GOING cashless

Saudi Payments is a merger of SADAD and the Saudi Arabian Monetary Agency’s (SAMA) General Department of Payment Systems. Could you tell us more about the organization’s inception?

Saudi Payments might be a new organization in its name and branding, but its legacy goes back to 1985, when SAMA was founded with the establishment of the banking technology department. This department focused on developing a shared payments infrastructure. SAMA’s forward-looking vision for the need of a shared infrastructure was the impetus behind the center. The journey started in 1990 with the introduction of the national payment system, mada, formerly known as SPAN. In 1997, Saudi Arabia became one of the first countries to introduce electronic real-time gross settlement system (RTGS). In 2003, we introduced our electronic payment platform, SADAD, in addition to other smaller-sized projects in between. In 2018, Saudi Payments was established with the mandate to continue that legacy by developing a national payment infrastructure, serving banks and fintechs equally, and creating a level playing field. In short, we work on standardization, interoperability, and security, linking everyone and providing infrastructure. Other countries have similar setups, and global institutions such as the World Bank, the IMF, and the G20 Committee have recognized that interoperability and shared infrastructure are the key enablers of fintech. Without these, the barriers for entry are simply too high; it would potentially lead to mega players coming in and eating up the entire market. Our main KPI is not revenue-based; rather it is based on increasing the number of cashless payments.

What strategies do you have in place to achieve the vision of having a 70% cashless society by 2030?

To grow from 20% to 70% in one decade is an ambitious objective. From our global benchmarking, even the UK is only about 50%, and it is fairly advanced in digital payments. The most advanced societies are Sweden and Norway. That said, with the financial infrastructure in place, together with high rates of technology adoption, paints a promising picture. The pick-up of near-field communication (NFC) payments in 2018 was phenomenal, reaching 40% of all contactless transactions. Within one year, we are close to reaching western European levels. In addition, mobile payment adoption is high compared to other countries, and it was only introduced in late 2018. There are still some missing pieces, like a faster payments platform. A faster payments platform is our next megaproject and should be up and running by 2020. The nature of this program will require large changes to banking systems; we will adopt ISO20022. People are moving away from the old SWIFT messaging standard to that new ISO standard. The new systems have proven to reduce cash transfers and unleash a wave of innovation for fintechs in the UK, Singapore, and US.

How do you consider your role working with both banks and fintechs?

This is challenging because banks have long regarded us as their main deliverer, which we still are. From a regulatory perspective, our objective is to serve everyone. Banks realize that the ecosystem is changing, and they are taking different approaches. Some have already established technology departments to find suitable fintech partners, either directly through capital investment or through partnership or extending bank services to those fintechs. Luckily, the pie is large, and there is room for all banks and fintechs with a customer-centered approach.

We are focusing on achieving the Financial Sector Development Program targets set by SAMA and the Ministry of Finance. Aside from financial inclusion—which currently stands at 74% according to the World Bank—and the cashless transactions objectives, we are also working on an e-invoicing platform. Operationally, we aim to finalize the internal carve out from SAMA and be an independent organization. ✖

Can you elaborate on SIJIL’s main activities and the rationale behind its inception?

The primary role of SIJIL with the support of SAMA and ecosystem stakeholders is to address most of the challenges in the financial leasing market by enhancing enforceability and ensuring transparency. The current mandate focuses on serving the financial leasing contracts across its lifecycle, from digitizing the contract registration to contract closure or enforcement in the event of default. The company will maintain records of the contract progress and reflect all amendments, enabling it to eventually provide a wide set on inquiry and analytical services to financial institutions. SIJIL was incepted to solve the issues and limitations in the financial leasing ecosystem such as the misuse of ownership rights, the lack of repossession policies and procedures, unclear enforcement mechanisms, and a lack of data and transparency.

What companies and organizations do you tailor your financial lease registration services to, and what types of leased assets are the most common?

SIJIL designed its services for all banks and fi¬nancing companies that provide financial leasing products. The most common products are vehi¬cles, representing more than 80% of existing con-tracts. We also focus on real estate as well as ma¬chinery, heavy equipment, medical equipment, and other assets.

What are the main trends in the leasing market, and how does the Saudi market compare regionally?

The Saudi leasing market is underpenetrated in comparison to its regional counterparts and mature markets. Forecasted growth for the coming five years is 5%. In 2019 alone, the annual growth in residential loans exceeded 110%, where Ijarah real estate financing represented around 30% of total loans, which provided a conformation of the market's potential to promptly recover and grow.

Where does SIJIL fit into the plans to increase home ownership and make home financing more accessible?

SIJIL is an enabler of the Housing Vision Realization Program. The services we provide con¬tribute to developing innovative housing finance products, giving lessors access to verifiable data to facilitate decision making in product develop¬ments. Furthermore, increasing the level of secu¬rity and assurance for the financial transactions will attract further investment. We will soon offer opportunities for securitization and transfer of rights in the local and international debt markets subject to regulatory approvals, which will help new market players like the Saudi Real Estate Re-finance Company (SRC) and other investors to expand their coverage.

What are your strategic priorities and ambitions for the coming year?

SIJIL aims to become a pioneer within the financial industry in the use of innovation and technology. SIJIL’s strategy is in line with Vision 2030, National Trans¬formation Program (NTP), Financial Sector Development Program (FSDP), ISKAN program, and the challenges faced by the financial lease ecosystem. Our goal is to provide automated registry services that reduce human errors and the unwanted consequences. Also, SIJIL’s services will help limit the flow of lawsuits to courts and allow asset repossession through a non-judicial approach, further reducing the burden on courts. All these will help debt collector companies, lessors, and refinancing companies save substantial amounts per asset repossession cycle. Moving forward, SIJIL will offer a set of unprecedented value-added services which will boost the financial leasing market and provide access to data and analytics about the market. We look forward to working closely with SAMA, the Ministry of Justice, financial institutions, and the wider ecosystem to realize this vision. In the end, we seek to become the source of information for general inquiries, reports, and financial analysis for the financial leasing market. ✖