Saudi’s cashless revolution well underway as investments soar

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• Point-of-sale transactions rise 16.6% in Q2 to $36.7bn
• Population’s smartphone use is 97% among 18–75-year-olds
• Investment deals worth $925m in Q2 set to create 2,000 jobs

Saudi Arabia’s digital payments revolution is gathering pace with point-of-sale transactions surpassing ATM cash withdrawals for the first time in the second quarter of 2022.

The kingdom’s transformation into a cashless economy resulted in point-of-sale (PoS) transactions rising 16.6 percent annually in Q2 to $36.7 billion, described by the Saudi Ministry of Investment (MISA) as a “significant milestone”.

The figures were revealed in a new report from MISA which also showed Saudi Arabia saw the signing of 49 major investment deals during the second quarter of 2022, which are set to create about 2,000 new jobs.

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In June alone 605 million PoS deals were completed, worth $12.3 billion, according to figures released in a new MISA report. As part of Saudi’s Vision 2030 programme the country aims to see digital payments make up 70 percent of the total by 2025.

Saudi Arabia’s ambitions have prompted major digital payment players such as Network International and Tarabut Gateway to focus on growth in the kingdom.

Saudi Arabia represents the largest economy in the Middle East but with digital payments penetration at 18 percent in 2020 it offers significant opportunity.

Network International is poised to announce a number of contracts with banks and partners while Tarabut Gateway recently announced it has been selected to partner with four of the kingdom’s banks including Riyad Bank, Saudi British Bank, Alinma Bank and Banque Saudi Fransi as part of its efforts to develop the open banking sector in the country.

The kingdom is home to a young, wealthy and digitally savvy population. World Bank data shows it has 98 percent internet penetration, with smartphone use among 18–75-year-olds at 97 percent.

According to Mastercard’s 2022 New Payments Index, consumers in Saudi Arabia are increasingly using digital cards, biometric payments, BNPL (Buy Now Pay Later) and open banking.

The survey found that 89 percent of people in the kingdom have used at least one emerging payment method in the last year.

While traditional payment methods still have traction, 30 percent of consumers indicated they used less cash in the past 12 months. 

Maria Medvedeva, VP and country business development lead, Saudi Arabia and Bahrain, Mastercard, said: “The kingdom has made significant progress in the pursuit of building an inclusive economy, and it’s fantastic to see that consumers in Saudi Arabia also share an openness for new emerging digital payments methods. 

“This passion for trying new digital solutions and discovering the benefits of an increasingly simpler, convenient and more secure payment ecosystem is being driven by Saudi’s young tech-savvy generation, and is great news for the kingdom’s future prospects.”

Investment deals accelerate

MISA said the 49 deals were worth at least $925 million and were buoyed by the objectives of the National Investment Strategy.

Flash estimates of real GDP growth show a further acceleration to 11.8 percent year-on-year in Q2 2022, the highest rate since 2011. Both the oil and non-oil activities of the economy showed significant gains during the period.

A total of 4,455 investment licences were issued in Q2, a 673.4 percent increase over the 576 licences issued in Q2 2021, although they numbered less than half that of the record levels seen in Q1 (9,383).

The wholesale and retail trade sector received much interest, with 2,713 licences issued to investors, an increase of 1,450 percent.

Also strong was the construction sector which saw 528 licences issued, while foreign investors were also granted 349 licences in manufacturing. 

The deals included a $133.3 million agreement between the Saudi Ports Authority and DP World to build a logistics park at Jeddah Islamic Port and a $37 million funding round led by global finance giant Mastercard into Saudi e-commerce firm HyperPay to expand the kingdom’s digital payment ecosystem.

Khalid Al-Falih, Minister of Investment, said: “Despite global headwinds, we are seeing strong interest from global investors in diverse industries to partner with Saudi Arabia.”

The kingdom saw its industrial production expand by 24 percent year-on-year in May, among the highest for three years as the country’s manufacturing, mining and quarrying sub sectors continue to grow. 

The manufacturing industry saw 151 factory licences with a total capital of $1.7 billion issued across April and May, while these two months also saw 59 and 62 factories commence production, respectively.

Investment is also strong in Saudi Arabia’s rapidly growing tourism industry with The Red Sea Development Company signing deals in May with hospitality groups Ritz-Carlton, Hyatt and Rosewood to develop luxury resorts, while Radisson and Hilton also announced that they are looking to open 20 and 59 new hotels in the kingdom, respectively. 

Building on this momentum, the national airline, Saudia, has also announced that it is adding 94 new destinations to bring visitors to Saudi Arabia.