When consumers pay with cards instead of cash, they are supporting the global Cards and Payments Industry. Whether it's credit cards such as American Express or Mastercard, or local banks' debit cards, in Saudi Arabia the move to pay with plastic took a huge leap forward during the period 2009-2013. A new report published this month by Timetric about Saudi Arabia's Cards and Payments Industry revealed that the number of cards in circulation in the Kingdom increased from 17.2 million cards in 2009 to 26.8 million in 2013. That's a review-period compound annual growth rate (CAGR) of 11.75 percent. Additionally, over the next five years, the card payments channel is anticipated to register a CAGR of 8.66 percent, to reach 42.2 million cards in 2018. In terms of transaction value, card payments increased from SR489.2 billion in 2009 to SR863.9 billion in 2013; a review-period CAGR of 15.28 percent. The card payments channel is anticipated to increase further from SR936.7 billion in 2014 to SR1.2 trillion in 2018, representative of a forecast-period CAGR of 5.44 percent. According to the Timetric report, the Saudi Arabian economy was largely resilient to the global financial crisis, mainly due to a sound banking and financial system. The adequate income from petroleum should be considered, too. The system was well capitalized with domestic banks maintaining a capital adequacy ratio of 17.9 percent at the end of 2013, as a result of which credit was easily available to corporate sectors. Consequently, business activity was vibrant and confidence was high, which reflected positively on employment levels, income and the overall card payments channel. This resulted in an enormous boost for issuers of credit cards. While the debit cards category occupied the largest channel share of 57.7 percent in 2013, in terms of the number of cards in circulation, the prepaid and credit card categories are gaining. By 2018 debit cards will be reduced to 52.3 percent of the total number of cards in circulation. With government efforts to attract the non-banked population into the country's banking system, domestic and foreign banks are issuing prepaid cards in large numbers. In 2013, the number of prepaid cards in circulation was 8.3 million, and is anticipated to reach 16.4 million by 2018. With more payment cards in circulation the opportunities for e-commerce increase. Timetric pointed to improvements in telecommunication infrastructure, payment and security systems, and an increased consumer willingness to shop online as all providing a boost to online purchasing. E-commerce registered a review-period CAGR of 35.71 percent, rising from SR1.8 billion in 2009 to SR6.0 billion in 2013. Another trend assisting the move to card transactions is the enthusiastic adoption of all things mobile. Saudi Arabia has one of the highest mobile penetration rates in the Middle East and North Africa (MENA). Banks such as Al Rajhi Bank, Samba Financial Group and The National Commercial Bank (NCB) have partnered with merchants and online retailers to provide secure payment facilities, enabling customers to pay via mobile phones or online. Consequently, mobile payments (m-payments) grew from SR453.4 million in 2010 to SR813.1 million in 2013. Such payments are expected to reach SR7.2 billion in 2018. The rising level of card payments has many positive benefits, but negative aspects must also be considered. Local banks have largely ignored government requests to reduce fees and charges against outstanding credit card balances. Awareness programs to educate the population on the benefits and detriments of card payments are lacking. The damages arising from the use of lost or stolen cards are still borne 100 percent by the consumer until the card is canceled at the consumer's request. It is time for the financial regulator to step in deal with these issues before they become a burden on the Saudi economy.
