Shaimaa Ibrahim

The cashless economy represents a fundamental transformation in the way financial transactions are being processed globally. In Saudi Arabia, the ambitious Vision 2030 targets enhancing financial inclusion and building a digital environment that fosters a non-cash economy.

Startups working in tech-based sectors play a pivotal role in enhancing the non-cash economy and driving digital transformation in the world in general and Saudi Arabia in particular. These startups contribute to developing innovative solutions that change consumer behavior and promote digital payments.

Importance of non-cash economy

The non-cash economy contributes to accelerating payments, reducing transaction times, enhancing the efficiency of commercial businesses, and lowering operational costs. It also provides unbanked individuals and small-sized enterprises a seamless access to financial services. Hence, the Saudi government adopted several strategies to drive digital transformation by fostering innovation in the fintech industry and upgrading e-payments infrastructure, leading to a leap in digital payments in the Kingdom.

According to figures released by the Saudi Central Bank (SAMA), the share of e-payments in the retail sector reached 70% of total retail payments in 2023, up from 62% in 2022. Additionally, Saudi national payment schemes saw significant growth in 2023 as the number of e-payments processed through these schemes hit 10.8 billion, compared to 8.7 billion transactions in 2022.

Startups and non-cash economy

Startups play a crucial role in driving the Kingdom’s shift towards a non-cash economy, thanks to their innovative solutions that transform the pattern of financial transactions.

Here, we showcase the key factors that make startups the driving force behind Saudi Arabia’s non-cash economy:

• Offering innovative solutions. Startups develop new solutions that offer users convenient and safe payment methods and enhance digital payment culture.
• Enhancing e-commerce.  Startups often establish platforms that streamline online purchases and payments by providing safe and flexible payment options.
• Supporting Vision 2030. Startups in Saudi Arabia spare no effort to realize Vision 2030’s goals of enhancing digital transformation, achieving financial inclusion, and diversifying the national economy away from oil resources.
• Promoting cybersecurity. Cybersecurity is a top priority for startups. That is why they invest heavily in upgrading security measures to protect users' data.
• Boosting financial inclusion. Startups provide financial services for individuals and small-sized enterprises that do not have access to traditional banking services, offering flexible payment solutions that cater to the different needs of all categories.

Finally, startups can play a crucial role in realizing Vision 2030 objectives, backed by the Kingdom’s continuous digitization efforts. By tackling challenges facing startups and bolstering cooperation between government and private sector, Saudi Arabia will be able to create a robust digital economy that fosters sustainable economic development.

Translation: Noha Gad

Ghada Ismail

As Saudi Arabia delves into its digital transformation trajectory toward a cashless community, the Kingdom’s payment sector has experienced tremendous growth in digital payments and financial technologies (fintech). 

However, this growth, by default, might have also attracted the attention of cybercriminals, making cybersecurity a critical issue for the financial sector. 

Recognizing the potential threats to its digital economy, Saudi Arabia’s government has implemented a series of regulatory measures to safeguard the integrity and security of the country’s rapidly expanding payment systems.

So, what is the current state of cybersecurity in Saudi Arabia’s payment sector? And what are the key cybersecurity challenges facing the industry, and the government’s regulatory efforts to protect the financial ecosystem from cyber threats? Let’s unfold the whole thing in the coming segments.

The Growth of Digital Payments in Saudi Arabia

Over the past few years, Saudi Arabia has seen a rapid shift toward cashless payments, a natural output of many advances in digital technology and a strong governmental push to reduce cash dependency. 

With digital payment platforms becoming mainstream, more consumers and businesses are conducting transactions online, which has made the payment ecosystem a prime target for cyberattacks. 

Cybercriminals are increasingly sophisticated, using methods like phishing, identity theft, and malware to exploit vulnerabilities in payment systems. Consequently, ensuring the security of these transactions is paramount to fostering trust and protecting the Kingdom's financial infrastructure.

Cybersecurity Challenges in Saudi Arabia’s Payment Sector

As digital payments become the norm for almost the majority of the population in  Saudi Arabia, so too do the risks associated with cybercrime. Some of the major cybersecurity challenges facing the payment sector include:

1. Increasing Fraud and Cyberattacks

With more consumers shifting to online payments, incidents of fraud and cyberattacks have also surged. Cybercriminals target digital transactions, seeking to steal sensitive financial information, such as credit card details and personal identification numbers (PINs). Techniques such as phishing (where attackers deceive users into revealing confidential information) and account takeover attacks have become more common.

Saudi Arabia’s financial institutions are on high alert for these threats. However, the sheer volume of transactions and the increasing sophistication of cybercriminals make it difficult to detect and prevent every potential attack.

2. Data Breaches and Privacy Risks

Data breaches, in which cybercriminals gain unauthorized access to sensitive personal and financial data, pose a significant risk to both consumers and businesses. In the payment sector, a breach can result in the exposure of sensitive information such as bank account numbers, credit card details, and personal identification. This not only causes financial loss but also erodes trust in the digital payments infrastructure.

Given the growing reliance on data in financial services, ensuring that digital payment platforms can securely handle and protect this information is crucial to preventing privacy violations.

3. New Attack Vectors from Emerging Technologies

The integration of emerging technologies such as Internet of Things (IoT) devices and blockchain in payment systems introduces new attack vectors for cybercriminals. As IoT-connected devices are increasingly used for payments, such as smartwatches and other wearables, they can also become entry points for hackers if not properly secured.

At the same time, new fintech solutions must ensure they comply with existing regulations while addressing potential security flaws in their applications.

Government Regulations to Enhance Cybersecurity

The Saudi Arabian government has recognized the importance of robust cybersecurity measures to support the growth of the digital payments sector. Over the last few years, various regulatory frameworks have been introduced to protect consumers, businesses, and financial institutions from cyber threats.

1. Saudi Central Bank (SAMA) Cybersecurity Framework

One of the most significant initiatives has been the development of the SAMA Cybersecurity Framework, introduced in 2017. The framework provides a comprehensive set of standards and guidelines for financial institutions to strengthen their cybersecurity defenses and manage the risks associated with digital payments. It requires banks, fintech companies, and other financial institutions to implement best practices in areas such as risk management, incident response, and continuous monitoring of cybersecurity threats.

2. National Cybersecurity Authority (NCA)

In 2017, Saudi Arabia established the National Cybersecurity Authority (NCA), which plays a central role in overseeing the country’s cybersecurity posture. The NCA collaborates with SAMA and other regulatory bodies to set national standards for cybersecurity across various sectors, including the financial sector.

The NCA is responsible for developing national policies to protect critical infrastructure, including payment systems, from cyberattacks. It also provides guidelines for financial institutions on safeguarding digital assets, detecting potential threats, and responding to cybersecurity incidents.

The NCA’s involvement ensures that cybersecurity regulations are standardized across the country, creating a cohesive defense against cybercriminals targeting digital payment systems.

3. Personal Data Protection Law (PDPL)

The introduction of the Personal Data Protection Law (PDPL) in 2022 marked a significant step toward strengthening data privacy and security in Saudi Arabia. This law governs how personal data, including financial information, is collected, processed, and stored. 

Under the PDPL, businesses, including financial institutions, must obtain user consent before processing personal data and ensure that appropriate security measures are in place to protect this data from breaches.

The PDPL requires payment providers to comply with strict rules regarding data protection and imposes penalties for non-compliance. This law aligns with global data protection standards such as GDPR (General Data Protection Regulation), ensuring that Saudi consumers’ data is protected while using digital payment services.

Technological Measures to Bolster Cybersecurity

In addition to regulatory frameworks, Saudi Arabia’s financial institutions are investing heavily in cutting-edge cybersecurity technologies to protect their payment systems. Some of the key technologies being deployed include:

1. Artificial Intelligence (AI) and Machine Learning (ML)

AI and ML are becoming increasingly essential in the fight against cybercrime. In the payment sector, these technologies enable real-time monitoring of transactions and help detect unusual patterns that may indicate fraud. AI-driven systems can automatically flag suspicious transactions, preventing cyberattacks before they can cause significant harm.

2. Blockchain Technology

Blockchain technology, known for its decentralized and immutable nature, is gaining traction as a means of enhancing the security of digital payments. Blockchain can provide an extra layer of protection by encrypting transaction data and ensuring that payment records are tamper-proof.

3. Biometric Authentication

Biometric authentication methods such as fingerprint scans, facial recognition, and voice recognition are increasingly being used to secure digital payments. These technologies provide an additional layer of security by verifying users' identities based on their unique physical traits, reducing the risk of unauthorized access to payment systems.

Looking Ahead: A Secure Future for Digital Payments in Saudi Arabia

As Saudi Arabia continues to progress toward becoming a cashless society, the importance of cybersecurity in the payment sector cannot be overlooked. With the combination of government regulations, technological advancements, and industry collaboration, Saudi Arabia is well-positioned to create a resilient, secure, and efficient digital payments ecosystem.

By adopting global best practices in cybersecurity and continuously enhancing its regulatory frameworks, the Kingdom is ensuring that consumers and businesses alike can put their confidence in the safety and security of digital transactions. As Saudi Arabia forges ahead with its Vision 2030 objectives, a secure digital payments infrastructure will be essential to building a thriving, modern, and competitive financial sector.

Shaimaa Ibrahim

E-wallets have become one of the key financial innovations in today’s era of digital evolution. They transform the way individuals and businesses process their financial transactions easily and securely, promote financial inclusion, and enhance the quality of life. 

With the growing adoption of technology in all life aspects, e-wallets emerged as an innovative solution that meets the users’ needs. The usage of e-wallets is expected to rise within the upcoming period, triggered by the increase in the number of innovative fintech startups that are expected to contribute to innovating and developing new services to enhance users’ experience.

What is e-wallet?

An E-wallet is an application or platform that enables users to store their funds and make safe and secure financial transactions, including paying for goods and services and receiving money.

Types of e-wallets

• Closed wallet: allows users to store their funds and spend them only with the issuer of the wallet.
• Semi-closed wallet: allows users to easily make transactions at specific merchants and locations. It enables online purchases and allows users within the network to send funds to one another.
• Open wallet: allows users to conduct transactions from anywhere in the world. It can be used for any type of transaction, making it easy to transfer funds and make online and in-store payments.
• Mobile wallet: enables users to make payments through their smartphones.
• Online wallet: mainly used to make online financial processes.    
• Crypto wallet: enables users to store, send, or receive digital currencies like Ethereum and Bitcoin.

Common uses of e-wallets

• In-store payments
• Money transfers 
• Bill payments

Importance of e-wallets

E-wallets are not just a payment method. They play a pivotal role in:

• Promoting financial inclusion.
• Enhancing customers’ experience.
• Facilitating daily financial transactions.
• Raising safety and security.
• Reducing transaction costs.
• Streamlining e-commerce activities.

Finally, e-wallets play a fundamental role in driving the digital transformation of the global financial ecosystem as they enable users to manage funds and make daily transactions seamlessly and securely. This technology has promising opportunities to grow, backed by government support and continued innovations. E-wallets are expected to continue reshaping the payment landscape, enhancing the economy, and making financial transactions easier and more flexible. 

Translation: Noha Gad

Mohamed Ramzy

Saudi Arabia relies on financial technology (fintech) applications to promote financial inclusion, in alignment with Vision 2030’s goals of increasing the share of non-cash transactions (digital transactions) amongst individuals and reducing the use of cash to 70% by 2025.

One of Saudi Arabia’s main goals is to increase the number of fintech firms to 230 by the end of 2025, with aspirations to reach 525 fintech firms by 2030. In doing so, the Kingdom encouraged the establishment of new fintech firms to create almost 18,000 jobs and contribute around SAR 13.3 billion to the national gross domestic product (GDP). 

The fintech ecosystem in Saudi Arabia has witnessed great momentum since the Saudi Central Bank (SAMA) launched the Fintech Saudi initiative in 2018 aiming to foster innovation and collaboration between startups and investors as well as other active entities. 

According to the Fintech Report 2022 released by SAMA, there were seven licensed fintech firms in the Kingdom in 2018, then the number doubled to 14 in 2019 and continued to rise until it reached 30 by the end of 2022. 

By the end of 2023, the number of fintech firms surpassed the 2023 target of 150 firms to hit 216 fintech firms offering various financial solutions, including digital payments and e-wallets. This considerable momentum in the fintech sector positioned Saudi Arabia as a prime destination for venture capital (VC) investments.

During the first nine months of 2024, Saudi startups secured $509 million, seizing 40% of the funding raised in the Middle East and North Africa (MENA) region, as stated in a recent report by MAGNiTT. Fintech remained the top sector with investments worth $480 million, representing 37% of MENA’s total funding. 

Finally, these records reflect the Kingdom’s efforts to support innovation in the fintech sector as it is a key pillar to achieving financial inclusion and creating a non-cash society. 

Translation: Noha Gad

Ghada Ismail

As the financial landscape evolves at a crazy pace, Saudi Arabia is embracing digital transformations in its banking sector. A key development is the rise of neobanks, which offer services exclusively online without physical branches, challenging the dominance of traditional banks. This article comprehensively explores the differences between neobanking and traditional banking in Saudi Arabia, examining their benefits, limitations, and impact on consumers.

What Are Neobanks and Traditional Banks?

Neobanks are financial institutions that operate entirely online. They provide services such as checking and savings accounts, loans, and payment services through mobile apps and websites. In Saudi Arabia, neobanks aim to provide a seamless user experience with minimal fees, leveraging technology for personalized services. Examples of neobanks in Saudi Arabia include STC Pay and Samba Digital.

Traditional Banks, on the other hand, have physical branches and a long-standing presence in the market. They offer a wide range of financial services, from basic banking to complex investment products. Key players in the Saudi Arabian market include Saudi National Bank, Riyad Bank, and Al Rajhi Bank.

Key Differences between Neobanks and Traditional Banks

1. Accessibility and Convenience

Neobanks: Operate fully online, which allows users to access their accounts and manage finances anytime and anywhere through mobile apps or web interfaces. This accessibility aligns with the increasing digital-savvy population in Saudi Arabia, particularly among the youth who prefer online services.

Traditional Banks: Require customers to visit physical branches for certain services, which can be inconvenient. However, many traditional banks in Saudi Arabia have also embraced digital transformation, offering mobile banking apps and online services.

2. Cost Structure

Neobanks: Typically have lower operational costs due to the absence of physical branches. As a result, they often offer lower fees or even fee-free banking. In Saudi Arabia, some neobanks offer no-fee accounts, competitive exchange rates, and reduced international transaction fees.

Traditional Banks: While they offer comprehensive services, traditional banks generally have higher fees to cover branch operations and maintenance costs. For example, fees for international transfers, ATM withdrawals, and account maintenance can be higher than those charged by neobanks.

3. Range of Services

Neobanks: Initially focused on core banking services, neobanks in Saudi Arabia are expanding their offerings to include personal loans, credit facilities, and investment products. However, their range of services is still limited compared to traditional banks.

Traditional Banks: Provide a more comprehensive suite of services, including mortgages, corporate banking, and wealth management. Saudi Arabian banks also have established relationships with government entities, which can be beneficial for customers who need government-related financial services.

4. Customer Experience and Technology

Neobanks: Leverage advanced technology to provide a streamlined, user-friendly experience. They offer features such as instant notifications, spending analysis, and budgeting tools, which appeal to tech-savvy customers.

Traditional Banks: Although they are investing in digital services, traditional banks in Saudi Arabia are often perceived as slower to adopt cutting-edge technologies. However, their emphasis on customer service through personal interaction and relationship management remains a significant advantage.

5. Security and Trust

Neobanks: Since they are relatively new, neobanks may face trust issues among older or less tech-oriented customers. However, in Saudi Arabia, neobanks are regulated by the Saudi Central Bank (SAMA), which ensures compliance with stringent security and privacy standards.

Traditional Banks: Enjoy a high level of trust due to their long-standing presence and adherence to local regulations. In Saudi Arabia, traditional banks are perceived as more secure, especially by those who prefer in-person services.

Advantages of Neobanking in Saudi Arabia

Digital Focus: With Saudi Arabia's Vision 2030 initiative emphasizing digital transformation, neobanks align with the Kingdom’s goals by promoting cashless transactions and enhancing financial inclusion.

Cost Savings: Neobanks often eliminate common banking fees, appealing to younger and cost-conscious consumers.

Quick and Easy Account Opening: Customers can open accounts online within minutes, which is particularly attractive to the youth demographic.

Advantages of Traditional Banking in Saudi Arabia

Comprehensive Services: Traditional banks provide a wide array of services, which is beneficial for customers who need access to complex financial products.

Established Trust: Many customers prefer traditional banks due to their established reputation, branch networks, and face-to-face interaction options.

Strong Government Ties: Traditional banks in Saudi Arabia often have close relationships with governmental bodies, which can be advantageous for customers requiring government-related financial services.

Challenges and Future Outlook

For Neobanks, a key challenge is gaining consumer trust. Many customers in Saudi Arabia still value the in-person support offered by traditional banks. Additionally, while neobanks are regulated by SAMA, they must continue to strengthen cybersecurity measures to protect against digital threats.

For Traditional Banks, staying competitive will require further investment in digital transformation to meet the growing demand for online services. Traditional banks must also find ways to streamline operations and reduce costs to compete with the low-fee structure of neobanks.

As Vision 2030 drives technological innovation in the financial sector, the Saudi Arabian market is likely to see increased collaboration between traditional banks and neobanks. For example, partnerships where traditional banks offer white-labeled neobanking services could become a trend, providing customers with the best of both worlds.

Neobanks and traditional banks each offer unique advantages and face distinct challenges in Saudi Arabia. The choice between the two will largely depend on individual preferences, financial needs, and comfort with digital services. As the Saudi market evolves, the coexistence of neobanks and traditional banks will likely foster a more diverse and customer-centric financial ecosystem.