Introduction to Saudi Arabia

An overview of Saudi Arabia's currency, population and key statistics.

Cash currency

Saudi Arabia's currency is the Saudi riyal (SAR), which is divided into 100 halalas. Coins come in denominations of 1, 5, 10, 25, and 50 halalas, and 1 and 2 riyals. Banknotes come in denominations of 1, 5, 10, 20, 50, 100, 200, and 500 riyals.

Digital currency

Saudi Arabia and the United Arab Emirates launched Project Aber in 2019 to explore the use of a common digital currency. Led by the Saudi Arabian Monetary Authority (SAMA) and the United Arab Emirates Central Bank, the project uses distributed ledger technology to investigate the feasibility and benefits of settling asset transactions (such as bonds) between the two countries. Ultimately, this project aims to improve the efficiency, security, and transparency of cross-border transactions between them.

Population

Saudi Arabia's population is expected to reach 36,947,025 in 2023, up from 35,162,390 in 2021, according to Worldometer. The population density in the country is approximately 17 people per square kilometre (45 people per square mile). The Saudi population has a median age of 30.6 years.

Languages

The official language of Saudi Arabia is Arabic, which is used in government, business transactions, and schools. English is also widely understood and commonly used in commerce, and is often a compulsory second language in schools.

Key statistics

The Saudi economy is resilient and growing in 2023, with real gross domestic product anticipated to expand by 1.9%. This projection aligns with the World Bank's forecast of 3.7% real GDP growth for 2023. The General Authority for Statistics corroborates this upward trajectory, reporting a 3.8% increase in real GDP in the first quarter of 2023 from the corresponding period in the previous year.

Further contributing to this economic vigour is the substantial 6.1% growth in non-oil activities in the second quarter of 2023. This reflects the country's strategic focus on diversification, with extensive financing in giga-projects and strategic investments to enhance the tourism, manufacturing, and mining sectors.

Driven by its ambitious Vision 2030, Saudi Arabia is transforming to diversify its industrial base, foster innovation, and strengthen its global position. The kingdom's dynamic economic landscape is poised for significant growth as it seeks to diversify away from oil-based revenue streams.

Saudi Arabia is also modernising its energy sector, demonstrating its commitment to a sustainable future. The nation aspires to achieve a target of 650 gigawatts of renewable energy by 2060, signalling a future defined by diversified economic prosperity and sustainable growth.

Internet & mobile phone trends

Saudi Arabia saw a notable increase in the number of internet users to 36.31 million in 2023 from 33.58 million in 2021, resulting in an impressive internet penetration rate of 99.0%, up from 95.7% the previous year.

Regarding smartphone utilisation, the nation reported 42.50 million active mobile cellular connections in 2023. Projections indicate that this rate will continue to rise, reaching 80.31% by 2028.

E-commerce statistics

In 2023, the average revenue per user from carrier billing in Saudi Arabia was $12.5. Additionally, the average revenue per user in the video game segment of the digital media market was forecast to continuously increase by a total of $46.7 from 2023 to 2027. 

Online buyers are expected to spend more on domestic e-commerce platforms than on cross-border platforms, with 74% of buyers predicted to increase their spending on Saudi e-commerce platforms than on those in China, Europe, the US and other Gulf Cooperation Council member states.

 

Summary of fiscal policy

In 2023, Saudi Arabia's fiscal policy is primarily aimed at reinforcing support and social protection mechanisms, accelerating strategic expenditures on Vision 2030 initiatives, and advancing major projects to fuel economic development. The Finance Ministry has projected total expenditure for 2023 to be approximately 1,114 billion riyals, with anticipated total revenues approaching 1,123 billion riyals. This is foreseen to yield a surplus of around 9 billion riyals, constituting roughly 0.2% of the overall GDP. The government is also making a dedicated effort to enhance the efficiency and effectiveness of fiscal expenditure and control, with a continuous endeavour to fortify the kingdom's fiscal stance.

However, Saudi Arabia faces several economic challenges in 2023. The International Monetary Fund (IMF) forecasts 3.1% growth in 2022, a significant slowdown from 8.7% in 2022. The IMF cautions that the budget balance would be jeopardised if average oil prices fell below $80 per barrel. Additionally, curtailing oil production under the OPEC+ accord to stabilise the market amid global economic uncertainty has significant repercussions, given that the oil sector contributes to over 45% of the nation's GDP.

Potential risks associated with the resurgence of coronavirus variants, as well as anxieties related to global economic downturns, especially involving the kingdom's primary trade and investment partners, generate apprehensions. The escalating demand for specialised talent, accompanied by intensified competition between private and government sectors, raises the prospect of elevated labour costs, which could potentially impact the nation in the long run.

How people pay in Saudi Arabia

An overview of how people in Saudi Arabia choose to make payments.

Traditional payment methods

The primary traditional payment methods used in Saudi Arabia

Visa

A Visa credit/debit card is a financial payment card issued by banks or financial institutions. It allows users to make purchases, withdraw cash, and use online and in person. Visa's processing network can handle over 65,000 transaction messages per second.

Mastercard

Mastercard is a worldwide payment network that links financial institutions, merchants, and individuals, facilitating seamless transactions. This renowned company provides a range of credit and debit cards issued through partner banks. Depending on the specific bank, customers may enjoy supplementary benefits such as rewards programs, cashback offers, and insurance coverage.

American Express

American Express cards are a type of payment card provided by the multinational financial services corporation, American Express Company. The Amex card portfolio includes a variety of options, including credit cards, charge cards, and prepaid cards. Amex cards are renowned for their broad acceptance among merchants and offer cardholders access to various advantages, such as perks, rewards programs, travel benefits, and dedicated customer service assistance.

Alternative payment methods (APMs)

Alternative payment methods

Tamara

Tamara is a Saudi Arabian buy now, pay later (BNPL) service that allows consumers to purchase items and pay for them over time, instead of paying the full amount upfront. BNPL services like Tamara typically offer an initial payment-free period or split the payment into smaller, more manageable instalments, providing flexibility and easing the immediate financial burden on consumers.

PayPal

PayPal is a frequently used digital payment system that allows clients to use their PayPal accounts, debit/credit cards, or bank accounts. Customers use PayPal for secure online shopping and to send or receive money.

Apple Pay

Apple Pay, a mobile payment service from Apple Inc., allows users to make in-person, online, and in-app payments. It replaces chip and PIN transactions at contactless terminals.

Google Pay

Google Pay is a digital wallet and payment service developed by Google. It allows users to make secure payments using their mobile devices or computers. It supports various payment methods, offers compatibility across different devices, and provides features like loyalty program integration and transit ticketing. Google Pay prioritises security and convenience with tokenisation and biometric authentication. It has expanded to include digital banking services and continues to evolve.

Amazon Pay

Amazon Pay is a payment processing service provided by Amazon. Users can use their Amazon account to make payments for goods or services on third-party websites and applications. The service aims to provide a smooth and secure payment experience, leveraging the trust and familiarity associated with Amazon. It also facilitates voice payments through Alexa, Amazon's virtual assistant.

Accepting payments in Saudi Arabia

A guide to accepting payments in Saudi Arabia

How to accept online payments in Saudi Arabia

Before accepting online payments, you must determine which methods you prefer. Then you can choose a payment gateway provider, a service that authorises and processes online payments with their specific system.  

Although there are plenty of payment gateway options in Saudi Arabia, the general process for online payments typically involves an acquirer, issuer, retailer, and cardholder in the following steps: 

1. The cardholder initiates a payment by presenting their payment card to the retailer to purchase goods or services.

2. The retailer sends the payment details to the acquirer, who processes the payment request and sends it to the payment scheme (such as Mastercard or Visa).

3. The payment scheme sends the payment request to the issuer (such as a bank or licensed issuer) who issued the card to the cardholder.

4. The issuer checks if the cardholder has enough funds to complete the transaction and approves or declines the payment request. If the payment is approved, the issuer sends an authorisation code to the payment scheme.

5. The payment scheme sends the authorisation code to the acquirer, which then sends it to the retailer, completing the transaction.

How long does an international payment from Saudi Arabia take?

The payment processing time may vary depending on the method and the recipient's bank. For instance, online money transfers through platforms like PayPal can quickly and conveniently send money to multiple destinations. 

  • Bank debit/credit cards: International payments with bank debit or credit cards may take a few minutes to a few hours, depending on bank processing times.

  • Online money transfers: Platforms like PayPal can process international payments within minutes to hours, depending on the service and destination country.

  • Wire transfers: Traditional bank-to-bank transfers or wire may take one to five business days or longer, depending on the destination country, intermediary banks, and transaction requirements.

Fees

Merchant fees

Merchant fees for online payments in Saudi Arabia can vary depending on the payment method and the merchant services provider used. Here are some examples of typical merchant fees for online payments in Saudi Arabia:

  • Credit and debit cards: Merchant fees for accepting online credit and debit card payments can range according to the transaction amount. It also varies depending on the type of card used and the merchant services provider.

  • Bank transfers: Bank transfer fees can vary depending on the bank used, with some banks charging a flat fee per transaction and others charging a percentage of the transaction amount.

 Other fees

Other fees surrounding online payments in Saudi Arabia include charges incurred by merchants, payment processors, and financial institutions involved in the payment processing chain. Below are some common fees:

  • Interchange fees: Interchange fees are charges paid by merchants' banks to cardholders' banks to cover the costs of processing card transactions. These fees are usually based on a percentage of the transaction value and can vary depending on the type of card used and the merchant's industry.

  • Payment gateway fees: Payment gateway providers charge a fee for processing transactions on their platform, which may be a percentage of the transaction value or a flat fee per transaction.

  • Cross-border fees: If a merchant accepts payments from customers outside the country, they may be subject to additional fees for cross-border transactions, including currency conversion fees and international processing fees.

  • Merchant discount rate: A processing fee that merchants are charged for transactions made using credit or debit cards. This fee generally falls within 1% to 3% of the total transaction amount.

Security challenges of online payments in Saudi Arabia

In Saudi Arabia, several security concerns are associated with online payments. Firstly, phishing scams are prevalent; many users have experienced these scams, including deceptive websites and misleading texts or calls while engaging in digital payments. This implies that users frequently encounter fraudulent attempts to access sensitive information through social engineering tactics.

Secondly, Saudi Arabia is a significant source of malware, ranking as the second-largest global contributor to malicious email distribution. This status underscores a critical security vulnerability, exposing users to potential harm and data breaches through unsolicited, harmful electronic communications.

Thirdly, there is a notable lack of cybersecurity awareness among users. A significant majority feel that there is a need for more educational initiatives from banks and payment companies to inform users about online threats and to promote safe online behaviour.

To address these challenges, individuals and companies should employ a range of security enhancements. One-time passwords sent via SMS for every transaction can offer an additional layer of security. Biometric security measures like facial or fingerprint recognition can further fortify user authentication processes. Two-factor authentication is another way to ensure that user identities are adequately verified. Establishing automatic detection mechanisms for fraudulent transactions and integrating point-to-point encryption is also critical in safeguarding sensitive information and financial assets.

Moreover, investing in holistic cybersecurity solutions is imperative for those involved in developing and providing digital payment services, including banks and corporations. Such investments can help detect and mitigate fraud across various customer interaction points and online payment processes. The emergence of advanced attacks by advanced persistent threat groups on financial institutions highlights the importance of in-depth visibility and sophisticated threat intelligence. These measures are crucial in protecting customers and maintaining business continuity in the face of evolving cybersecurity threats.

Key sectors & industries in Saudi Arabia

According to Invest Saudi, the top 10 industries in Saudi Arabia are:

Energy

Saudi Arabia's energy sector is crucial to its economy, driven by significant demand from the industrial base. The kingdom's thriving economy is increasing its focus on sustainable growth and energy efficiency. Vision 2030 aims to meet over 50% of the country's energy needs through renewable sources, such as solar, wind, and tidal energy, boosting market demand for renewables. This initiative, supported by substantial government backing and private sector investments, reflects a commitment to sustainable development.

Food processing

Saudi Arabia's food processing sector is robust and poised for rapid growth, driven by rising domestic and global demand, particularly for seafood, dates, and halal products. Supported by a favourable ecosystem, the industry is well-positioned to meet growing market expectations and high standards. Saudi Arabia, renowned for its authentic halal products, has the potential to lead the $1.3 trillion global halal industry, offering lucrative prospects and instilling investor confidence in the sector's potential and excellence.

 

Healthcare

One of the kingdom's most promising sectors is healthcare and life sciences, which accounted for 17.7% of the 2021 budget. The country's sizable and youthful population represents significant current and future market demand. New investment opportunities are emerging, spurred by a growing market and government initiatives to increase private sector participation through innovative financing models and privatisation.

Pharmaceuticals

Saudi Arabia's pharmaceutical sector, valued at $8.5 billion and accounting for 37% of the Middle East and North Africa market, is drawing significant attention and is anticipated to experience substantial growth, with a projected compound annual growth rate of 5.7% until 2029. This growth is fuelled by an increasing population and a high demand for chronic disease treatment, as non-communicable diseases are expected to account for 73% of all deaths in the country. The kingdom has notable market demand in several pharmaceutical segments, including vaccines, systemic antibacterials, oncology, insulin and analogues, and immunosuppressants, highlighting the region's wide-ranging market potential and opportunities.

Manufacturing

Saudi Arabia is one of the world's fastest-growing manufacturing nations, with an average annual growth rate of 7.5%. The sector is pivotal to the kingdom's economic diversification, localization, and privatisation efforts, and it has become the third-largest non-oil contributor to the Saudi economy. The manufacturing industry's growth in the country is driven by its large market size, advanced research and development facilities, government support, modern infrastructure, and favourable business regulations.

 

Environment services

The environmental services sector is rapidly expanding, driven by population growth, elevated living standards, and burgeoning industrial output. The kingdom is committed to advancing this sector, offering promising business opportunities and robust investor and customer rights protection within its regulatory framework. Water and waste management are central to achieving the sustainability and circular economy goals of Vision 2030, with an estimated $67 billion to be invested in water and sanitation projects by 2025.

Real estate

Saudi Arabia's real estate sector is undergoing significant transformation as a result of a young population and the 70% homeownership goal under Vision 2030. The government is heavily involved in the private sector and offers substantial support through technology enhancements, increased transparency with online real estate indicators, the introduction of the Developers Services Centre (Etmam) for an attractive investment environment, and innovative financing solutions to facilitate consumers in this dynamic sector.

Chemical

Saudi Arabia, the largest chemical market in the Middle East and North Africa and home to the world's largest single-phase integrated chemical complex, is a hub for major global chemical players, with nine of the top ten having operations there. The kingdom is the fifth-largest chemical production market globally, contributing to 10% of the world's total output and leading in producing key products like ethylene, glycol, polyethylene, and methyl tert-butyl ether. Given its cost-competitive edge in ethylene production, the sector, driven by growing demand across chemical categories, is projected to double by 2030.

Financial services

Saudi Arabia has a highly advanced and efficient financial services sector, with robust government support to enhance growth in the public and private sectors and develop capital markets. By 2030, projections include $1.3 trillion in total credit demand, a 20% increase in micro, small, and medium enterprises financing by banks, a 53% rise in capital market asset shares, and a 70% share in non-cash transactions.

Aerospace and Defence

Saudi Arabia is focused on enhancing local aerospace and defence manufacturing, targeting 50% localisation of sector expenditure by 2030. This initiative aims to strengthen national security and open up global partnership opportunities. The localisation agenda presents extensive investment opportunities across the supply chain, ensuring equal rights for compliant foreign companies and fostering knowledge and technology transfer opportunities.

 

Imports & Exports

Saudi Arabia's leading imports in 2022-2023 were machinery, mechanical appliances, and electrical equipment (21.4% of total imports) and transport equipment (18.5% of total imports). Other significant imports included cars ($12.1 billion), refined petroleum ($7.43 billion), broadcasting equipment ($4.29 billion), gold ($3.65 billion), and packaged medicaments ($3.13 billion). The major sources of imports were China (20.2%), the US (8.7%), and the United Arab Emirates (6.2%).

Mineral fuels, including oil, are Saudi Arabia's predominant exports, accounting for $268.5 billion or 83.8% of the total. Other notable exports include plastics and plastic articles ($19.6 billion), organic chemicals ($14 billion), fertilisers ($4 billion), and aluminium ($2.3 billion). The top destinations for Saudi exports are China (17.2%), Japan (11%), and South Korea (10.5%).

 

Regulation in Saudi Arabia

The regulatory environment of Saudi Arabia

Summary of the regulatory environment in Saudi Arabia

To maintain fairness and operational smoothness in business ventures in Saudi Arabia, entrepreneurs are required to comply with a range of laws and regulations, which include:

  • Company law: This includes regulations governing companies' establishment, operations, and dissolution.

  • Employment law: This includes regulations governing employment contracts, working conditions, and employee rights.

  • Product liability law: This includes regulations governing the legal liabilities and responsibilities of manufacturers, sellers, distributors, and other parties involved in the production and sale of goods.

  • Intellectual property law: This includes regulations governing copyrights, patents, and trademarks. 

  • Competition law: This includes regulations governing competition and antitrust matters to promote fair competition.

  • Consumer protection law: This includes regulations governing the rights of consumers, product safety, and advertising standards.

  • Data protection law: This includes regulations concerning the collection, use, and storage of personal data.

In Saudi Arabia, various government agencies ensure legal compliance across different sectors. The 2022 Companies Law governs entity structures in the market. Employment is regulated by the labour and social insurance laws, along with provisions of sharia. Consumer and product liability concerns are managed by the Consumer Protection Association. The Saudi Authority for Intellectual Property oversees intellectual property rights, covering various forms of intellectual creation. The Competition Council enforces the competition law to maintain a balanced competitive environment. Lastly, the National Data Management Office administers data protection laws to safeguard personal information.

How card payments are regulated in Saudi Arabia

The Saudi Central Bank (SAMA) regulates card payments in Saudi Arabia under the Payment Services Provider Regulations (PSPR). These regulations allow non-bank entities, such as payment companies, to be licensed to provide payment services within the kingdom. The PSPR applies to both local and offshore providers. 

In 2023, SAMA issued the Implementing Regulations for the Law of Payments and Payment Services to enhance the robustness of the kingdom's payment systems infrastructure. These regulations aim to stabilise the financial sector and align with international standards, such as the Principles for Financial Market Infrastructures. 

In line with Vision 2030, these initiatives promote innovation, competition, and the introduction of internationally aligned payment products that meet the needs of clients. Furthermore, the central bank mandated that all retailers offer SAMA-authorised electronic payment methods from August 25, 2020, to advance electronic payments.

 

Do I need a licence?

To operate a business in Saudi Arabia, you must obtain a licence. First, obtain a certificate of business registration from the Ministry of Commerce and Industry. Then, apply for a trade licence from the Chamber of Commerce and Industry. You must also apply for a commercial trade licence through the Saudi Business Centre and submit all required documents, including a trade licence, memorandum/articles of association, power of attorney, and audited financial statements for previous years. It is also critical to register with the Ministry of Investment for a certificate issued by the Saudi Arabian General Investment Authority. Make sure all your legal documents and articles of association are ready. Once you have obtained all of the necessary documents, you can obtain your commercial registration licence and register your national address.

Payment solutions in Saudi Arabia

An overview of how to accept payments from customers in Saudi Arabia

Payment gateways and providers in Saudi Arabia

Saudi Arabia's evolving payment landscape requires merchants to accommodate multiple transaction forms. Businesses are thus seeking versatile payment solutions. APEXX uses its payment orchestration layer (POL) to link payment methods and banks. 

The POL's strength lies in its support for various payment types and its features that boost business productivity. 

Thanks to APEXX's pre-configured plugins and APIs, integrating its payment services into current systems is hassle-free. It allows smooth compatibility with different platforms, including online stores and point-of-sale systems, enhancing workflow.

APEXX's solutions allow firms to process diverse payments and enhance transaction volumes. Its flexible framework helps in elevating customer service.

 

Cheapest payment solutions in Saudi Arabia

To reduce fees in their payment stacks, merchants in Saudi Arabia can implement the following strategies: 

  • Negotiate fees: Merchants should negotiate with their payment providers for better rates, including transaction fees, and monthly fees.

  • Choose a suitable payment provider: Merchants should research and compare different payment providers to select the one that offers competitive rates and low fees. 

  • Use alternative payment methods: Merchants can reduce fees by using alternative payment methods such as e-wallets or bank transfers instead of traditional card payments.

  • Prevent chargebacks: To avoid chargebacks and additional fees, merchants can offer clear product descriptions, prompt customer complaint resolution, and refunds when necessary.

  • Implement fraud prevention measures: Merchants should adopt fraud prevention measures to prevent fraudulent transactions, which can lead to chargebacks and additional fees.

  • Monitor payment processing fees: Merchants should keep a close eye on their payment processing fees and use payment analytics tools to track their expenses and identify areas where they can reduce costs.

Merchants can also consider using payment aggregators such as APEXX, which allow them to accept multiple payment methods through a single platform, reducing the need for multiple payment providers and lowering costs.

BNPL in Saudi Arabia

The buy now, pay later (BNPL) market in Saudi Arabia is poised for considerable growth, projected to increase from $0.58 billion in 2023 to $1.83 billion by 2028, representing a compound annual growth rate of 25.76%. The pandemic has been a catalyst for this sector, amplifying the attractiveness of deferred payments amid financial uncertainties and elevated unemployment.

BNPL services are gaining popularity over credit cards in the region, offering a more transparent and convenient alternative for transactions. This surge in popularity is also rooted in Saudi Arabia's long standing aversion to credit cards. The acceleration of e-commerce activities during the pandemic has further fuelled the adoption of BNPL services, aligning with the consumer shift towards online shopping 

Due to the merchant-funded approach of BNPL, it primarily targets consumers with lower credit risk, tapping into the growing market for delayed payments. In response to the increasing popularity of BNPL products, the central bank has deemed it essential for all BNPL providers to obtain a permit. Failure to do so may result in legal repercussions.

APEXX provides a comprehensive solution for merchants to manage and integrate various alternative payment methods efficiently, streamlining their operational processes and ensuring seamless transactions. This is particularly important in a rapidly expanding market where alternative payment options like BNPL are gaining momentum.




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