ATM Cards’ Pressure Creates Hassle at SAMA System

Author: 
Javid Hassan, Arab News
Publication Date: 
Thu, 2006-08-31 03:00

RIYADH, 31 August 2006 — With the Hijri month (Rajab) having just passed and the month of August ending today, both Saudis and expatriates have to go through a hassle every month when they swipe their ATM cards at the Points of Sale (POS) terminals in hypermarkets and departmental stores or draw money from ATM terminals.

In both situations, the transaction is likely to fail. What is more, the printout shows that the amount payable by the customer is deducted from his account. “We are facing this problem every month. We are also losing business, because the customers blame us for what they think is our faulty POS system,” the sales supervisor of a major hypermarket told Arab News.

Inquiries with some major banks revealed that this problem, which cropped up during the last four or five years, has nothing to do with them. They all point their fingers at the Saudi Arabian Monetary Agency (SAMA) which needs to expand the capacity of the Saudi Payment Network (SPAN) set up in 1993.

Arab News tried to get a response from SAMA by visiting its headquarters personally, sending a fax message, and making several phone calls to the concerned department. Yet, there was no response.

Speaking on condition of anonymity, a banking executive told Arab News that the breakdown in the POS system was due to the fact that the number of bank accounts, which were in the range of two to four million five years ago, now stood at around nine million, representing almost a fourfold increase.

He attributed the surge in the use of ATM cards to the fact that during the same period there has been a sharp increase in the flotation of Initial Public Offerings (IPOs). The number of joint stock companies also went up, while the salaries of all government and private-sector employees as well as retirees are deposited in their bank accounts during the last week of the month. For all these transactions, they rely on the ATM card.

According to SAMA statistics, the total amount of cash withdrawn from automated teller machines (ATMs) in the Kingdom hit its highest level last year, following a steady rise over the last seven years.

The statistics show that the total amount of cash withdrawals from ATMs in Saudi Arabia reached SR245.9 billion ($65 billion) in 2005, marking a 22.7-percent increase from 2004 and a rise of 136.6 percent from 1999.

The reliance on automated banking in the Kingdom has boosted the total number of ATM transactions and ATM cards issued over the last seven years. According to SAMA, Saudi banks issued 1.6 million new ATM cards in 2005. The total number of ATM cards issued in the Kingdom reached eight million. This could mean that nearly half of the Kingdom’s population holds ATM cards. In 2004, the accumulated number of issued cards was 6.4 million; and between 1999 and 2005, the number of ATM cards almost doubled. The total number of ATM transactions in 2005 was 533 million compared to 412 million transactions in 2004 and 136 million in 1999.

The bank’s executive said that most of the banks have expanded their system, including the ATM network, to cope with the sharp increase in share transactions and subscription to IPOs. On the other hand, SAMA has not kept pace with the exponential growth in the use of the SPAN system. He said SAMA has announced that it will launch soon SARIE-11 (Saudi Arabian Riyal Interbank Express) to handle the growing inter-bank transactions. This will mark a substantial improvement on SARIE-1.

The executive said the use of ATM cards in the past was not as high as it is now, when a majority of Saudis are relying on the ATM cards for subscribing to the slew of IPOs coming on the market. Instead of going to the banks, they go online to fill out the subscription forms. “More than 90 percent of Saudis use ATM cards either to draw money or to subscribe to IPOs.”

In the meantime, the number of POS at hypermarkets and other shopping complexes has almost been doubling every year with new hypermarkets being set up and the existing ones expanding their network. In fact, the demand for the POS terminals has shot up so much that one has to wait for several weeks before they are installed.

The executive said that with the gap between the Hijri and the Gregorian calendars closing in, there is heavy pressure on the POS, causing a breakdown in the system. As a result, when a customer swipes his ATM card at the cash counter to pay for his shopping in hypermarkets, the transaction fails. Yet, the amount is deducted from his account, although it will be adjusted automatically in due course. “On Friday, I tried to make payment through ATM five to six times, but it failed,” he pointed out.

He said the problem could be solved once SAMA expands its network capacity. Also, there is a limit up to which the banks are allowed to deposit money for withdrawal through ATM. When there is excessive demand, it cannot handle the pressure. Moreover, the pressure on the ATMs on main roads is heavier than that on other terminals located off the main road, he added.

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