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Emerging Opportunities in

the Saudi Arabian Cards and

Payments Industry

Market Size, Trends and Drivers,

Strategies, Products and Competitive

Landscape

Product Code: VR0886MR

Published Date: January 2013

TABLE OF CONTENTS

Emerging Opportunities in the Saudi Arabian Cards and Payments Industry

© Timetric. This product is licensed and is not to be photocopied Published: January 2013

TABLE OF CONTENTS

1 Executive Summary ..................................................................................................................... 8 2 Market Attractiveness and Future Prospects of Cards and Payments Industry ......................... 10 3 Analysis of Cards and Payments Industry Drivers .................................................................... 13

3.1 Macroeconomic Fundamentals ..................................................................................................... 14

3.1.1 Gross domestic product (GDP) growth .......................................................................................... 14

3.1.2 Decreasing inflationary pressure ................................................................................................... 15

3.1.3 Government investments in housing ............................................................................................. 15

3.2 Infrastructure Drivers ................................................................................................................... 16

3.2.1 Increasing number of internet users .............................................................................................. 16

3.2.2 Growing number of POS terminals ................................................................................................ 17

3.2.3 Smartphone adoption................................................................................................................... 18

3.2.4 Driving EMV adoption .................................................................................................................. 19

3.2.5 Growing number of ATMs ............................................................................................................. 20

3.3 Business Drivers .......................................................................................................................... 21

3.3.1 E-commerce growth ..................................................................................................................... 21

3.3.2 Steadily growing tourism sector .................................................................................................... 22

3.3.3 Retail sector dynamics ................................................................................................................. 22

3.4 Consumer Drivers ........................................................................................................................ 23

3.4.1 Consumer confidence score ......................................................................................................... 23

3.4.2 Changing lifestyle and spending habits.......................................................................................... 24

3.4.3 Urban vs. rural population ............................................................................................................ 24

3.5 Card Fraud Statistics ................................................................................................................... 25

3.5.1 By channel .................................................................................................................................. 25

3.6 Regulatory Framework ................................................................................................................. 26

3.6.1 E-banking rules ........................................................................................................................... 27

3.6.2 Anti money laundering and terrorism financing............................................................................... 27

4 Emerging Consumer Atti tudes and Trends................................................................................ 28

4.1 Market Segmentation and Targeting ............................................................................................. 28

4.1.1 Retail customers .......................................................................................................................... 30

4.1.2 Corporate customers ................................................................................................................... 32

4.2 Consumer Preference .................................................................................................................. 33

4.2.1 Price ........................................................................................................................................... 34

4.2.2 Services ...................................................................................................................................... 35

4.2.3 Convenience ............................................................................................................................... 35

4.3 Online Buying Behaviour .............................................................................................................. 36

5 Competitive Landscape and Industry Dynamics........................................................................ 37

5.1 Market Share Analysis by Payment Channels ................................................................................ 37

5.1.1 Overview of the payment channels ............................................................................................... 37

5.1.2 Cash ........................................................................................................................................... 38

5.1.3 Credit transfers ............................................................................................................................ 39

5.1.4 Direct debit .................................................................................................................................. 40

5.1.5 Card payments ............................................................................................................................ 41

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5.1.6 Checks........................................................................................................................................ 42

5.2 Debit Cards Category Share......................................................................................................... 43

5.2.1 By bank....................................................................................................................................... 43

5.2.2 By scheme .................................................................................................................................. 44

5.3 Credit Cards Category Share........................................................................................................ 45

5.3.1 By bank....................................................................................................................................... 45

5.3.2 By scheme .................................................................................................................................. 46

5.4 Charge Cards Category Share...................................................................................................... 47

5.4.1 By card type ................................................................................................................................ 47

6 Strategies Adopted by Key Players ........................................................................................... 48

6.1 Marketing Entry Strategies ........................................................................................................... 48

6.2 Marketing and Product Strategies ................................................................................................. 50

6.2.1 Debit cards .................................................................................................................................. 51

6.2.2 Credit cards ................................................................................................................................. 53

6.3 Pricing Strategies ........................................................................................................................ 54

7 Industry Size and Growth Potential of Payment Card Industry .................................................. 55

7.1 Market Share Analysis by Type of Card......................................................................................... 55

7.2 Total Industry Size and Forecast of Card Categories ...................................................................... 56

7.2.1 Analysis by number of cards ......................................................................................................... 56

7.2.2 Analysis by transaction value........................................................................................................ 57

7.2.3 Analysis by transaction volume ..................................................................................................... 58

7.3 Debit Card Category Size and Forecast ........................................................................................ 59




7.3.4 Other key performance indicators ................................................................................................. 62

7.4 Prepaid Card Category Size and Forecast ..................................................................................... 64

7.4.1 Analysis by number of cards – segment wise................................................................................. 65


7.5 Charge Card Category Size and Forecast ..................................................................................... 68





7.6 Credit Card Category Size and Forecast ....................................................................................... 72





8 Company Profiles, Product, and Marketing Strategies .............................................................. 77

8.1 Al Rajhi Bank ............................................................................................................................... 77

8.1.1 Strategies .................................................................................................................................... 78

8.1.2 Credit cards offered ..................................................................................................................... 81

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8.2 The Saudi British Bank ................................................................................................................. 83

8.2.1 Strategies .................................................................................................................................... 84


8.3 Samba Financial Group................................................................................................................ 86

8.3.1 Strategies .................................................................................................................................... 87


8.3.3 Co-branded cards offered............................................................................................................. 91

9 Appendix ................................................................................................................................... 95

9.1 Methodology................................................................................................................................ 95

9.2 Definitions ................................................................................................................................... 96

9.3 Methodology................................................................................................................................ 97

9.4 Contact Us .................................................................................................................................. 97

9.5 About Timetric ............................................................................................................................. 97

9.6 Disclaimer ................................................................................................................................... 98

TABLE OF CONTENTS



LIST OF FIGURES

Figure 1: Current and Future Prospects of Payment Cards in Saudi Arabia ............................................................................................... 10 Figure 2: Grow th Potential of Saudi Arabia’s Cards and Payments Industry by Area of Usage ................................................................... 11 Figure 3: Saudi Arabian Cards and Payments Industry Drivers ................................................................................................................... 13 Figure 4: Saudi Arabian GDP Grow th Rate (%), 2008 - 2017 ...................................................................................................................... 14 Figure 5: Saudi Arabian Inflation Growth Rate (%), 2008 - 2017 ................................................................................................................. 15 Figure 6: Number of Internet Users in Saudi Arabia (Million), 2008 - 2012 .................................................................................................. 16 Figure 7: Number of POS terminals in Saudi Arabia (Thousands), 2008-2017 ............................................................................................ 17 Figure 8: Smartphone Adoption by Various Age Groups in Saudi Arabia (%), 2011 .................................................................................... 18 Figure 9: Smartphone Adoption by GCC Countries (%), 2011 ..................................................................................................................... 18 Figure 10: Snapshot of EMV Card by Gamalto ............................................................................................................................................ 19 Figure 11: Number of ATMs in Saudi Arabia (Thousands), 2008-2017........................................................................................................ 20 Figure 12: GCC Countries’ B2C E-Sales (USD Million), 2011...................................................................................................................... 21 Figure 13: GCC Countries’ Retail Sales (USD Billion), 2011........................................................................................................................ 22 Figure 14: Consumer Confidence Score of GCC countries, 2012................................................................................................................ 23 Figure 15: Urban Vs. Rural Population in Saudi Arabia (Million), 2008-2012 .............................................................................................. 24 Figure 16: Saudi Arabian Card Fraud Statistics (SAR Million), 2008–2012.................................................................................................. 25 Figure 17: Snapshot of SADAD Payment System in Saudi Arabia .............................................................................................................. 26 Figure 18: Saudi Arabian Cards and Payments Industry Segmentation by Card Type ................................................................................ 29 Figure 19: Snapshot of Female Credit Cards Offered by Samba Financial Group and Al-Rajhi Bank ......................................................... 30 Figure 20: Co-Branded Cards Offered by Samba Financial Group in Saudi Arabia ..................................................................................... 31 Figure 21: Consumer Preferences on Various Types of Cards .................................................................................................................... 33 Figure 22: Snapshot of Al-Jazira Bank’s Credit Cards and Charges ............................................................................................................ 34 Figure 23: Payment Preferences for Online Shopping in Saudi Arabia, 2011 ............................................................................................. 36 Figure 24: Market Share of Different Payment Channels in Saudi Arabia (%), 2008 And 2012 ................................................................... 38 Figure 25: Saudi Arabian Value of Cash Transactions (SAR Million), 2008–2012 ....................................................................................... 38 Figure 26: Saudi Arabian Value of Credit Transfers (SAR Million), 2008–2012 ........................................................................................... 39 Figure 27: Saudi Arabian Value of Direct Debit Transactions (SAR Million), 2008–2012............................................................................. 40 Figure 28: Saudi Arabian Value of Card Payments (SAR Million), 2008–2012 ............................................................................................ 41 Figure 29: Saudi Arabian Value of Check Payments (SAR Million), 2008–2012 .......................................................................................... 42 Figure 30: Saudi Arabian Debit Card Category Share by Banks (%), 2011 ................................................................................................. 43 Figure 31: Saudi Arabian Debit Card Category Share by Schemes (%), 2011 ............................................................................................ 44 Figure 32: Saudi Arabian Credit Card Category Share by Bank (%), 2011 .................................................................................................. 45 Figure 33: Saudi Arabian Credit Card Category Share by Schemes (%), 2011 ........................................................................................... 46 Figure 34: Saudi Arabian Charge Card Catgeory Share by Schemes (%), 2011 ......................................................................................... 47 Figure 35: Foreign Banks Operating in Saudi Arabia ................................................................................................................................... 49 Figure 36: Marketing and Product Strategies Based on Card Category....................................................................................................... 50 Figure 37: Debit Cards Category Size by Volume (Thousands), 2008 to 2017 ............................................................................................ 51 Figure 38: Banks’ Debit Cards Portfolio (Thousands), 2007 - 2011 ............................................................................................................. 52 Figure 39: Comparison Of Annual Fee......................................................................................................................................................... 54 Figure 40: Saudi Arabian Card Categories by Type of Card (%), 2008–2017.............................................................................................. 55 Figure 41: Saudi Arabian Card Category Size by Volume (Thousands), 2008–2017................................................................................... 56 Figure 42: Saudi Arabian Card Category Size by Transaction Value (SAR Million), 2008–2017 ................................................................. 57 Figure 43: Saudi Arabian Card Category Size by Transaction Volume (Million), 2008–2017....................................................................... 58 Figure 44: Saudi Arabian Debit Card Category Size by Volume (Thousands), 2008–2017 ......................................................................... 59 Figure 45: Saudi Arabian Debit Card Category Size (SAR Million), 2008–2017 .......................................................................................... 60 Figure 46: Saudi Arabian Debit Card Category Size by Transaction Volume (Million), 2008–2017 ............................................................. 61 Figure 47: Saudi Arabian Debit Card Category Size by Frequency of Use, 2008–2017 .............................................................................. 62 Figure 48: Debit Card Usage ATMs and POS Terminals (Million), 2008–2017 ............................................................................................ 63 Figure 49: Saudi Arabian Prepaid Card Category Size (Thousands), 2008–2017 ....................................................................................... 64 Figure 50: Saudi Arabian Open-Loop Prepaid Cards Segment Size (Thousands), 2008–2017 ................................................................... 65 Figure 51: Saudi Arabian Closed-Loop Prepaid Cards Segment Size (Thousands), 2008–2017................................................................. 66 Figure 52: Saudi Arabian Prepaid Cards Category Size (SAR Million), 2008–2017..................................................................................... 67 Figure 53: Saudi Arabian Charge Card Category Size by Volume (Thousands), 2008–2017 ...................................................................... 68 Figure 54: Saudi Arabian Charge Card Category Size (SAR Million), 2008–2017 ....................................................................................... 69 Figure 55: Saudi Arabian Charge Card Category Size by Transaction Volume (Million), 2008–2017 .......................................................... 70 Figure 56: Saudi Arabian Charge Card Category Size by Frequency of Use, 2008–2017 .......................................................................... 71 Figure 57: Saudi Arabian Credit Card Category Size by Volume (Thousands), 2008–2017 ........................................................................ 72 Figure 58: Saudi Arabian Credit Card Category Size by Transaction Value (SAR Million), 2008–2017 ....................................................... 73 Figure 59: Saudi Arabian Credit Card Category Size by Transaction Volume (Million), 2008–2017 ............................................................ 74 Figure 60: Saudi Arabian Credit Card Category Size by Frequency of Use, 2008–2017 ............................................................................. 75 Figure 61: Saudi Arabian Credit Card Category Size by Average Transaction Value (SAR), 2008–2017.................................................... 76 Figure 62: Al Rajhi Bank Market Segmentation of Cards Offered ................................................................................................................ 78 Figure 63: Al Rajhi Bank Deals Offer for Credit Card Users......................................................................................................................... 79

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Figure 64: Credit Cards Offered by Al Rajhi Bank........................................................................................................................................ 79 Figure 65: Al Rajhi Bank’s Retail Partners Under Rew ard Program............................................................................................................. 80 Figure 66: The Saudi British Bank’s Market Segmentation of Cards Offered............................................................................................... 84 Figure 67: Samba Financial Group’s Market Segmentation of Cards Offered.............................................................................................. 87 Figure 68: Snapshot of the Al-Khair Ladies Credit Card .............................................................................................................................. 88 Figure 69: Snapshot of Credit Cards Offered by Samba Financial Group.................................................................................................... 89

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LIST OF TABLES

Table 1: Saudi Arabian Payment Channels (SAR Million), 2008 and 2012 .................................................................................................. 37 Table 2: Banks’ Debit Cards Portfolio (Thousands), 2007 - 2011 ................................................................................................................ 52 Table 3: Saudi Arabian Card Categories by Type of Card (Number in Thousands), 2008–2017 ................................................................. 55 Table 4: Saudi Arabian Card Category Size by Volume (Thousands), 2008–2017 ...................................................................................... 56 Table 5: Saudi Arabian Card Category Size by Transaction Value (SAR Million), 2008–2017..................................................................... 57 Table 6: Saudi Arabian Card Category Size by Transaction Value (USD Million), 2008–2017 .................................................................... 57 Table 7: Saudi Arabian Card Category Size by Transaction Volume (Million), 2008–2017 .......................................................................... 58 Table 8: Saudi Arabian Debit Card Category Size by Volume (Thousands), 2008–2017............................................................................. 59 Table 9: Saudi Arabian Debit Card Category Size (SAR Million), 2008–2017.............................................................................................. 60 Table 10: Saudi Arabian Debit Card Category Size (USD Million), 2008–2017 ........................................................................................... 60 Table 11: Saudi Arabian Debit Card Category Size by Transaction Volume (Million), 2008–2017............................................................... 61 Table 12: Saudi Arabian Debit Card Category Size by Frequency of Use, 2008–2017................................................................................ 62 Table 13: Saudi Arabian Prepaid Card Category Size (Thousands), 2008–2017 ........................................................................................ 64 Table 14: Saudi Arabian Open-Loop Prepaid Cards Segment Size (Thousands), 2008–2017 .................................................................... 65 Table 15: Saudi Arabian Closed-Loop Prepaid Cards Segment Size (Thousands), 2008–2017.................................................................. 66 Table 16: Saudi Arabian Prepaid Cards Category Size (SAR Million), 2008–2017 ...................................................................................... 67 Table 17: Saudi Arabian Prepaid Cards Category Size (USD Million), 2008–2017...................................................................................... 67 Table 18: Saudi Arabian Charge Card Category Size by Volume (Thousands), 2008–2017 ....................................................................... 68 Table 19: Saudi Arabian Charge Card Category Size (SAR Million), 2008–2017 ........................................................................................ 69 Table 20: Saudi Arabian Charge Card Category Size (USD Million), 2008–2017 ........................................................................................ 69 Table 21: Saudi Arabian Charge Card Category Size by Transaction Volume (Million), 2008–2017 ........................................................... 70 Table 22: Saudi Arabian Charge Card Category Size by Frequency of Use, 2008–2017 ............................................................................ 71 Table 23: Saudi Arabian Credit Card Category Size by Volume (Thousands), 2008–2017 ......................................................................... 72 Table 24: Saudi Arabian Credit Card Category Size by Transaction Value (SAR Million), 2008–2017 ........................................................ 73 Table 25: Saudi Arabian Credit Card Category Size by Transaction Value (USD Million), 2008–2017 ........................................................ 73 Table 26: Saudi Arabian Credit Card Category Size by Transaction Volume (Million), 2008–2017 ............................................................. 74 Table 27: Saudi Arabian Credit Card Category Size by Frequency of Use, 2008–2017 .............................................................................. 75 Table 28: Saudi Arabian Credit Card Category Size by Average Transaction Value (SAR), 2008–2017 ..................................................... 76 Table 29: Saudi Arabian Credit Card Category Size by Average Transaction Value (USD), 2008–2017..................................................... 76 Table 30: Key Definitions ............................................................................................................................................................................. 96

EXECUTIVE SUMMARY



1 Executive Summary

The Saudi Arabian banking system is well capitalized and consists largely of commercial banks. In April 2012,

the international monitory fund (IMF) stated that there were XX licensed banks in operation in the country.

Compared to other Gulf Co-operation Council (GCC) countries, the Saudi Arabian cards and payments

industry is considered, by MasterCard’s 2012 consumer confidence survey, to be extremely optimistic. It

offers credit, debit, prepaid and charge cards to corporations and consumers. During the review period

(2008−2012), nominal growth at a CAGR of XX.XX% was experienced within the cards and payments

industry. It is predicted to register a CAGR of XX.XX% over the forecast period (2013−2017).

Debit and charge card categories to exhibit nominal growth, prepaid and credit cards drive industry

The debit and charge card categories are anticipated to post nominal growth over the forecast period. The

prepaid card category is expected to post a CAGR of XX.XX% while the credit card category is expected to

grow at a CAGR of XX.XX%. The prepaid and credit card categories are anticipated to be key industry drivers.

The debit card category is expected to grow at a CAGR of X.XX% and the charge card category is projected

to grow at a CAGR of X.XX% over the forecast period.

Growth of e-commerce, tourism and retail sales volume to drive the cards and payments industry

Online shopping in Saudi Arabia is rapidly growing in popularity due to improvements in telecommunication

infrastructure and payment and security systems. In the first quarter of 2012, the total number of inbound

tourists reached X.X million, with a recorded spends of almost USDX.X billion. The increasing internet

penetration rate is a key driver of online retail sales. Emerging retail models , such as department stores,

supermarkets, hypermarkets and specialty stores are driving consumer confidence and accelerating revenues

in the cards and payments industry.

Security measures in debit, credit, prepaid and charge cards expected to drive indust ry

The value of card fraud transactions posted a CAGR of XX.XX% during the review period, increasing from

SARXXX.X million (USDXX.X million) in 2008 to SARXXX.X million (USDXXX.X million) in 2012. To reduce

card fraud in Saudi Arabia, all commercial banks are implementing EMV technology in all card categories . For

example, Al Rajhi Bank has partnered with Gemalto, a provider of digital security solutions, to replace

magnetic stripe cards with EMV cards. The bank has completed the main phase of Dexxis instant issuance,

(Gemalto's refined personalization solution), a deployment program for on the spot EMV card delivery which is

designed to manage the issuance of any payment card securely and efficiently at the bank 's branch or POS

terminal. The increasing security measures will increase consumer confidence in payment cards when making

online transactions.

Changing consumer preferences and lifestyle to accelerate industry dynamics

Consumer preference is expected to change current industry dynamics. Increased consumerist lifestyles have

changed the manner in which Saudi Arabian consumers procure goods and services. Increasing income

levels and growing levels of urbanization have prompted the diversification of the industry and contributed to

the emergence and growth in the prepaid and credit card categories. Both private label prepaid cards and

charge cards are gaining market share with changing consumer preferences and lifestyle changes of Saudi

Arabian consumers.

Innovative marketing strategies to attract customers and increase consumer spending

Intense competition within the cards and payments industry has forced card issuers to innovate their

marketing strategies. In addition to discounts and rebates, banks offer additional services and benefits

including complementary insurance, interest-free installment payment options, international medical and legal

assistance. Higher levels of customer satisfaction, resulting from effective marketing strategies such as these,

increase customer loyalty and attract new clientele. Many banks charge competitive interest rates on

extended credit, and issue and renew cards for free to maintain a competitive edge. Many banks offer direct

cash discounts or cash-back offers on retail purchases at partner outlets in Saudi Arabia and abroad.

MARKET ATTRACTIVENESS AND FUTURE PROSPECTS OF

CARDS AND PAYMENTS INDUSTRY



2 Market Attractiveness and Future Prospects of Cards and Payments

Industry

The Saudi Arabian cards and payments industry recorded a CAGR of XX.XX% during the review period. In

terms of transaction value, the industry increased from SARXXX.X billion (USDXXX.X billion) in 2008 to

SARXXX.X billion (USDXXX.X billion) in 2012. Economic growth is anticipated to benefit the industry and

provide positive growth potential for banking and non-banking card issuers operating in the country.

The debit and credit card categories in Saudi Arabia are relatively mature and experienced a CAGR of X.XX%

and XX.XX% respectively during the review period. Over the forecast period, the debit card category is

expected to post a CAGR of X.XX%. However, in value terms the CAGR over the forecast period is expected

to be XX.XX%. The credit cards category in terms of value is forecast to post a CAGR of XX.XX% between

2013 and 2017.

Figure 1: Current and Future Prospects of Payment Cards in Saudi Arabia

Source: Timetric analysis © Timetric

ANALYSIS OF CARDS AND PAYMENTS INDUSTRY DRIVERS



3 Analysis of Cards and Payments Industry Drivers

The cards and payments industry is driven by various macroeconomic fundamentals, these include GDP

growth, decreasing inflationary pressure and government investments, infrastructure drivers (including a

growing number of POS terminals and ATMs, smartphone adoption and increasing EMV technology

adoption), business drivers (including e-commerce growth, the steadily expanding tourism sector and retail

industry dynamism), and consumer drivers (comprised of increasing consumer confidence, improved li festyles

and increased spending, and growing urbanization).

Figure 2: Saudi Arabian Cards and Payments Industry Drivers





3.1 Macroeconomic Fundamentals

Saudi Arabia is an oil based economy with one-fi fth of the worlds proven petroleum reserves. The petroleum

sector accounts for XX% of the country’s GDP. Strong macroeconomic fundamentals are expected to foster

growth in the cards industry both in terms of transaction volume and value. The various macroeconomic

factors that are expected to act as growth drivers in the cards and payments industry are gross domestic

product (GDP) growth, decreasing inflationary pressure and increasing government investments .

3.1.1 Gross domestic product (GDP) growth

Growing economy with International demand for oil

Saudi Arabia’s economy is largely supported by oil reserves. GDP has shown impressive growth during the

review period, at a rate of X.X% in the second quarter of 2012, fuelled mainly by the private sector –

construction and communication. In 2011, GDP recorded a X.X% growth rate due to a major contribution from

the hydrocarbon sector. Following the beginning of the Libyan civil war in 2011, oil production increased in

Saudi Arabia by XX% due to the decline in Libyan oil production. Saudi Arabia replaced XX% of Libya’s

missing oil productions in 2011. IMF is expecting positive GDP growth ranging between X.X% and X.X%

during the forecast period. The growing economy will foster the cards and payments industry.

3.2 Infrastructure Drivers

3.2.1 Increasing number of internet users

During the review period, the number of internet users in Saudi Arabia has show n impressive growth from X.X

million users in 2008 to XX.X million users in 2012. A total of XX% of internet users buy products and pay for

services online. Electronic goods are the most popular products bought by online shoppers, followed by

software products. Top services obtained online are airline ticket bookings and hotel reservations. The

increase in internet users is mainly driven by the improved literacy and high youth rate. Nearly XX% of the

total population is under the age of XX and the literacy rate has grown from XX% in 1972 to XX% in 2012.

Growth in e-commerce and increased internet penetration is expected to increase the use of debit, credit and

charge cards for online shopping.

3.3 Business Drivers

3.3.1 E-commerce growth

Saudi Arabia is ranked as having the second largest market in e-commerce sales in the Gulf Co-operation

Council (GCC) countries after United Arab Emirates (UAE) and, more importantly, represents the biggest

retail sector in the region, with the promise of huge growth in e-commerce. In December 2011, there were

around XX million internet users with a XX% penetration level of the entire Saudi Arabian population. Total e-

commerce sales were recorded at USDX.X billion in 2011, with XX% growth in online sales. The enlarging e-

commerce market is currently very attractive to international investors. For instance, Souq.com, an online

retailer with a customer base of X million, secured USDXX million in October 2012 from Naspers, a South

African media company, and Tiger Global, a New York hedge fund. In November 2012 PayPal announced the

launch of its Middle East operations. The growing e-commerce market is expected to create competitive

pressure among banks.




3.4 Card Fraud Statistics

Though the Saudi Arabian Monitory Agency (SAMA) has created a strong regulatory framework to limit fraud,

card fraud statistics in Saudi Arabia grew from SARXXX.X million (USDXX.X million) in 2008 to SARXXX.X

million (USDXXX.X million) in 2012. POS transactions form the major market for fraud related activities in

terms of channel.

3.4.1 By channel

Along with e-commerce, payment cards can be used at ATMs and POS terminals. SAMA and commercial

banks have taken a number of steps to control fraud at these channels including the introduction of pin

numbers to reduce fraud at ATMs.

The highest incidences of fraud occur at POS terminals as debit, credit and prepaid cards can be easily used

if stolen. All commercial banks in Saudi Arabia started implementing EMV technology to enable the security.

This is expected to limit fraudulent activities at POS terminals in the forecast period.

EMERGING CONSUMER ATTITUDES AND TRENDS



4 Emerging Consumer Attitudes and Trends

Consumer attitude and preference plays a major role in the success of any product in any industry and so is

the case with Saudi Arabia’s cards and payments industry. Organizations must research their target market

thoroughly, considering age group, income level and locality (urban or rural). Precautions must be undertaken

when determining consumer expectations of product pricing and service expectations. The following section

discusses factors which help the Saudi Arabian cards and payments industry to make effective business

decisions.

4.1 Market Segmentation and Targeting

Saudi Arabia’s cards and payments industry grew strongly during the review period, growing at a CAGR of

XX.XX% from XX.X million cards in 2008 to XX.X million cards in 2012. The usage and demand of these

cards varies significantly based on the market targeted, such as corporate customers including government

and public bodies, individual customers, various income groups, travelers (both business and leisure), and

consumers of different age groups. Notably, large domestic and foreign banks are making a concerted effort

to segment the overall industry and target the most profitable and growing segment in order to gain significant

share and improve revenue.

EMERGING CONSUMER ATTITUDES AND TRENDS



4.2 Online Buying Behaviour

Online shopping in Saudi Arabia is growing with increased internet penetration and consumer knowledge. E-

commerce is expected to continue growing in Saudi Arabia, with the increasing incidence of retailers moving

business operations online to gain a more significant market share and expand customer bases across the

country. A large volume of the Saudi Arabian population now uses e -commerce, which provides opportunities

to banks and other card providers to penetrate the industry by offering innovative products and services.

Schemes and promotions are being optimized by banks to drive credit and debit card e-commerce sales.

The Saudi Arabian e-commerce market is chiefly driven by the XX–XX age range who are more likely to use

mobile and internet communication, and social media. Social and cultural factors influence this demographics

behaviour, preferences and habits. Consumers under XX are more likely to be influenced by online marketing

and to purchase goods and services than any other age group. Online credit card payments, with XX% of total

online retail payments, are significantly dominating the e-commerce market versus Paypal, debit cards, cash,

prepaid and bank transfers in 2011.

Figure 3: Payment Preferences for Online Shopping in Saudi Arabia, 2011


COMPETITIVE LANDSCAPE AND INDUSTRY DYNAMICS



5 Competitive Landscape and Industry Dynamics

The Saudi Arabian banking system is strengthened by the oil based economy. A growing Islamic banking

system (based on Islamic rules and principles) creates intensive competition within the industry. The sector is

expected to grow continuously, especially as Saudi Arabia opens its doors further to foreign i nvestment.

Factors that play vital role in the growth of Saudi banking system are as follows:

Implemented mortgage law

A major increase in government spending which is expected to stimulate consumer and economic

activity to new levels

Increase in lending intermediation of the private sector in government initiated infrastructure projects

Increasing confidence in private sector which is expected to stimulate demand for lending

5.1 Market Share Analysis by Payment Channels

The section contains the market shares of various payment channels and details how these channels have

grown during the review period. The channels covered include checks, cash transaction, credit cards and

credit transfers.

5.1.1 Overview of the payment channels

Payment systems in Saudi Arabia are dominated by cash-based transactions. However, due to improved

security measures in alternative payment plat forms, the market share of cash-based transactions decreased

from XX.X% in 2008 to XX.X% in 2012. The value of card-based transactions grew at a CAGR of XX.XX%

during the review period to gain an industry share of X.X% in 2012. After cash-based transactions, the value

of credit transfers has recorded the second largest market share of XX.X% in 2012. Check-based transactions

represented a X.XX% share in 2012 in comparison to X.X percentage points in 2008.

COMPETITIVE LANDSCAPE AND INDUSTRY DYNAMICS



5.2 Debit Cards Category Share

5.2.1 By bank

Al Rajhi Bank was the leading bank in terms of debit card issuance volume in 2011, which accounted for

XX.X% of the total volume of debit cards in 2011. Other key operatives in the debit cards category are the

Samba financial group, Saudi British Bank, Riyad Bank and Arab National Bank, which accounted for industry

shares of X.X%, X.X%, X.X%, and X.X% respectively in 2011. The remaining XX.X% share of the industry

was constituted by other leading banks. While Al Rajhi Bank had total of X.X million debit cards in circulation,

Samba Financial Group and Arab National Bank had X.X million and X.X million debit cards, respectively in

2011.

5.3 Credit Cards Category Share

5.3.1 By bank

In 2011, five major banks in the credit card category were Al Rajhi Bank, Samba financial group, Saudi British

Bank, Riyad Bank and Arab National Bank. These banks collectively accounted for XX.X% share of the

industry in terms of card volume. In 2011, Saudi British Bank, the leading bank in Saudi Arabia, held the

XX.X% industry share in Saudi Arabia’s credit card category. Other banks including Al Rajhi Bank, Samba

Financial Group, Riyad Bank and Arab National Bank held respective industry shares of X.X%, XX.X%,

XX.X% and X.X%.

5.4 Charge Cards Category Share

5.4.1 By card type

In 2011, there were XXX,XXX charge cards in Saudi Arabia’s cards and payments industry . As of 2011, there

were four players in Saudi Arabia’s charge cards category, Visa, MasterCard, Diners Club and American

Express. Visa dominates the industry with a share of XX.X% closely followed by MasterCard with an industry

share of XX.X%. American Express accounted for industry share of XX.X% in 2011.

STRATEGIES ADOPTED BY KEY PLAYERS



6 Strategies Adopted by Key Players

Saudi Arabia’s cards and payments industry in terms of volume grew at a CAGR of XX.XX% during the review

period, from XX.X million in 2008 to XX.X million in 2012. By volume, the industry is forecast to grow at a

CAGR of XX.XX% over the forecast period. The growing cards and payments industry has encouraged

several foreign banks and card providers to enter the industry. In order to achieve a maximum customer base

within the competitive industry, domestic and foreign banks are adopting innovative marketing and growth

strategies. The following section discusses the marketing, pricing and product strategies adopted by

commercial banks and those used by foreign banks to enter the industry.

6.1 Marketing Entry Strategies

This section outlines strategies used by international banks to enter the Saudi Arabian cards and payments

industry. Growth within the industry has encouraged leading global banks to expand, further supported by

favorable Foreign Direct Investment (FDI) regulations devised by the Saudi Arabian government. The Capital

Market Authority (CMA) is responsible for the implementation of financial, legal and administrative framework

within the banking industry. It stipulates that international involvement in the Saudi Arabian banking sector can

include a joint-venture company with foreign equity capital of up to XX%, open direct branches, provide asset

management, financial advisory services and financial brokerage services . In December 2011, Deutsche

Bank was licensed to operate by the Saudi Arabian Monetary Agency . Other foreign banks in Saudi Arabia

include BNP Paribas, J.P Morgan, National Bank of Kuwait, National Bank of Bahrain, Emirates Bank, Gulf

International Bank, State Bank of India (SBI) and National Bank of Pakistan. The legal framework surrounding

the entrance of international banks into Saudi Arabian banking system creates equal opportunities to foreign

investors with minimal restrictions.

Entrance into the Saudi Arabian banking sector by international operatives is mainly achieved with the

association of local players. French bank Credit Agricole established operations in 1977 when it partnered

with Banque Saudi Fransi in 1977 to become a joint stock company. In this joint venture, Banque Saudi Fransi

holds XX.X% and the remaining XX.X% by Crédit Agricole. HSBC entered into Saudi Arabia with the

association of the Saudi British Bank, a XX% indirectly held associate.

COMPANY PROFILE, PRODUCTS AND MARKETING STRATEGIES



7 Industry Size and Growth Potential of Payment Card Industry

This section gives an overview of the industry size and growth potential of various categories in the Saudi

Arabian cards and payments industry. Subsections cover the industry share of various card categories and

the current and forecasted market size of the various card categories. It analyses the credit, debit, prepaid

and charge card category size in value and volume of cards, and transaction volume. The section covers both

the past performance and future growth potential of various categories in the Saudi Arabia’s cards and

payments industry.

7.1 Market Share Analysis by Type of Card

All card categories posted positive growth during the review period. In terms of card issuance volume, the

highest growth was registered in the prepaid card category with a CAGR of XX.XX% in 2012. The second

largest growth was witnessed in the credit card category. The charge cards category had a CAGR of

XX.XX%, while the debit cards category had X.XX% growth.

Over the forecast period, the prepaid cards category is expected to grow at a CAGR of XX.XX%. The credit

card category is expected to grow at CAGR of XX.XX%. The charge card category is forecast to grow at a

CAGR of X.XX%, followed by debit cards with a CAGR of X.XX%. The overall cards category grew at a CAGR

of XX.XX% and is predicted to grow at a CAGR of XX.XX% over the forecast period.




8 Company Profiles, Product, and Marketing Strategies

8.1 Al Rajhi Bank

Al Rajhi Bank is one of the major joint stock banking and investment companies with XXX% Saudi capital. The

bank operates in Saudi Arabia, Kuwait, Jordan and Malaysia. In Malaysia, Al Rajhi Bank functions through its

100% wholly owned subsidiary, Al Rajhi Banking and Investment Corporation (Malaysia) BHD. In December

2011, a network of X,XXX ATMs and XX,XXX POS terminals in various locations were in operation. The bank

operates XXX branches and employs over X,XXX people. Headquartered in Riyadh, business is carried out in

six regions: Western, Central, Eastern, Qassim, Hail, Al Madina, Northern and Southern.

The bank operates mainly through retail banking group, corporate banking group, treasury group and Al Rajhi

Capital.

Retail banking group

Al Rajhi Bank, through its retail banking group, offers a wide range of financial products and banking services

to individual customers such as current accounts, personal finance, home finance and car finance products.

The bank also offers various services to individual customers such as remittance, currency exchange and

retail internet banking services.

Corporate banking group

The bank’s corporate banking group is responsible for delivering business solutions to corporate customers

and financial institutions. Under corporate banking, the bank offers trade finance, cash management and SME

banking services.

Treasury group

Al Rajhi Bank’s treasury group manages the liquidity requirements of the bank by raising market funding

where required and through prudent investment of the bank’s surplus cash. It is also responsible for the

development and execution of strategies to maximize yield on investments while preserving the bank’s capital

and meeting all regulatory liquidity standards.

Al Rajhi Capital

Al Rajhi Capital is the bank’s investment arm which offers brokerage, asset management and investment

banking advisory services.




8.2 The Saudi British Bank

The Saudi British Bank (the bank/SABB), a Saudi Joint Stock company, is an associate of the HSBC Group.

SABB commenced its operations with the taking over of operations of the British Bank of the Middle East in

1978. The bank provides a range of banking products and services to both retail and corporate sectors

including traditional banking products, such as current and saving accounts, time deposits, finances and

personal and housing loans, trade finance, cash management, treasury and card business. SABB also

provides non-interest bearing products, which are approved and supervised by an independent Shariah

Board. The bank operates in Saudi Arabia and employs over X,XXX people.

The bank has three subsidiaries as of December 2011:

SABB Securities Limited which is engaged in the business of custody and dealing as an agent

excluding underwriting

SABB Insurance Agency Company Limited, which acts as a sole insurance agent for SABB Takaful

Company (an associate company)

SABB Insurance Services Limited, which acts as insurance brokers and consultants to consumers

operating within Saudi Arabia

The bank operates primarily through retail banking and wealth management, corporate banking, t reasury and

others.

Retail banking and wealth management

SABB’s retail banking and wealth management sector caters mainly to banking requirements of personal and

private banking customers including deposits, current and savings accounts, personal finances and credit

cards.

Corporate Banking

The corporate banking sector caters mainly for the banking requirements of commercial and corporate

customers including deposits, current accounts, loans, finances and other credit facilities.

Treasury

The bank’s treasury sector caters mainly to capital markets, foreign currency transactions and trading in

financial derivatives. This segment is also responsible for the management of the bank’s liquidity, currency

and special commission rate risks. It is also responsible for funding banking operations and managing the

investment port folio and statement of financial position.

Others

SABB’s others segment includes activities of SABB Securities Limited and investment in assoc iates.




8.3 Samba Financial Group

Samba financial group (the bank) is a joint stock company incorporated in Saudi Arabia which commenced in

1980 when it took over the operations of Citibank. The bank aims to provide a full range of banking and

related products. The bank also provides Shariah approved Islamic products. The bank employs X,XXX

employees and operates in Saudi Arabia and Pakistan. In December 2011, the bank operates XX branches in

Saudi Arabia and three overseas branches.

Samba Financial Group’s business is mainly organized into three business segments:

Consumer

The bank’s consumer sector is comprised of individual customer time deposits, current, call and savings

accounts, credit cards, retail investment products and consumer loans.

Corporate

The corporate sector includes corporate time deposits, current and call accounts, overdrafts, loans and other

credit facilities as well as the Group’s investment, trading and derivative portfolios and its corporate finance

advisory services.

Treasury

The bank’s treasury sector manages the financial market, foreign exchange, commission rate trading and

derivatives for corporate and institutional customers as well as for the Samba Group’s own account. It is also

responsible for funding the Samba Group’s operations, maintaining liquidity and managing the Group’s

investment port folio and statement of financial position.

As of December 2011, Samba Financial Group has four subsidiaries ;

Samba Capital and Investment Management Company (Samba Capital): responsible for the bank’s

investment services and asset management activities related to dealing, arranging, managing,

advising and custody businesses

Samba Bank Limited, Pakistan (SBL): Established in Pakistan and engaged in commercial banking

and related services

Co-Invest Offshore Capital Limited (COCL): Responsible for the management of certain overseas

investments, through an entity controlled by COCL

Samba Real Estate Company: Engaged in managing real estate projects on behalf of Samba Real

Estate Fund, a fund under management by Samba Capital

APPENDIX



9 Appendix

9.1 Methodology

All Timetric cards and payments reports are created by following a comprehensive, four-stage methodology.

This includes market study, research, analysis and quality control.

1) Market Study

A. Standardization

Definitions are specified using recognized industry classifications. The same definition is used

for every country.

Annual average currency exchange rates are used for the latest completed year. These are

then applied across both the Review and forecast data to remove exchange rate

fluctuations.

B. Internal audit

Review of in-house databases to gather existing data:

Historic market databases and reports

Company database

C. Trend monitoring

Review of the latest cards and payments companies and industry trends

2) Research

A. Sources

Collection of the latest market-specific data from a wide variety of industry sources:

Government statistics

Industry associations

Company filings

International organizations

Cards and payments regulatory agencies

B. Expert opinion

Collation of opinion taken from leading cards and payments industry experts

Analysis of third-party opinion and forecasts:

Broker reports

Media

Official government sources

C. Data consolidation and verification

Consolidation of data and opinion to create Review datasets

Creation of models to benchmark data across sectors and regions

3) Analysis

A. Market forecasts

Feeding forecast data into market models:

Macroeconomic indicators

Industry-specific drivers

Analysis of cards and payments industry database to identify trends:

Latest cards and payments trends

Key drivers of the cards and payments industry

B. Report writing

Analysis of market data

Discussion of company and industry trends and issues

Review of financial deals and cards and payments trends

APPENDIX



4) Quality Control

A. Templates

Detailed process manuals

Standardized report templates and accompanying style guides

Complex forecasting tool used to ensure forecast methodologies are consistently applied

Quality-control checklists

B. Quality control process

Peer review

Senior-level QC

Random spot checks on data integrity

Benchmark checks across databases

Market data cross-checked for consistency with accumulated data from:

Company filings

Government sources.

9.2 Definitions

Table 1: Key Definitions

Categories Description

Gift cards

Suitable for a variety of purposes, such as key religious festivals or specif ic anniversaries including

marriages and birthdays. The card can also be used by corporations as gifts to employees, vendors or

clients.

Meal cards Offers employees a meal allow ance and eliminates the logistical problems associated w ith the

procurement, stock-keeping and distribution of paper-based meal vouchers.

Payroll cards Used to pay employee salaries by eliminating the need to put funds into a specif ic bank account. The

payroll card is loaded with the salary amount or reimbursements, which can be spent by using the card.

Travel currency card Targets international travelers and are available in a number of currencies.

Remittance card Targets those who receive remittances from abroad.

Multi-purpose prepaid cash

card Used to purchase various goods and services from aff iliated merchants.

Average Transaction Value The average value of transactions made through each card in a year.

Frequency of Use The average number of transactions made using different cards in a given year.

Turnover Per Card The value of transactions generated by various cards in a year.

Online Spending Through

Mobile Value of transactions made though mobile using various payment options.

Card Penetration (per '000) Average number of various card types available per thousand populations.

Contactless Transactions It reflects the total number of NFC enabled cards in circulation.

NFC-enabled Cards It reflects the total number of NFC enabled cards in circulation.


APPENDIX



9.3 Methodology

Timetric’s dedicated research and analysis teams consist of experienced professionals with an industry

background in marketing, market research, consulting and advanced statistical expertise.

Timetric adheres to the Codes of Practice of the Market Research Society (www.mrs.org.uk) and the

Society of Competitive Intelligence Professionals (www.scip.org).

All Timetric databases are continuously updated and revised.

9.4 Contact Us

If you have any queries about this report, or would like any further information, please contact

[email protected].

9.5 About Timetric

Timetric is an independent economic and business research firm that provides critical intelligence on

emerging economies and key global industries. The company offers detailed economic and sector

intelligence, business insights and independent and authoritative commentary.

Underpinning all Timetric’s research services is a belief that data – if gained following the right

technologies and analytic frameworks – can provide unique and powerful economic and business

insights.

The Timetric economic and industry intelligence centers are premium decision tools that provide access

to comprehensive research, data and expert analysis. They provide invaluable decision support,

presented in an easily digestible format and grounded in rich, proprietary data and data analysis

frameworks.

Each year, Timetric produces hundreds of high-quality research reports across countries, industries

and companies. These reports draw on in-depth primary and secondary research, proprietary data and

high-quality modeling and analysis to give its readers a deep insight into global market dynamics and

economic trends.

Timetric helps its clients to:

Gain an unbiased, expert insight from a genuinely independent and trusted source

Save time in researching, visualizing and comparing economic and industry data

Access the latest and most useful data sets, indices and forecasts

Gain access to a unique methodology for understanding economic trends

Forecast and predict trends more accurately

http://www.scip.org/

mailto:[email protected]

APPENDIX



Economic Research Services

Timetric’s economic research services are founded on three key goals:

1. To provide the strongest base data:

The most accurate data

The most timely and frequently updated data sets

The best data curation methodologies and standardizations

Unique data sets and forward-looking indicators

Industry-specific, premium data sets

2. To develop the best data analysis frameworks:

Unique economic indices and data analysis frameworks

Forward-looking indicators

Proprietary indices and surveys

Data analysis frameworks, scorecards and models

3. To provide authoritative independent economic insights:

To give a uniquely local perspective on developing markets

Truly expert, independent economic analysis and commentary

Proprietary analysis techniques and frameworks

Unique forecasts

Timetric believes that world-class content delivery should be the enabling factor across all it does. All its

research services follow the principle that data and research should be easy to access, visualize and

consume.

All economic research products are built on the Timetric economic research software platform, which

has four layers:

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World-class browser-based display to visualize the data searched

9.6 Disclaimer

All rights reserved.

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by

any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission

of the publisher, Timetric.

The facts of this report are believed to be correct at the time of publication but cannot be guaranteed.

Please note that the findings, conclusions and recommendations that Timetric delivers will be based on

information gathered in good faith from both primary and secondary sources, the accuracy of which

Timetric is not always in a position to guarantee. Timetric will accept no liability whatsoever for actions

taken based on any information that may subsequently prove to be incorrect .

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