Saudi Arabia records 21% surge in credit card loans to reach $8bn

RIYADH: Saudi banks recorded a 21 percent annual surge in credit card loans in the second quarter of 2024, reaching SR30.04 billion ($8.01 billion), according to official data.

Figures from the Saudi Central Bank, also known as SAMA, showed that this is the highest quarterly figure reported, and the most substantial annual growth seen in a year.

Consumer loans – typically paid back in installment, used for significant purchases and often featuring lower fixed interest rates than credit cards – rose by a modest 2 percent to reach SR452.32 billion during this period.

According to SAMA, these loans exclude real estate financing, finance leasing and margin lending.

In their Critical Consumer 2024 report, consultancy firm AlixPartners stated that Saudi Arabia’s preference for digital and credit card payments matches that of Switzerland and surpasses Germany.

Payment cards are dominating Saudi Arabia’s financing ecosystem, driven by government-led economic inclusion initiatives under Vision 2030. This strategy focuses on digital transformation and reducing cash transactions in favor of electronic payments.

The adoption of contactless transactions, accelerated by the COVID-19 pandemic, has fueled the growth of card usage. Additionally, rising banking penetration, improved infrastructure, and increased retailer acceptance, are driving the market’s development.

The government’s push to reduce cash reliance and promote fintech innovation under Vision 2030 is further advancing the payment card market.

According to a July report by Global Data, key players in Saudi Arabia’s cards and payments market include Al Rajhi Bank, Saudi National Bank, and SAB, as well as Alinma Bank, and Visa.

To boost card penetration, banks are tailoring credit cards to different customer segments. 

A Titanium Mastercard is Shariah compliant, and provides perks including free VIP lounge access, purchase protection, and installment options.

Some banks target students with a Visa Signature credit card, designed for those enrolled in accredited Saudi universities, and offering installment payment options along with reward points through the Akthr Program.

According to Global Data, recent developments in Saudi Arabia’s cards and payments market include the launch of pilot digital banking services by two of the three licensed digital banks – STC Bank and D360 – in 2023, as noted in the Financial Sector Development Program annual report.

Additionally, Buy Now Pay Later services are growing in popularity, especially among Generation Z consumers. 

To regulate this emerging market, the Saudi Central Bank introduced new rules for regulating BNPL companies in December 2023.

These included establishing licensing requirements for such firms and setting minimum standards for offering these services, focusing on consumer protection, sector growth, and sustainability.

Rules also focused on provisions on licensing, internal regulatory measures, information security, and financial crime prevention, along with guidelines for supervision and compliance. 

BNPL services can contribute to a more dynamic, inclusive, and innovative payment market in Saudi Arabia, supporting both consumer needs and business growth.

Consumer spending in Saudi Arabia is expected to remain strong in the coming year, despite global economic uncertainties, according to a study by management consulting firm AlixPartners.

This resilience stands in contrast to the broader Europe, the Middle East and Africa region, where 37 percent of consumers plan to cut back on spending in 2024 compared to the previous year, according to the study.

Saudi Arabia’s stable spending environment persists amid global challenges like persistent inflation and geopolitical instability, with some sectors still grappling with post-pandemic recovery.

In contrast, Saudi consumers are increasingly embracing online shopping, with e-commerce growing in popularity. The study showed that while international companies currently dominate this retail landscape, there is a noticeable shift toward homegrown businesses.

The AlixPartners study showed that Saudi Arabia is at the forefront of artificial intelligence adoption for shopping research, with consumers showing strong enthusiasm for innovative solutions like AI-powered tools for holiday bookings.

According to TechSci Research, Saudi Arabia’s AI market in retail and e-commerce was valued at $245 million in 2023 and is expected to experience substantial growth from 2025 to 2029.

According to the study, the sector is evolving rapidly as technology reshape customer experiences, streamline operations, and improve business decision-making.

AI-powered chatbots and virtual assistants are increasingly common, offering personalized customer support and enhancing engagement, while recommendation engines use advanced algorithms to analyze consumer preferences and provide customized product suggestions, boosting sales and satisfaction.

Additionally, AI optimizes supply chain management through predictive analytics and machine learning, reducing costs and ensuring product availability.