Riyadh — Credit card loans by Saudi banks hit a record high of SR30.27 billion ($8.07 billion) in the third quarter of 2024, marking a significant 14.24 percent increase compared to the same period last year, according to data released by the Saudi Central Bank (SAMA).
The surge in credit card borrowing reflects evolving consumer preferences driven by increasing digitization, economic initiatives, and attractive credit offerings. In contrast, total consumer loans, excluding real estate financing, finance leasing, and margin lending, grew modestly by 4.01 percent year-on-year, reaching SR462.29 billion.
Sectoral Trends in Lending
Education lending recorded the highest growth among all categories, climbing 16 percent to SR8.24 billion. Loans for vehicles and private transportation represented the largest identified segment, constituting 3 percent of the total consumer loans at SR11.93 billion.
Interestingly, 91 percent of consumer loans fell into the “Others” category, reflecting a diverse range of borrowing needs. Consumer loans typically feature fixed repayment schedules and lower interest rates, catering to significant expenditures such as purchasing vehicles or funding education.
In contrast, credit card loans operate as revolving facilities with varying interest rates based on usage. Although these loans currently account for a smaller share of total consumer debt, their rapid growth highlights a shift in borrowing behavior.
Drivers of Credit Card Loan Growth
The sharp rise in credit card loans can be attributed to several factors:
- Increased Digitization: The widespread digitization of banking services has made credit cards more accessible, especially for younger consumers who prefer online transactions and instant credit options.
- Consumer Spending Trends: Government initiatives aimed at boosting economic activity and diversifying financial products have driven higher consumer spending, with credit cards becoming a preferred payment method for everyday purchases.
- Attractive Promotions: Cashback rewards, loyalty programs, and other promotions have incentivized credit card adoption.
- E-commerce Boom: The growing e-commerce sector, expanding at an annual rate of 30 percent, has further fueled the demand for credit cards, as consumers seek seamless payment solutions for online shopping.
These developments align with the Kingdom’s Vision 2030 initiative to transition to a cashless economy, supported by the rapid adoption of contactless payment technologies.
Shift Towards Digital Payments
SAMA data highlighted a significant shift in payment dynamics. By the end of September 2024, the number of ATMs in Saudi Arabia decreased by 604 year-over-year to 15,448, while the total number of issued cards rose by 3.6 million to 49.95 million.
Visa’s Regional President Andrew Torre noted that the adoption of contactless payments in Saudi Arabia has reached 98 percent for in-person transactions, a dramatic increase from just 4 percent in 2017. Speaking at a forum ahead of the Future Investment Initiative in Riyadh, Torre credited this transformation to government backing, consumer demand, and technological innovations, which align with Vision 2030’s goal of fostering digital commerce.
Saudi Arabia’s fintech-friendly regulatory environment, spearheaded by SAMA, has been instrumental in facilitating this digital shift. Initiatives such as the fintech sandbox have encouraged innovation in financial services, empowering small businesses with secure and efficient transaction options.
Future Outlook
The annual value of card transactions in Saudi Arabia’s payments market is projected to reach $146.8 billion in 2024, according to a study by GlobalData. This figure is expected to grow at a compound annual growth rate (CAGR) of over 6 percent from 2024 to 2028, underscoring the Kingdom’s continued transition towards a digitally-driven financial landscape.
As Saudi Arabia embraces digital transformation, the rapid growth of credit card loans and contactless payments exemplifies the evolving financial habits of consumers and businesses, paving the way for a cashless economy in line with the Vision 2030 framework.
Source: ARAB NEWS
