Saudi banks reported a significant increase in credit card loans during the third quarter of 2024. The total reached a record high of SR30.27 billion, equivalent to $8.07 billion. This growth represents a 14.24 percent rise compared to the same period last year. These figures were released in recent data from the Saudi Central Bank (SAMA).
Growth in Consumer Loans
Consumer loans, excluding real estate financing, finance leasing, and margin lending, hit SR462.29 billion, reflecting a 4.01 percent increase. Among these loans, education lending experienced the highest growth, rising by 16 percent to SR8.24 billion. Notably, loans for vehicles and private transportation made up the largest share within the sectors identified by SAMA, accounting for 3 percent of the total at SR11.93 billion. Interestingly, 91 percent of consumer loans were categorized as “Others.”
Characteristics of Consumer Loans
Consumer loans typically offer fixed repayment schedules and lower interest rates. These loans often finance significant expenditures, such as purchasing vehicles or funding education, and represent a substantial portion of individual debt. In contrast, credit card loans serve as revolving facilities, allowing users to borrow up to a predetermined limit. These loans are repayable at varying interest rates based on usage.
The Digital Shift Driving Credit Card Growth
Several factors are contributing to the rapid growth of credit card debt:
- Digital Banking: Increased access to digital banking services, especially among younger consumers, has fueled demand for flexible payment options.
- Consumer Spending: Government initiatives to boost the economy and diversify financial offerings have encouraged consumers to rely more on credit cards for daily purchases.
- Attractive Promotions: Cashback rewards and loyalty points have incentivized credit card usage.
- E-commerce Boom: The rise of online shopping has further accelerated credit card adoption.
Aligning with Vision 2030
This growth trend aligns with Saudi Arabia’s Vision 2030 initiative, which aims to foster a cashless economy and enhance the financial landscape through digital transformation. Data from SAMA indicated that by the end of September, the number of ATMs in Saudi Arabia decreased by 604 year-over-year, totaling 15,448. In contrast, the number of issued cards rose by 3.6 million, reaching 49.95 million.
This shift illustrates the evolving payment dynamics in the Kingdom. The decline in ATMs reflects a diminishing reliance on physical cash, while the surge in card issuance highlights an increasing demand for contactless payment options.
Rapid Adoption of Contactless Payments
Saudi Arabia has achieved a 98 percent adoption rate for contactless payments in in-person transactions, a significant rise from just 4 percent in 2017. Andrew Torre, Visa’s regional president, attributes this transformation to government support, increasing consumer demand, and Visa’s technological initiatives. These developments align with the goals of Saudi Arabia’s Vision 2030 to enhance digital commerce.
Torre noted that the transition to contactless payments, including mobile taps, has occurred rapidly and is among the fastest globally. Saudi Arabia’s fintech-friendly regulatory environment, led by the Saudi Central Bank, has been crucial in facilitating this digital evolution.
Fintech and E-commerce Growth
SAMA’s early adoption of a fintech sandbox has allowed for innovation in financial services. Additionally, e-commerce in the region has surged, growing at an annual rate of 30 percent, partly due to the pandemic’s push toward online shopping. As digital payment adoption expands, it empowers small businesses with secure transaction options.
A recent study by GlobalData revealed that the annual value of card transactions in Saudi Arabia’s cards and payments market is projected to reach $146.8 billion in 2024. The market is expected to grow at a compound annual growth rate of over 6 percent from 2024 to 2028.
