FINANCIAL SERVICES

LIFELINE FOR SMES AS SAUDI EMBRACES DIGITAL FINANCE

Led by the Saudi Central Bank, the kingdom’s financial services sector has stepped up efforts during COVID-19, supporting businesses – big and small – and citizens in these drawn-out uncertain times.

In March, the Saudi Central Bank (SAMA) said it will extend its popular Deferred Payment Program for three additional months until the end of June, to support the country’s micro, small and medium-sized enterprises (MSME) sector.

“The central bank also announces the extension of the Guaranteed Financing Program for one year to end on 14 March 2022, as another support lever for MSMEs to help overcome challenges that arise from the COVID-19 preventive measures,” the SAMA said. “MSMEs can benefit from the Guaranteed Financing Program through banks and financing companies that are subject to the supervision of the Saudi Central Bank and are members of the Small & Medium Enterprises Loan Guarantee Program ‘Kafalah’.”

The deferred payment programme has already benefitted 99,000 contracts valued at SAR 124 billion, while the guaranteed finance programme has supported 5,000 companies with total financing of SAR 8 billion.

The kingdom’s banking sector also accelerated its digital payments infrastructure last year as COVID-19 necessitated social distancing, remote work and a preference for cashless payments and transactions.

The efforts and investment paid off handsomely. E-commerce transactions nearly quadrupled to SAR 38.82 billion last year, compared to SAR 10.25 billion in 2019. The number of transactions also jumped to 170 million in 2020, versus just over 38 million the year before.

The number of transactions has risen steadily over the past four quarters last year, with a record SAR 12.55 billion of e-commerce transactions in the fourth quarter, across 55 million transactions, according to the latest Saudi Central Bank data.


Point-of-sales transactions using near field communications technology, such as contactless payments, have also risen. Sales using mobile phones jumped 490% during the year to 54.89 million, compared to the same period last year. Meanwhile, sales using cards grew 156% during the year.

In February, SAMA launched its instant payment system ‘Sarie’ as part of its efforts to promote the national payments' ecosystem and to enhance its infrastructure, aiming to achieve financial inclusion.

“National payment systems are fundamental in strengthening the kingdom's pioneering position in the financial sector,” SAMA said. “They offer secure and innovative payment solutions, meet the needs of various segments of the economy, and increase the effectiveness of the liquidity circulation in the financial system, through reducing the operational costs of cash handling, facilitating sending and receiving payments, and driving the digital transformation in the kingdom by increasing the volume of digital financial transactions.”

In a significant development in the kingdom’s banking sector, The Saudi British Bank (SABB) completed its merger with The Alawwal Bank to create a banking powerhouse designed in line with the kingdom’s growth ambitions. A 300-member project team migrated 4,500 corporate clients and 500,000 retail customers from Alawwal bank into the new combined business, despite the pandemic and the complexity of the operations.

“As a stronger, more diverse and now fully integrated bank, we are even better positioned to be the bank of choice for a wide range of innovative banking and finance services and to support the exciting transformation of the Kingdom and our economy,” said Ms Lubna Olayan, Chair, SABB.

The banks began combining their operations after their merger in June 2019, retaining the best qualities of each bank, to create a suite of comprehensive services that serve the needs of its business customers, large or small. Retail customers will also benefit from access to a larger banking network, apart from an award-winning online and mobile apps suite of services and a rewards program.

The merged bank also aims to leverage its partnership with HSBC to boost its global international banking network and develop new digital services in the country.

David Dew, managing director of SABB who is retiring in May, said that the increased balance sheet and capital means the bank can better support its customers and deliver greater shareholder value.

“We’re all very proud of the bank we have created and the new world of financial opportunities it provides for our customers.”

The merged bank will be led by Tony Cripps, former CEO of HSBC Singapore, and will be charged with taking the bank “in a new strategic direction,” according to SABB.

OPEN BANKING

SAMA also announced in January its Open Banking policy, which aims to bring innovation to the financial services sector, leverage financial technologies (fintech) and enable new cost-effective and efficient services for consumers and businesses.

“Open Banking represents an opportunity for stakeholders to leverage on the data associated with financial transactions to imagine and access new ways of managing money,” SAMA said in its Open Banking policy document.

Meanwhile, customers will benefit from better financial products and services, ranging from bringing all accounts into a single dashboard to creating smoother journeys into daily banking activities.

“Data are securely shared, and customers have a choice to consent to give access to third-party providers providing explicit and informed consent,” the bank noted.

The Open Banking policy will be broken up in three phases: focus on design in the first half of 2021, market implementation in the second half and it is expected to go live by the first half of 2022.

The policy builds on a string of developments in the financial services sector. In 2018, SAMA established a regulatory sandbox that allows financial services and fintech companies to test and launch their products and services in a ring-fenced environment. Last year, SAMA licensed 15 non-bank financial institutions