The Saudi Arabian economy was largely resilient to the global financial crisis, mainly due to a sound banking and financial system. The system was well capitalized with domestic banks maintaining a capital adequacy ratio of 17.9% at the end of 2013, as a result of which credit was easily available to corporate sectors. Consequently, business activity was vibrant and confidence was high, which reflected positively on employment levels, income and the overall card payments channel.

In a bid to develop a non-oil economy, the government focused on advancing infrastructure projects related to roads, airports, telecommunications, water and electricity, spurring domestic and foreign investment in core areas. The overall measures taken by the Saudi government, including the Mortgage Law in July 2012, had a direct impact on Saudi Arabia's cards and payments industry.
Card payments channel demonstrates healthy growth potential.

The Saudi Arabian card payments channel grew at a healthy pace, both in terms of volume and value during the review period (2009−2013). In terms of the number of cards in circulation, the channel increased from 17.2 M cards in 2009 to 26.8 M in 2013, at a review-period compound annual growth rate (CAGR) of 11.75%. Over the forecast period (2014−2018), the card payments channel is anticipated to register a CAGR of 8.66%, to reach 42.2 M cards in 2018.

In terms of transaction value, the card payments channel increased from SAR489.2 Bn (US$130.5 Bn) in 2009 to SAR863.9 Bn in 2013, at a review-period CAGR of 15.28%. The card payments channel is anticipated to increase further from SAR936.7 Bn in 2014 to SAR1.2 Tn in 2018, representative of a forecast-period CAGR of 5.44%.

The Saudi government's initiative promote cashless transactions, the growing popularity of payment cards based on Islamic principles, and retail industry growth all contributed to the expansion of Saudi Arabia's card payments channel in volume and value terms during the review period.

Debit cards to pave the way for prepaid and credit cards

While the debit cards category occupied the largest channel share of 57.7% in 2013, in terms of the number of cards in circulation, the prepaid and credit card categories are eroding the share of the debit cards category, which is anticipated to decrease to 52.3% in 2018. With government efforts to attract the non-banked population into the country's banking system, domestic and foreign banks are issuing prepaid cards in large numbers. In 2013, the number of prepaid cards in circulation was 8.3 M, and is anticipated to reach 16.4 M by 2018.

Due to consumer demand for cards that comply with Islamic principles, banks in Saudi Arabia are issuing Sharia-compliant credit cards. Banks are targeting different segments, such as women, high-income groups, online shoppers and pilgrims, by offering bespoke credit cards and services. Consequently, the number of credit cards in circulation increased during the review period and is anticipated to reach 3.2 M in 2018.

Growth of m-commerce, e-commerce and outbound travel to drive card payments channel

Saudi Arabia's well-developed telecommunications infrastructure allowed it to record one of the highest mobile penetration rates in the Middle East and North Africa (MENA) region in 2013. Banks such as Al Rajhi Bank, Samba Financial Group and The National Commercial Bank (NCB) partnered with merchants and online retailers to provide secure payment facilities, enabling customers to pay via mobile phones or online. Consequently, mobile payments (m-payments) grew from SAR453.4 M in 2010 to SAR813.1 M in 2013 and are anticipated to reach SAR7.2 Bn in 2018, at a forecast-period CAGR of 46.48%.

E-commerce is increasing as a result of improvements in telecommunication infrastructure, payment and security systems, and an increased consumer willingness to shop online. E-commerce registered a review-period CAGR of 35.71%, rising from SAR1.8 Bn in 2009 to SAR6.0 Bn in 2013.

In line with an increase in number of outbound travelers, the outbound travel expenditure among the retail and corporate segments increased at a review-period CAGR of 21.31%, and is anticipated to increase further over the forecast period at a CAGR of 10.11%, fuelling the growth of travel cards.

New technology to enhance consumer convenience and provide a secure banking environment

Banks and card providers operating in Saudi Arabia have introduced several new technologies to improve consumer convenience. New technology makes it easier for bank customers and unbanked individuals to access funds and pay for goods and services, both online and offline. Several enhanced security measures to control fraudulent activity and provide a more secure banking environment have been developed. The most widely used include 3-D Secure, chip and PIN, and internet cards.

With increased security features, banks intend to offer cards that can be used anywhere, with no security issues, for retail shopping, online purchases and mobile commerce. The introduction of new technology will create advanced, secure and more convenient card payments.

Growing demand for smart cards with enhanced security measures

Debit and credit cards recorded significant growth during the review period due to improved efficiency, convenience and security. However, as security features on payment cards are well established, so too are methods of frauds. Despite a strict regulatory framework, card fraud statistics in Saudi Arabia grew in value from SAR290.6 M in 2009 to SAR375.8 M in 2013.

To support consumer confidence in the security of the card payment system, card providers and banks are offering Europay, MasterCard and Visa EMV-compliant cards. EMV cards consequently grew in volume terms from 4.2 M cards in circulation 2009 to 18.6 M in 2013.

Targeting unexploited categories to overcome competition and gain industry share

The Saudi Arabian card payments channel is yet to be explored to its full potential by card issuers. Cards aimed at students, teenagers and businesses are gaining popularity across the world, but are yet to be exploited fully in Saudi Arabia. Some banks, such as Samba Financial Group and Al Rajhi Bank, are offering credit and debit cards, targeting female customers through the Ladies Banking service.

The growing e-commerce sector has prompted many banks, such as Al Rajhi Bank, SABB, Samba Financial Group and Riyad Bank, to offer cards exclusively targeted at online shoppers. To target high-income customers, banks are offering credit cards with a range of benefits and value-added services.

Embracing social media to benefit the cards and payments industry

The use of social media to reach target audiences is steadily increasing among banks in Saudi Arabia. Al Rajhi Bank has a Facebook, YouTube and Twitter presence, enabling it to answer consumer queries and communicate the latest developments concerning its products and services. Similarly, the Saudi British Bank (SABB), The National Commercial Bank (NCB), Riyad Bank are actively present on Facebook, LinkedIn and YouTube. With a number of banks strengthening their presence in social media to engage with their target audiences, this will have a positive impact on the cards and payments industry.