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Saudi Arabia's new payment system seen as catalyst for e-commerce and fintech sectors in the Kingdom.

Saudi Arabia's newly launched instant payment system hailed as a major breakthrough by retailers and financial experts.

Saudi Arabia has launched a new payment system - the Kingdom's first instant payment system (IPS). The arrival of the Kingdom's IPS has been hailed by retailers and financial experts as a major breakthrough.

Fahd Al-Akeel, Saudi Payments managing director, said yesterday that the IPS launch was the result of several months of "meticulous efforts" with all partners. In his words, “Despite the challenges posed by the COVID-19 pandemic, the speed of the instant payment system’s deployment across all the local banks is the fastest of its kind worldwide.”

The payment system will allow financial institutions, companies, and people to complete transactions instantly across various banks, around the clock.

According to Mazen Al-Sudairi, head of research at the Riyadh-based financial services company Al-Rajhi Capital, the move would have two main benefits for retailers and consumers. First, it would help boost consumption and make the monetary supply chain more efficient. It would also reduce the use of cash in the economy. In his words, “The more electronic trade in the economy, the more it means a lower shadow economy and more data-based economy, the more it is a transparent economy.”

Previously, local payment processing had traditionally been limited to bank business hours and did not take place beyond these hours or on weekends and holidays. However, these limitations would no longer apply under the new payment system, according to Talat Zaki Hafiz, an economist and board member of the Saudi Financial Association. He defined instant electronic payments using the description by the Euro Retail Payments Board - instant electronic payments are electronic retail payment solutions available 24 hours a day, seven days a week and 365 days a year, with payments processed between accounts within seconds.

Talat Zaki Hafiz said about the new payment system's launch that its introduction is a major milestone in the history of payment systems in Saudi Arabia and that "it will help to promote safety and improve efficiency for the main stakeholders in the Kingdom’s development of its financial ecosystem, including SAMA (Saudi Central Bank), Saudi Payments, and all the financial institutions and customers who will benefit from this latest development.”

For internet entrepreneurs like  Yasser Al-Ammari, a Saudi entrepreneur who founded the online platform last year, the new IPS would benefit e-commerce by helping facilitate and speed up the operational process of e-commerce, particularly in online payment and refunds for both partners and customers.

For e-commerce customers who depend on a fast efficient service as part of the offering, the IPS development is also a major step for the Kingdom.

Michael Trueschler, co-founder and CEO of FlexxPay, a fintech company with headquarters in Saudi Arabia, called the new system “a fantastic initiative.”

FlexxPay, a Shariah-compliant platform that employees or pensioners can use to access a portion of their future income in advance. Image Source: FlexxPay

FlexxPay is a Shariah-compliant platform that employees or pensioners can use to access a portion of their future income in advance. It covers salaries, commissions, pensions and end-of-service benefits to allow users to plan their expenses.

“For FlexxPay users this means that access to their earned income is immediate,” he said. “They can cover unexpected expenses even during the weekends and after banking hours. This is a massive value add for everyone in Saudi Arabia.”, an online platform backed by Saudi Arabia's Public Investment Fund, predicted that the new payment service will be a catalyst for growth in the Kingdom's digital payments sector. According to Mosam Gadia, senior vice president at Noon Payments, “The newly announced Instant Payments System will act as a huge catalyst in bringing the cost of funding down for e-wallet players as well as adding convenience to customers and businesses alike. This new system will enable customers to add money seamlessly to e-wallets from their bank accounts in real time, a capability that we will leverage when our homegrown wallet, Noon Pay, launches in Q2. It will also make the process of merchant collections super swift, allowing them to receive payments in near real time.”

The IPS launch comes at a great time for the e-commerce sector, which saw a surge in the use of digital payments last year.

The total number of digital transactions in Saudi Arabia in 2020 amounted to about 2.8 billion, an increase of 75 percent compared with the same period in the previous year.

The value of these (digital transactions) amounted to about SR349 billion ($93.7 billion), an increase of nearly 24.1 percent compared with the same period in 2019.

Saudi Arabia in focus:

Population: 34.2 million (2019)

GDP: $793 billion (2019)

GDP Per Capita: $23,139 (2019)