As a part of Vision 2030, the Saudi government aims to achieve 70% non-cash transactions by 2030 in order to support economic growth and diversification.
Investments made into fostering widespread digitalisation coupled with large digitally savvy youth demographics are driving the digital economy and payments industry in KSA.
To learn more about the payments landscape in the Kingdom, don’t miss the re:Imagine Payments white paper. In the meantime, dive into our summary of 5 important payment trends taking place in Saudi Arabia today.
Exponential Growth in Digital Payments
The government has set out several initiatives to achieve holistic digital transformation that will be felt across all of Saudi society. This includes new infrastructure such as high-speed internet access through public hotspots which will help the nation to achieve a 99% internet penetration rate by 2030.
Actions have also been taken to increase confidence in digital payments across both young and older demographics. In line with this drive, the Saudi governmental sector has almost completely shifted to digital payment methods for all outward payments to businesses, individuals and other government agencies.
The regulatory frameworks adopted by KSA and other MENA countries, combined with continued efforts to drive adoption of innovative payment products, will accelerate the growth of digital payments in the region.
SME Businesses Are at the Heart of Digital Payments Adoption
SMEs (Small and Medium Enterprises) provide jobs for 50% of private workers in Saudi Arabia. These businesses, many of which are led by young entrepreneurs, are at the heart of long-term adoption of digital payments.
Millennials (born between 1981 and 1996) make up the bulk of the population at 26%, partly thanks to the nation’s extensive expat demographic. Notably, the preferences and needs of this group are shaping the way businesses offer experiences to their customers in several sectors.
Economic Prosperity to Drive Digital Payments Market Growth
Overall consumer expenditure is expected to register a CAGR (Compound Annual Growth Rate) of 8.5% between 2021 and 2026 in Saudi Arabia. Rising oil and gas output, large-scale investment in the energy and non-energy sectors, and effective government programs to stimulate economic diversification are driving this positive outlook.
Economic development plans are resulting in stronger employment, higher income levels and increased consumer spending. Ultimately, this is fuelling the growth and expansion of online sales and the digital payments sector.
Online bill payments accounted for the largest segment in the digital payments market in 2022, but e-payments for consumer food service and retail also recorded substantial growth.
Gen-Z Embrace Digital Payments and Modern Solutions
The Kingdom has substantial Gen-Z (born between the late 1990s and early 2010s) and Gen Alpha (born after 2010) population sizes of 22.1% and 22.6% respectively, many of whom already have a strong aptitude for new technology adoption. As these groups age, their preferences for digital-first technologies will impact the future digital landscape of KSA.
Interestingly, a Gen-Z survey carried out by SixthFactor Consulting found that the preferred payment methods of this group were cash and credit/debit cards. It also found that 48% of Gen-Zs in Saudi already use digital/mobile wallets for daily payments. This is partly due to a perceived pressure to keep up with the latest trends, including digital payments.
This generation is shaping the consumer habits of tomorrow and many businesses are already adapting the way they operate to better cater to these groups as their economic potential becomes realised.
BNPL continues to grow
Buy Now, Pay Later (BNPL) in Saudi Arabia has gained popularity in recent years thanks to its ability to facilitate easy loan access for a broad spectrum of consumers. The benefits and efficiencies for both consumers and businesses are now increasingly understood and both usage and demand grow across the Kingdom.
That said, competition among BNPL providers is intensifying, leading to the strategic development of loyalty programs and discounts to acquire new customers. This trend is only set to continue as more providers see the opportunities to be found in the KSA market.
Keen On Learning More?
For more information about the world of digital payments, fintech solutions and the evolution of a cashless economy across Egypt, the UAE and Saudi Arabia, read through the full white paper, “What’s Next for Digital Payments in the Middle East and North Africa.”
Estimates and prospects set out in this blog are taken from the white paper prepared based on in-depth research into the payment industry done by Euromonitor International and sponsored by Amazon Payment Services. The legal disclaimer “Estimates of segment share may be incomplete and unreliable and/or may not include a full set of substitutable products.” will also be added at the end.