Saudi Arabia combines NFC, QR and faster payments to speed move to cashless society

Saudi Payments, Saudi Arabia’s national payments infrastructure operator, is to use a combination of NFC and contactless payments, a new faster payments system and the introduction of a common QR code platform to reduce the use of cash and speed up its move towards a cashless society, managing director Ziad Al Yousef has told NFCW.

ziad-al-yousef
AL YOUSEF: Saudi Payments’ MD

The country has set its sights on becoming a cashless society with the aim that 70% of all payments in the Kingdom will be digital by 2030, compared with only 18% in 2017, Al Yousef explains.

He adds: “Our estimate is that we have now reached 23% to 24% in 2018, so we believe we are ahead of target. That was mainly pushed by the adoption last year of NFC.”

NFC and contactless payments via card or smartphone were introduced in Saudi Arabia in mid-2017; today more than 94% of POS devices support the technology.

Takeup by consumers has been “phenomenal”, Al Yousef says. “We have surpassed many countries. In June 2019, 53% of all transactions were done using NFC. In May last year it was 12%.”

Adoption has been driven by the swift roll out of a digital mobile payment infrastructure that will enable customers of any Mada member bank to carry their payment card information in a digital form on their mobile devices, coupled with customer education about security, Al Yousef explains.

Mada Pay, an Android mobile wallet, launched in the country in July 2018, while Apple Pay launched in February 2019. “Both mobile and card are pushing NFC more and more here in Saudi,” Al Yousef says.

The introduction of a common QR code platform, based on a standard published earlier this year, will target the thousands of micro merchants that haven’t invested in POS machines and are still relying on cash.

“Both mobile and card are pushing NFC more and more here in Saudi.”

By implementing this national platform, Saudi Payments aims to provide various payment solutions for retailers, payment service providers and individual customers through a unified platform that enables all involved parties to interact effectively using one common and consistent national standard.

In May, Saudi Payments signed a memorandum of understanding with nine banks and three financial technology firms to implement the QR solution.

“In Saudi, from a financial inclusion and bank account perspective, it’s pretty advanced. Most people have bank accounts and cards but the reason we are introducing QR is that there are certain segments from a merchant perspective that need an inexpensive method of accepting payments,” Al Yousef says.

“Most large and mid-size merchants have POS machines. However, micro merchants are still cash dominant, so we believe that QR can help in the ease of deployment of these micro merchants.”

Saudi Payments is working on the infrastructure to enable the QR code standard, which will be live by the end of this year.

“We are providing options to the market. There are currently wallets in the market that operate based on QR codes but they are not integrated together.”

Banks and other fintechs are now developing their solutions based on the standard, to enable interoperability between wallet providers.

“We are providing options to the market,” Al Yousef says. “There are currently wallets in the market that operate based on QR codes but they are not integrated together.

“There is no interoperability between them, so the wallet holders will benefit from having the flexibility of interoperability. They can move money from one to another or buy from merchants that have a commercial relationship with others.”

He adds that the introduction of faster payments will also help in the move to a cashless society. “We announced two months ago the signing of a contract to start building the national faster payments platform.

“We are basically doing the same thing as the UK. We believe that introducing a faster payments platform, which will go live next year, will help push the move towards cashless by taking away the need to withdraw cash for micro payments.”

Yousef says the coordinated approach of the payments industry in the country, as well as tech-savvy consumers, has also contributed to the fast adoption of new payment methods.

“From an industry perspective, when you roll out a technology that all the banks are doing at the same time, all the merchants will adopt at the same time, all the cardholders know about at the same time, then adoption will happen. Both the supply and the demand side is unique in Saudi Arabia.”