In recent years, digital wallet in Saudi Arabia has shown gradual growth. The COVID-19 pandemic, specifically, has boosted digital wallet usage in the cash-oriented Kingdom nearly overnight.
The size of Saudi Arabia's digital wallet market can be seen through the rising value of card payments at a CAGR of 19.9 percent from 2017 to 2021. Today, the market expects to record a 29.6 percent growth due to the decisive shift to cashless payment methods.
The rapid growth of the digital wallet method in Saudi Arabia started when consumers shifted to online shopping to contain the spread of the COVID-19. During 2020, digital payment transactions surged by a whopping 75 percent, while cash withdrawals from the Kingdom's ATM fell by 30 percent or equivalent to a 318 million drop.
The proxies justified Saudi Arabia's urgent demand for resilience digital wallet infrastructure to the previously known cash-basis country. Contrastingly, before 2020, the most preferred payment method for online shopping was Cash on Delivery (COD) despite the tech-savvy consumer's characteristics and the dense population of people under 30 years old in Saudi Arabia.
Even though the popularity of digital wallets in the Kingdom has been increasing quickly, Saudi Arabia has been experiencing a lag in changing the consumers' preference from cash to e-wallet. Therefore, the pandemic has provided a long-awaited push for the digital wallet demand.
Saudi Arabia's strategic position as the economic powerhouse of the Middle East and North Africa (MENA) region alongside its economic diversification plan under Saudi Arabia's Vision 2030 pushes the Kingdom to initiate transformative programs that will enable businesses to flourish in the near future.
The development of digital wallet market size through robust infrastructure is a critical element that would allow the business ecosystem to go forward.
The government of Saudi Arabia has launched numerous efforts to link the payment systems between the government and other private sectors. The electronic wallet, Sadad, will provide financial services and act as one of the four leading digital wallet portals in the Kingdom.
Sadad offers payment services and allows individuals to pay mundane tasks such as finishing taxes obligations and paying their bills through the app.
Other than Sadad, digital wallet solutions for KSA include Saree' and Mada. Saree emphasizes a payment transfer system that reduces financial risks and ensures seamless payment transfers from different Kingdom banks.
On the other hand, Mada is an online system that enables online payment services such as Point of Sales (POS) and ATMs. The government also filters private e-payment services to provide credibility and safety for citizens' digital wallet transactions. So far, there are four private e-payment services that the Saudi Arabian government authorizes.
As Saudi Arabia moves towards a cashless economy, the market will reap benefits, including greater transparency and efficiency of transactions happening inside the ecosystem.
By 2030, Saudi Arabia forecasts digital wallets will cover around 70 percent of all transactions in the Kingdom. The transformation of digital wallet spending will drive Saudi Arabia to emphasize its position as the economic hub of the MENA region.