have been approved and there has been an increase in the number of people using digital banking services in Saudi Arabia. According to one survey, 82% of Saudi respondents use a digital bank at least once per week and 88% of people would choose digital banking services over visiting a branch in person.

To further develop the digital banking ecosystem, the government has invested in initiatives to support small businesses. In 2016, the Saudi government launched Monshaat, an online platform that offers a range of services for small businesses, including access to financing. This is in line with the Vision 2030 goal of supporting entrepreneurship and small businesses and will help to create an ecosystem that will promote the development of smaller digital banking and fintech companies in Saudi Arabia.

The Challenges of Digital Banking

Despite the clear benefits of digital banking, there are still some challenges that need to be addressed to further develop the sector in Saudi Arabia. One significant issue is the lack of awareness about digital banking and its benefits amongst the older generation. However, since the majority of Saudi Arabia is under the age of 35, this is likely to change over time as more people become comfortable with using digital banking services.

Perhaps the biggest challenge facing digital banking in Saudi Arabia is the risk of fraudulent activity. Phishing scams are a particular problem and there have been several high-profile cases in recent years. According to the Kaspersky Digital Payments survey, 57% of Saudi respondents have encountered some kind of scam activity while using online banking services. This is a significant concern and something that needs to be tackled to ensure the continued growth of digital banking in the Kingdom.

Overall, digital banking is a key part of the government’s Vision 2030 goal to modernise the Saudi economy and make it more competitive on the global stage. By making it easier for people to access banking services and providing support for small businesses, the government is promoting the development of a thriving digital ecosystem.

By Hammad & Al-Mehdar, Saudi Arabia, a Transatlantic Law International Affiliated Firm. 

For further information or for any assistance please contact saudiarabia@transatlanticlaw.com

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