CAIRO: Saudi banks shut down 42 branches over the year ending in June, revealed the Saudi Central Bank, also known as SAMA.
The number of bank branches in Saudi Arabia also inched lower to 1,927 in the second quarter this year from 1,932 in the same quarter last year.
So, what are the reasons behind this decreased number of bank branches, and when did this trend begin?
The most common assumption would be the COVID-19 pandemic and its prolonged effect on the entire economy, including the financial and banking sectors.
Between the fourth quarter of 2019 and the first quarter of 2021, which includes the peak of the pandemic, 68 branches were closed.
Also, bank branches continued to decrease quarterly long after lifting COVID-19 restrictions, albeit there was no clear trend.
Between May 2020 and June this year, 137 bank branches in the Kingdom shut shop.
It is worth mentioning that branches that have closed are not second-tier or underperforming banks but some of the largest and well-performing ones. For instance, Al Rajhi Bank, which had 543 branches in the fourth quarter of 2020, reduced it to 515 by June this year.
While COVID-19 sparked the digital revolution, advanced and innovative technologies did the job.
The past three years of the pandemic slowly began the transformation toward digital banking, which can be seen closely in the Saudi banking sector.
More banks are switching to increased virtual interactions and digitalization, and new banks are opening entirely on that premise.
Last February, SAMA licensed and welcomed the Kingdom’s third digital bank D360 Bank, following the launch of STC and Saudi Digital Bank in June last year.
Similarly, according to SAMA, 19 Saudi fintech companies have been authorized to provide payment services, consumer microfinance and electronic insurance brokerage over the past few months.
So, what does the future of digital banking in the Kingdom hold and will the population accept this digital revolution?
In a survey conducted by Ipsos in the Kingdom in October 2021, the research major pointed out that 61 percent still trust traditional banks, while 47 percent counted on mobile service providers and 40 percent depended on popular digital brands to carry out financial transactions.
The report added: “63 percent said that they will be making all their financial transactions through digital banking in the future, and 58 percent believe that people would no longer use cash as a payment method.”