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How money moves

How money moves in Saudi Arabia

Written by

George Davis

on

Aug 30, 2023

/

How money moves

How money moves in Saudi Arabia

Written by

George Davis

on

Aug 30, 2023

/

How money moves

How money moves in Saudi Arabia

Written by

George Davis

on

Dec 13, 2023

How money moves: KSA
How money moves: KSA
How money moves: KSA

The short version

The Kingdom of Saudi Arabia has a clear objective to promote innovation within the country based on its Saudi Vision 2030. With a strong economy and an innovative regulator open for business, Saudi Arabia is one of the most important payment ecosystems to explore as the next focus in our series. You’ll find some crossovers with the UAE picture and some interesting distinctions too.

The long version

The Kingdom of Saudi Arabia (KSA) boasts one of the fastest, most innovative, transformations of finance in the modern world. Leading payment technologies combined with the Saudi Vision 2030 focus on solidifying the Kingdom as the leading banking hub for the Middle East, amongst many other ambitious key initiatives, has led to a rapid growth in foreign investment, regulation and technology. 

The Saudi Arabian currency, the Saudi Riyal (SAR), has been in place since the formation of the Kingdom. Pegged to the US Dollar (USD) since 1986, at a rate of 3.75, it is a strong and stable global currency - as the currency of the world’s largest oil exporter, it plays a significant role in the global economy. It is a common misconception that pegged currencies do not suffer from the volatility of their country’s economy, the Saudi Arabian Monetary Authority (SAMA; Arabic: مؤسسة النقد العربي السعودي) works hard to provide international investors with confidence that the Saudi economy can support the required reserves to maintain the dollar peg - largely supported by oil revenues, the Saudi central reserve holds nearly $480bn, the 8th largest reserve in the world. 

At the center of money movement in the Kingdom is the Real Time Gross Settlement system (RTGS) known as SARIE (the Saudi Arabian Riyal Interbank Express). As the primary method of settlement, SARIE underpins all forms of payments that flow around the Kingdom - such as commercial, salary and government transactions - and plays a crucial role in maintaining interbank liquidity. 

On top of SARIE sit a number of payment schemes: 

  1. The Bill Presentment and Payment System (SADAD) - a central payment scheme for managing the payment of bills in KSA. Acting as an intermediary between service providers and banks, the system was established to unify payments of bills and ensure that bills are made available digitally to Saudi residents. Payments are processed in real time, immediately. 

  2. The Saudi Payments Network (SPAN) - the primary payments network for card processing in Saudi Arabia, connecting ATMs and POS machines to a central payment switch connecting to the global card schemes. Established explicitly to modernize financial infrastructure across the kingdom, the system almost entirely reduces the country's reliance on cheques and cash. 

  3. The Wage Protection System (WPS) - while not strictly a payment system in the traditional sense, the WPS is a system implemented by the Ministry of Labor and Social Development. It ensures that companies pay their employees on time and that the payments align with the terms of the employment contracts. This is done by routing and monitoring salary payments through the banking system. 

Enabled by the implementation of SPAN, card adoption is ever increasing across the Kingdom however not through Visa and Mastercard issued cards that you will find in other countries - KSA has adopted a card scheme called mada that is responsible for 92% of all issued cards in the country. Only 8% of issued cards in the Kingdom are issued by international card schemes, making it difficult for international tourists to make payments whilst visiting as many retailers will not support Visa, Mastercard or AMEX payments.

How money moves: Kingdom of Saudi Arabia metrics graphic

Similarly to many of the other member countries of the Gulf Cooperation Council (GCC), Saudi Arabia has a young and technologically advanced population with a 98% internet penetration level (the world, on average has a 62% internet penetration). This has led to the majority of payments being remitted digitally and, as with the rest of the GCC, the country has skipped emerging market payment methods such as mobile money. As such, over 45% of all transactions are made via card payments and only 13% are made with cash. 

In contrast to the UAE, Saudi Arabia is not a payment clearing hub for the region (see our recent article on how money moves in the United Arab Emirates), however the country was still the third largest remittance hub in the world, behind the UAE and the US, accounting for $35bn USD in outbound flow in 2020. The Kingdom’s large expatriate population drives this number, with 37% of the total population originating from India, Pakistan, Nepal, Philippines, Bangladesh, Sri Lanka and Egypt. The biggest remittance corridors in 2021 included India ($13bn), Egypt ($8.1bn), Pakistan ($8bn), Bangladesh ($4bn), and the Philippines ($3.6bn).

How money moves: Kingdom of Saudi Arabia - graphic showing popular KSA remittance corridors in 2021

Established in 1952, SAMA is the central bank of KSA. It acts as the Kingdom’s regulator for banks and financial institutions. February 2022 saw the launch of new regulations for payment services under the Law of Payments and Payment Services in KSA. These adjustments were strategically implemented to promote investment and innovation in line with international standards. 

There are two key payment licensing regimes:

  1. Payment Institutions - facilitating the collection and remittance of payments around the Kingdom, but not holding funds. 

  2. Electronic Money Institutions - facilitating payment services and holding funds on platform.

Unlike the United Arab Emirates, the Electronic Money licensing supersedes payment institution licensing meaning that institutions only need to hold one license rather than both. 

Graphic highlighting how important it is to have an EMI license in KSA

Similarly to the UK, KSA categorizes each license as “Major” and “Minor” meaning that small payment institutions can achieve a lighter license that can facilitate less transactions whilst having less onerous supervision. Micro Payment Institutions and E-Money Institutions cannot process more than 10mn SAR and have a set transaction size limit. In introducing these lighter institution types, SAMA is encouraging innovation and facilitating the launch of early stage ventures who may not yet have the capacity, client base, or funding to achieve the full “major” licensing. 

SAMA is amongst the most innovative regulators in the world. With the mandate to greatly accelerate the Kingdom into a world financial hub, no longer synonymous with the oil industry, the regulator has created initiatives such as the regulatory sandbox to encourage new entrants to test solutions ahead of the introduction of new regulations. The regulatory sandbox acts as a ‘safe space’ to encourage local and international companies to explore innovative products in KSA. Specifically, this sandbox assists in a faster launch facilitating a testing period within a controlled environment. After successful testing of the product, companies may be able to go to market based on SAMA guidelines.

With Vision 2030 dominating the focus of the Kingdom, the largest GDP in the GCC, and a regulator open for innovation, KSA represents a unique opportunity for payment companies around the world. If you’re looking to expand to the Middle East and Saudi Arabia is on your agenda, reach out to the team at Fuse to support your entrance into the market.

The Kingdom of Saudi Arabia (KSA) boasts one of the fastest, most innovative, transformations of finance in the modern world. Leading payment technologies combined with the Saudi Vision 2030 focus on solidifying the Kingdom as the leading banking hub for the Middle East, amongst many other ambitious key initiatives, has led to a rapid growth in foreign investment, regulation and technology. 

The Saudi Arabian currency, the Saudi Riyal (SAR), has been in place since the formation of the Kingdom. Pegged to the US Dollar (USD) since 1986, at a rate of 3.75, it is a strong and stable global currency - as the currency of the world’s largest oil exporter, it plays a significant role in the global economy. It is a common misconception that pegged currencies do not suffer from the volatility of their country’s economy, the Saudi Arabian Monetary Authority (SAMA; Arabic: مؤسسة النقد العربي السعودي) works hard to provide international investors with confidence that the Saudi economy can support the required reserves to maintain the dollar peg - largely supported by oil revenues, the Saudi central reserve holds nearly $480bn, the 8th largest reserve in the world. 

At the center of money movement in the Kingdom is the Real Time Gross Settlement system (RTGS) known as SARIE (the Saudi Arabian Riyal Interbank Express). As the primary method of settlement, SARIE underpins all forms of payments that flow around the Kingdom - such as commercial, salary and government transactions - and plays a crucial role in maintaining interbank liquidity. 

On top of SARIE sit a number of payment schemes: 

  1. The Bill Presentment and Payment System (SADAD) - a central payment scheme for managing the payment of bills in KSA. Acting as an intermediary between service providers and banks, the system was established to unify payments of bills and ensure that bills are made available digitally to Saudi residents. Payments are processed in real time, immediately. 

  2. The Saudi Payments Network (SPAN) - the primary payments network for card processing in Saudi Arabia, connecting ATMs and POS machines to a central payment switch connecting to the global card schemes. Established explicitly to modernize financial infrastructure across the kingdom, the system almost entirely reduces the country's reliance on cheques and cash. 

  3. The Wage Protection System (WPS) - while not strictly a payment system in the traditional sense, the WPS is a system implemented by the Ministry of Labor and Social Development. It ensures that companies pay their employees on time and that the payments align with the terms of the employment contracts. This is done by routing and monitoring salary payments through the banking system. 

Enabled by the implementation of SPAN, card adoption is ever increasing across the Kingdom however not through Visa and Mastercard issued cards that you will find in other countries - KSA has adopted a card scheme called mada that is responsible for 92% of all issued cards in the country. Only 8% of issued cards in the Kingdom are issued by international card schemes, making it difficult for international tourists to make payments whilst visiting as many retailers will not support Visa, Mastercard or AMEX payments.

How money moves: Kingdom of Saudi Arabia metrics graphic

Similarly to many of the other member countries of the Gulf Cooperation Council (GCC), Saudi Arabia has a young and technologically advanced population with a 98% internet penetration level (the world, on average has a 62% internet penetration). This has led to the majority of payments being remitted digitally and, as with the rest of the GCC, the country has skipped emerging market payment methods such as mobile money. As such, over 45% of all transactions are made via card payments and only 13% are made with cash. 

In contrast to the UAE, Saudi Arabia is not a payment clearing hub for the region (see our recent article on how money moves in the United Arab Emirates), however the country was still the third largest remittance hub in the world, behind the UAE and the US, accounting for $35bn USD in outbound flow in 2020. The Kingdom’s large expatriate population drives this number, with 37% of the total population originating from India, Pakistan, Nepal, Philippines, Bangladesh, Sri Lanka and Egypt. The biggest remittance corridors in 2021 included India ($13bn), Egypt ($8.1bn), Pakistan ($8bn), Bangladesh ($4bn), and the Philippines ($3.6bn).

How money moves: Kingdom of Saudi Arabia - graphic showing popular KSA remittance corridors in 2021

Established in 1952, SAMA is the central bank of KSA. It acts as the Kingdom’s regulator for banks and financial institutions. February 2022 saw the launch of new regulations for payment services under the Law of Payments and Payment Services in KSA. These adjustments were strategically implemented to promote investment and innovation in line with international standards. 

There are two key payment licensing regimes:

  1. Payment Institutions - facilitating the collection and remittance of payments around the Kingdom, but not holding funds. 

  2. Electronic Money Institutions - facilitating payment services and holding funds on platform.

Unlike the United Arab Emirates, the Electronic Money licensing supersedes payment institution licensing meaning that institutions only need to hold one license rather than both. 

Graphic highlighting how important it is to have an EMI license in KSA

Similarly to the UK, KSA categorizes each license as “Major” and “Minor” meaning that small payment institutions can achieve a lighter license that can facilitate less transactions whilst having less onerous supervision. Micro Payment Institutions and E-Money Institutions cannot process more than 10mn SAR and have a set transaction size limit. In introducing these lighter institution types, SAMA is encouraging innovation and facilitating the launch of early stage ventures who may not yet have the capacity, client base, or funding to achieve the full “major” licensing. 

SAMA is amongst the most innovative regulators in the world. With the mandate to greatly accelerate the Kingdom into a world financial hub, no longer synonymous with the oil industry, the regulator has created initiatives such as the regulatory sandbox to encourage new entrants to test solutions ahead of the introduction of new regulations. The regulatory sandbox acts as a ‘safe space’ to encourage local and international companies to explore innovative products in KSA. Specifically, this sandbox assists in a faster launch facilitating a testing period within a controlled environment. After successful testing of the product, companies may be able to go to market based on SAMA guidelines.

With Vision 2030 dominating the focus of the Kingdom, the largest GDP in the GCC, and a regulator open for innovation, KSA represents a unique opportunity for payment companies around the world. If you’re looking to expand to the Middle East and Saudi Arabia is on your agenda, reach out to the team at Fuse to support your entrance into the market.

The Kingdom of Saudi Arabia (KSA) boasts one of the fastest, most innovative, transformations of finance in the modern world. Leading payment technologies combined with the Saudi Vision 2030 focus on solidifying the Kingdom as the leading banking hub for the Middle East, amongst many other ambitious key initiatives, has led to a rapid growth in foreign investment, regulation and technology. 

The Saudi Arabian currency, the Saudi Riyal (SAR), has been in place since the formation of the Kingdom. Pegged to the US Dollar (USD) since 1986, at a rate of 3.75, it is a strong and stable global currency - as the currency of the world’s largest oil exporter, it plays a significant role in the global economy. It is a common misconception that pegged currencies do not suffer from the volatility of their country’s economy, the Saudi Arabian Monetary Authority (SAMA; Arabic: مؤسسة النقد العربي السعودي) works hard to provide international investors with confidence that the Saudi economy can support the required reserves to maintain the dollar peg - largely supported by oil revenues, the Saudi central reserve holds nearly $480bn, the 8th largest reserve in the world. 

At the center of money movement in the Kingdom is the Real Time Gross Settlement system (RTGS) known as SARIE (the Saudi Arabian Riyal Interbank Express). As the primary method of settlement, SARIE underpins all forms of payments that flow around the Kingdom - such as commercial, salary and government transactions - and plays a crucial role in maintaining interbank liquidity. 

On top of SARIE sit a number of payment schemes: 

  1. The Bill Presentment and Payment System (SADAD) - a central payment scheme for managing the payment of bills in KSA. Acting as an intermediary between service providers and banks, the system was established to unify payments of bills and ensure that bills are made available digitally to Saudi residents. Payments are processed in real time, immediately. 

  2. The Saudi Payments Network (SPAN) - the primary payments network for card processing in Saudi Arabia, connecting ATMs and POS machines to a central payment switch connecting to the global card schemes. Established explicitly to modernize financial infrastructure across the kingdom, the system almost entirely reduces the country's reliance on cheques and cash. 

  3. The Wage Protection System (WPS) - while not strictly a payment system in the traditional sense, the WPS is a system implemented by the Ministry of Labor and Social Development. It ensures that companies pay their employees on time and that the payments align with the terms of the employment contracts. This is done by routing and monitoring salary payments through the banking system. 

Enabled by the implementation of SPAN, card adoption is ever increasing across the Kingdom however not through Visa and Mastercard issued cards that you will find in other countries - KSA has adopted a card scheme called mada that is responsible for 92% of all issued cards in the country. Only 8% of issued cards in the Kingdom are issued by international card schemes, making it difficult for international tourists to make payments whilst visiting as many retailers will not support Visa, Mastercard or AMEX payments.

How money moves: Kingdom of Saudi Arabia metrics graphic

Similarly to many of the other member countries of the Gulf Cooperation Council (GCC), Saudi Arabia has a young and technologically advanced population with a 98% internet penetration level (the world, on average has a 62% internet penetration). This has led to the majority of payments being remitted digitally and, as with the rest of the GCC, the country has skipped emerging market payment methods such as mobile money. As such, over 45% of all transactions are made via card payments and only 13% are made with cash. 

In contrast to the UAE, Saudi Arabia is not a payment clearing hub for the region (see our recent article on how money moves in the United Arab Emirates), however the country was still the third largest remittance hub in the world, behind the UAE and the US, accounting for $35bn USD in outbound flow in 2020. The Kingdom’s large expatriate population drives this number, with 37% of the total population originating from India, Pakistan, Nepal, Philippines, Bangladesh, Sri Lanka and Egypt. The biggest remittance corridors in 2021 included India ($13bn), Egypt ($8.1bn), Pakistan ($8bn), Bangladesh ($4bn), and the Philippines ($3.6bn).

How money moves: Kingdom of Saudi Arabia - graphic showing popular KSA remittance corridors in 2021

Established in 1952, SAMA is the central bank of KSA. It acts as the Kingdom’s regulator for banks and financial institutions. February 2022 saw the launch of new regulations for payment services under the Law of Payments and Payment Services in KSA. These adjustments were strategically implemented to promote investment and innovation in line with international standards. 

There are two key payment licensing regimes:

  1. Payment Institutions - facilitating the collection and remittance of payments around the Kingdom, but not holding funds. 

  2. Electronic Money Institutions - facilitating payment services and holding funds on platform.

Unlike the United Arab Emirates, the Electronic Money licensing supersedes payment institution licensing meaning that institutions only need to hold one license rather than both. 

Graphic highlighting how important it is to have an EMI license in KSA

Similarly to the UK, KSA categorizes each license as “Major” and “Minor” meaning that small payment institutions can achieve a lighter license that can facilitate less transactions whilst having less onerous supervision. Micro Payment Institutions and E-Money Institutions cannot process more than 10mn SAR and have a set transaction size limit. In introducing these lighter institution types, SAMA is encouraging innovation and facilitating the launch of early stage ventures who may not yet have the capacity, client base, or funding to achieve the full “major” licensing. 

SAMA is amongst the most innovative regulators in the world. With the mandate to greatly accelerate the Kingdom into a world financial hub, no longer synonymous with the oil industry, the regulator has created initiatives such as the regulatory sandbox to encourage new entrants to test solutions ahead of the introduction of new regulations. The regulatory sandbox acts as a ‘safe space’ to encourage local and international companies to explore innovative products in KSA. Specifically, this sandbox assists in a faster launch facilitating a testing period within a controlled environment. After successful testing of the product, companies may be able to go to market based on SAMA guidelines.

With Vision 2030 dominating the focus of the Kingdom, the largest GDP in the GCC, and a regulator open for innovation, KSA represents a unique opportunity for payment companies around the world. If you’re looking to expand to the Middle East and Saudi Arabia is on your agenda, reach out to the team at Fuse to support your entrance into the market.

George Davis, Fuse Co-Founder & CEO
George Davis, Fuse Co-Founder & CEO

George Davis

, Co-Founder & CEO

at Fuse

George Davis

, Co-Founder & CEO

Co-Founder & CEO

at Fuse

Fuse

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