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Cash still king as Saudis shun credit cards | ASHARQ AL-AWSAT English Archive 2005 -2017
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MasterCard credit cards are displayed for a photographer. (AP Photo/Toby Talbot)

MasterCard credit cards are displayed for a photographer. (AP Photo/Toby Talbot)

MasterCard credit cards are displayed for a photographer. (AP Photo/Toby Talbot)

Riyadh, Asharq Al-Awsat—Credit card use in Saudi Arabia has been on the decline since 2008, according to recent data released by the country’s central bank, the Saudi Arabian Monetary Agency.

The figures show that credit card revenues in the Kingdom, which stood at 9.4 billion Saudi riyals (2.5 billion US dollars) in 2008, have fallen 22.3 percent between then and 2013.

Total revenues fell from 2008 to 2009 to reach 8.6 billion riyals (2.3 billion dollars), and then to 8.3 billion riyals (2.2 billion dollars) in 2010, and 7.7 billion riyals (2 billion dollars) in 2011, rising slightly in 2012 to 7.9 billion riyals (2.1 billion dollars), and then dropping again to the lowest level during the five-year period to 7.3 billion riyals (1.9 billion dollars) in 2013.

Despite having one of the largest economies in the Arab world and rising individual spending power, Saudi Arabia remains dominated by a preference for cash, with 98 percent of transactions in the country still being made using notes and coins, according to the McKinsey Global Payments Map.

But this is not unusual in the Arab world, where cash economies predominate. Even in other GCC high-flyers, such as Kuwait, the UAE and Qatar, around 92 percent of all transactions in each country are still being made in cash. In “electronifying” economies such as the US and the UK, 56 percent and 61 percent of all transactions remain cash-based respectively.

Commenting on the data, Mohamed Mahmoud Shams, head of the Gadwa Feasibility Studies Center in Riyadh, told Asharq Al-Awsat: “The figures from the last five years indicate that payments made outside the Saudi banking system have been increasing since 2008, a clear sign that cash is still preferable [among Saudi consumers] to credit, despite the latter’s being widespread and available across the world.”

He added that payments in Saudi Arabia made outside the banking system had risen 63 percent during the same period.

Shams said that both savings deposits and certificates of deposit had only grown by 7 percent, another sign that Saudis preferred “simpler financial products” and that the country’s economy remained reliant on “traditional policies.”

But a number of market observers see an inevitable future rise in consumer financial products in the Kingdom over the coming years, and particularly in credit card use. A recent Euromonitor International report sees changing consumer patterns in the Kingdom stemming from the growing number of expats, rising disposable incomes, the country’s young population and the increase in Sharia-compliant credit cards as signs that non-cash payment methods will become more popular in the coming years.

A joint report by the Royal Bank of Scotland and Capgemini also predicted a rise in credit card use in Saudi Arabia in the future as consumer awareness programs by domestic banks improve and payments systems innovations produce increasingly more specialized, Sharia-compliant non-cash payment methods catering specifically to the Saudi market.