One of the main objectives of the Financial Sector Development Program is to reduce the amount of cash being used in the Kingdom by developing the national finance infrastructure to allow a transition to an electronic payment environment.
The rationale behind cutting back on cash usage is to achieve multiple benefits for the Saudi economy, including cost reductions, greater transparency in government monitoring of cash flows for taxation purposes, and ease of tackling commercial concealment.
It has been estimated that moving toward a cashless society will increase the share of noncash transactions as a percentage of total transactions by 28 percent in 2020 and up to 70 percent by 2030.
The Saudi Arabian Monetary Authority (SAMA) has been focusing its attention on enhancing MADA (an electronic payment network) infrastructure capabilities and encouraging banks and nonbanking institutions to develop electronic payment channels such as point of sale (PoS), the use of bank cards, smartphone payment apps and electronic wallets. Additionally, SAMA has introduced SADAD e-invoicing and has announced the launch of licenses for non-bank financial institutions (financial technology organizations).
The authority has also introduced initiatives such as the Elevation program, to incentivize merchants and cardholders to increase cashless payments, and putting a cap on the value of customer cash transactions with corporate merchants.
Other measures are being considered too, including possible fees for cash withdrawals and deposits.
The efforts have so far achieved excellent PoS results. In 2019, the number of transactions reached 1.6 billion, a rise of 57 percent on the previous year, with the monetary value amounting to SR287 billion, up 24 percent on 2018 figures.
Contactless PoS transactions hit 918.5 billion in 2019, an increase of 442 percent on 2018, with bank cards and smart phones representing 56.6 percent of all PoS transactions last year. The monetary value was SR94.8 billion in the same year, soaring 1,431 percent from 2018.
• Talat Zaki Hafiz is an economist and financial analyst.