Saudi Central Bank reports surge in credit card loans

Saudi Arabia has witnessed a remarkable increase in credit card loans, with a 16 percent rise in the first quarter of 2024, reaching SR27.25 billion ($7.3 billion) according to the latest data from the Saudi Central Bank (SAMA). This surge highlights a shift towards cashless payment options, showcasing the country's advancement towards a cashless society.

The move from cash to electronic payments is becoming more apparent in Saudi Arabia as consumer preferences evolve. While cash usage has traditionally been prevalent, there is a noticeable decline as electronic payments gain traction. GlobalData's analysis reveals a 17.8 percent growth in card payments value in 2022, followed by 9.7 percent in 2023, reaching SR511.5 billion.

Saudi Arabia boasts a robust digital payment infrastructure, bolstered by a growing card market and well-established card acceptance systems. The government is actively promoting electronic payments by encouraging merchants to integrate electronic payment options alongside cash transactions.

The rise in credit card loans can be attributed to collaborations introducing new credit card offerings and payment solutions across the Kingdom. For example, Mastercard's partnership with digital payments technology company Loop to issue Bank Identification Numbers for credit cards aims to enhance transaction speed, security, and protection against fraud.

These innovative payment solutions are expected to simplify digital payments for consumers, merchants, and fintech companies, fostering digitization in daily transactions. This progress aligns with the flourishing small and medium enterprises and fintech sector in Saudi Arabia, creating a favorable environment for digital payment solutions.

On the other hand, consumer loans experienced a modest 1 percent increase, totaling around SR451 billion in the first quarter of 2024. Education loans surged by 24 percent to SR8 billion, while travel and tourism loans increased by 19 percent to SR990 million.

Consumer loans offer structured repayment plans with lower interest rates compared to credit card loans, making them a cost-effective option for significant purchases or long-term financing needs. They enable borrowers to manage debt effectively through budgeting and structured repayments.

In contrast, credit card loans provide flexibility with no fixed repayment period, allowing borrowers to repay over time with minimum monthly payments. They offer convenience, flexibility, rewards programs, and cashback incentives, making them a popular choice for managing expenses without the need for cash.

The surge in credit card loans in Saudi Arabia reflects a growing trend towards cashless payments, driven by innovative payment solutions and a supportive digital infrastructure. As the country embraces electronic transactions, consumers and businesses are benefiting from increased convenience and efficiency in financial transactions. With a focus on promoting digital payments, Saudi Arabia is paving the way for a more streamlined and secure financial ecosystem.