CEO Series: Abdelmalik Al Sheikh, CEO of SADAD Payment System
In 2004, SADAD Payment System was launched as the first electronic bill presentment and payment (EBPP) service provider for the Kingdom of Saudi Arabia. Today, SADAD is an essential element of e-commerce and e-payments infrastructure in KSA. It aims at providing one solution for all payments, facilitating and streamlining a wide range of payment transactions for individuals, banks, businesses, and the government sector, while continuing to develop new payment products and services.
Arabnet’s CEO, Omar Christidis, sat down with Abdelmalik Al Sheikh, SADAD’S CEO to discuss the growing scope of SADAD and his future vision.
May you provide us with your view of the progress that has taken place the past 10 years in the fields of digital banking, e-payments, and e-transactions? So many changes have occured these past few years that we couldn’t visualize back then the new ecosystem that we have now. A lot can be attributed to the high levels of connection that individuals and organizations have enjoyed. Another example is the ‘prosumer’ concept (consumer and producer) as a lot more people started designing, producing, and selling from their homes. We are also witnessing a move around the world from ownership to access – people don’t have to own a car because they have access to ride-sharing – in the form of the Uber disruption.
At SADAD, we are building an infrastructure and an ecosystem capable of handling the developments witnessed in the market. When we started in 2004 and launched officially in 2007, we based our brand identity on ease, comfort, and rendering consumers’ lives easier with regards to bill payments. Currently, now we are supporting e-commerce through digital accounts of the SADAD payment services at the banks allowing users to pay directly online with only a username and password.
This is just the beginning, there is a big wave of change that is influencing the banking world, and the fintech phenomenon is a prime example. Everywhere in the world fintech is becoming the talk of the banking sector and some executives consider it a threat to the banking world because it provides ease, flexibility, cheaper services, and engagement. Fintech models are more engaging in their response to client needs and banks are starting to view them as opportunities for change.
Speaking of banks, should they be worried about disruption from fintech? How must they respond and collaborate? Fintech started as a small concept and has become a phenomenon in the past year that is gaining momentum in affecting the banking sector. It is clearly a threat to the banking world, and banks have a big role to play. This is overdue. For a long time people have been wondering when will disruption influence the banking industry? Until now, banks still have full control over the fintech and banking services. More recently, the ‘prosumer’ concept became attractive. Crowd funding, for example, allowed people to borrow from other people instead of getting a loan from a bank.
Banks have adopted different models in dealing with the fintech world. Some bought fintech companies, others started collaborating with them. Such engagements are allowing fintech players to present new ideas that help banks transition into the digital age. How has SADAD’S journey been thus far and what kind of active role will it play in fintech? I can proudly say that SADAD is the most advanced electronic bill payments system in the world. We have a central system (with a head-turning, complicated infrastructure) for the full electronic payment of all services from electricity to water, telecom, municipality charges, etc. this led to a high volume of usage indicating that SADAD has become part of people’s lives. Last year, over 170 million transactions were made, while this year we surpassed 180 million at a value of more than 200 billion SAR a year.
Since we launched, there has been over one billion operations, with a total value exceeding 1 trillion SAR. In addition to these traditional payments, the government joined enthusiastically due to the completed infrastructure of our offering – citizens can pay any financial dues, wherever they are through their bank accounts. This gave us the chance to reach new levels.
Part of our strategy is allowing users to have a SADAD digital account with all the banks. This will be their gateway to all future digital transformation – for it can include person to person mobile and other online payments in addition to supporting international service providers such as Visa, Mastercard, and Paypal. There has already been talks of collaborations which can easily become a reality given our advanced, facilitating infrastructure. It is worth noting that this change won’t happen overnight, it requires time, awareness, and education for market players to benefit from the existing infrastructure.
Has your e-wallet been launched as a service from within the infrastructure? It is officially available now and there are over 100 traders and major companies using it including Saudi Airlines and Jarir Bookstores among others. It is still a work in progress that has not, until now, achieved a high user rate because people still need to open an account to get used to the way it works. We are hoping for fast and constant growth with the introduction of other products.
“Fintech models are more engaging in their response to client needs and banks are starting to view them as opportunities for change.”
When will we see a service that allows payments among individuals – friends splitting a lunch tab, for instance? Person to person mobile payments might lead to fast progress that would serve the commercial sector as a whole, not just individuals paying one another. Currently we have a pilot program and some early stage experiments on involving the mobile number registered on the digital account of SADAD. We have conducted experiments with 8 banks, all of which resulted in a success, and we’re currently building the ecosystem to support it, and that includes call centers, fraud detection and security programs, en route to officially launching the service in the first half of 2017.
What is SADAD’S interest and role in stimulating fintech growth given the popular demand for such digital services? SADAD Payment System is part of the Saudi Arabian Monetary Authority (SAMA) and we have a group of services that include SADAD, Mada, and Sarie (fast). They are all part of the Integrated Payment System Strategy (IPSS) 2020 currently underway. There is an inclination within SAMA to support fintech which has become an international phenomenon where hubs, cities and governments compete in their support of fintech and this is happening in Hong Kong, Singapore, Berlin, and San Francisco.
We want to create a stimulating fintech environment for developing new services. There are preliminary talks with banks and scheduled workshops for devising an operational formula for the knowhow of creating fintech platforms that would provide fintech players with ideas.
I believe we have the talented youth to innovate and develop services for the benefit of both the banking sector and the consumers. Fintech development in the Kingdom is a very promising field, and we’re hopeful that by next year’s Arabnet Riyadh to share with you our results and progress. What is required from organizations in the next 3-5 years to adapt with the fintech movement? Fintech will surely cause change. Banks, in return, will play a major role in this new world. All the local Saudi banks are now investing heavily in digital banking. Because we cannot know what will happen in 3 years in this changing world, then the service players have to be flexible and quickly adapt to changes in the market.
We have seen plenty of examples when organizations are slow in adapting and this might threaten their existence, such as what happened to Nokia and others. More importantly, you have to be more agile and able to transform internally and develop your products quickly to continue competing. When will SADAD be used as payment gateway for the e-commerce websites of KSA – not just for big companies but also startups? The service is available now and is provided by banks and service providers. We have a qualified group of service providers capable of working with startups and small companies. In return, these established companies and startups must provide a commercial register and a bank account and they’d qualify for a SADAD account as a payment service via website or mobile.
Will you require fintech startups to obtain a banking license for using your services? If they are providing banking services, then a license is certainly required. However, if fintech startups are
“Person to person mobile payments might lead to fast progress that would serve the commercial sector as a whole, not just individuals paying one another.”
providing services and new ideas within a bank’s ‘umbrella of services’ then it doesn’t need licensing because banks already deal with various service providers in this regards. The new types of services would just need quality checks, audits, and reviews. I expect fintech startups to go through stages, first with the basic services that attract banks and won’t require a banking license and then moving on to plenty of new opportunities in the field.
Will we see an expansion of SADAD Payment System to the GCC? We currently work with service providers from the GCC who have clients in the kingdom. There is an inclination by SAMA to render the SADAD and Mada services as independent entities within the commerce sector. This is a journey which SAMA has already started, so we might actually see these services expanding into the GCC and other areas in the near future.
We are hearing a lot about new technologies such as Big Data, virtual reality and others; which do you think are the right ones to focus on and invest in? Developing tech systems used to take time in the past, whereas now the institutes that want to stay and compete must change their tech development model. Agility and flexibility are of key importance. Around the world markets are open to fintech development on all levels. In addition, mobile apps have made a revolution in providing services and products. Now you can create what’s beneficial to people without the need for huge investment in infrastructure. Furthermore, Big Data will be the engine of the world, and the information is there but we make very limited use of it today. With time, more tools will be developed for better analysis and making the right decisions.
Furthermore, the existence of APIS is very important for companies to interact with what’s happening abroad and to have access. Google Maps is the best example of an open API. So organizations have to be open – and many of the international players like Visa and Mastercard expanded their systems last year to include an open API. Currently at SADAD we are on the right path to release the SADAD Open API which will allow fintech startups to have access and develop products related to our existing infrastructure.