BNPL services can help Saudi Arabia‘s payment market become more dynamic, inclusive, and inventive, thereby meeting consumer expectations and promoting company growth.
Banks in Saudi Arabia record a 21% annual hike in credit card loans in the second quarter of 2024. The numbers reach SR30.04 billion as per their official data.
Recorded as the highest quarterly figure reported by the figures from Saudi Central Bank which is also known as SAMA. Also recorded as the most substantial annual growth seen in a whole year.
Ideally paid back in instalments, the consumer loans are used for significant purchases and are frequently featured at less fixed rates than most credit cards. The rates rose by a small 2% in order to reach SR452.32 billion during this period.
These loans are not inclusive of real estate financing, margin lending and finance leasing according to SAMA.
According to AlixPartners’ Critical Consumer 2024 research, Saudi Arabia‘s propensity for digital and credit card payments is comparable to Switzerland’s and even exceeds Germany’s.
Payment cards are dominating Saudi Arabia’s financing ecosystem, owing to government-led economic inclusion measures under Vision 2030. This strategy focuses on digital transformation and moving away from cash transactions in favor of electronic payments.
The COVID-19 pandemic has hastened the implementation of contactless transactions, resulting in increased card usage. Additionally, greater banking penetration, enhanced infrastructure, and increased retailer acceptance are propelling the sector forward.
The government’s Vision 2030 initiative to eliminate cash reliance and stimulate fintech innovation is helping to advance the payment card business.
Global Data released a report in July which stated that the key players in the card and payments market in Saudi Arabia include Al Rajhi Bank, Saudi National Bank, and SAB, as well as Alinma Bank, and Visa.
The banks are tailoring credit cards to different customer segments in order to boost card penetration.
The Titanium Mastercard provides benefits which includes free VIP lounge access, purchase protection, and instalment options and is a Shariah Compliant.
Some banks target students with the Visa Signature credit card, which is meant for people enrolled in authorized Saudi colleges and offers installment payment alternatives as well as reward points through the Akthr Program.
According to Global Data, recent advancements in Saudi Arabia’s cards and payments business include the implementation of pilot digital banking services by two of the three licensed digital banks, STC Bank and D360, in 2023, as stated in the Financial Sector Development Program annual report.
Additionally, Buy Now Pay Later services are gaining popularity, particularly among Generation Z buyers.
To govern this expanding sector, the Saudi Central Bank implemented new guidelines for BNPL firms in December 2023.
These included establishing licensing procedures for such businesses and minimum standards for providing these services, with an emphasis on consumer safety, sector growth, and sustainability.
The rules also included provisions for licensing, internal regulatory measures, information security, and financial crime prevention, as well as instructions for oversight and compliance.
BNPL services can help Saudi Arabia’s payment market become more dynamic, inclusive, and inventive, thereby meeting consumer expectations and promoting company growth.
According to a report conducted by management consulting firm AlixPartners, Saudi consumer spending is likely to continue strong in the coming year, despite global economic uncertainty.
As per the study, it is known that 37% of the consumers plan to cut back on expenditures in 2024 when compared to 2023 as this resilience stands in contrast to the broader Europe, the Middle East and Africa region.
The stable spending environment of Saudi Arabia continues despite the global challenges like increasing inflation and geopolitical instability. There are some factors that are stuck amid post-pandemic recovery.
E-commerce is gaining popularity in contrast as the Saudi Arabian consumers are increasingly embracing online shopping. There is a visible shift towards home grown businesses while the international companies currently take up a larger space in the retail landscape as per a study.
AI-powered chatbots and virtual assistants are becoming more widespread, providing personalised customer service and increasing engagement, whereas recommendation engines utilise complex algorithms to study consumer preferences and provide tailored product recommendations, boosting sales and satisfaction.
Furthermore, AI improves supply chain management using predictive analytics and machine learning, lowering costs and ensuring product availability.
