Saudi Arabia’s Payments Revenue Pool Projected to hit $21.7 Billion by 2027, Despite Global Growth Rates Slowing Compared to Previous Years

• Global payment revenues are anticipated to grow by $2.2 Trillion by 2027 at a CAGR of 6.2%.
• The total payments revenue for the KSA payments industry increased at an annual rate of 7.7%, reaching $12.8 Billion by the end of 2022 compared to 2017.

Riyadh, November 13, 2023— The Kingdom of Saudi Arabia’s (KSA) payments industry has demonstrated resilience amid global challenges such as the pandemic and economic fluctuations. Between 2018 and 2022, the total revenue for the payments industry grew at a Compound Annual Growth Rate (CAGR) of 7.7%, reaching a revenue pool of $12.8 Billion by the end of 2022. In contrast, the global payments industry registered an annual growth rate of 8.3% to reach $1.6 Trillion by the end of 2022. According to the latest Boston Consulting Group (BCG) report, titled ‘Global Payments Report 2023’, slower growth is on the horizon globally.

BCG’s comprehensive study on the KSA payments market forecasts revenue growth at a CAGR of 3% over the next five years (2023-2027), projecting the revenue pool to reach $21.7 Billion. Global payment revenues, in comparison, are expected to rise by $2.2 Trillion by 2027 at a CAGR of 6.2%. The report provides an in-depth market analysis, exploring challenges and opportunities for acquirers, issuers, and other key players in the KSA payments ecosystem.

Mohammad Khan, Managing Director & Partner, BCG, commented, “KSA occupies a significant position in the landscape of merchant services, transaction banks, issuers, and payment infrastructure stakeholders. While the industry achieved a CAGR of 7.7% from 2018 to 2022, the focus is shifting towards sustainable growth. Projections for 2027 indicate a more moderate but stable CAGR of 3.0%, accompanied by a payment revenue growth of 16%. This forward-looking perspective is significantly bolstered by KSA’s strategic adoption of innovative technologies led by GenAI. These technologies are seamlessly integrated into organizational procedures, creating enhanced customer experiences, tailored solutions, and ultimately, revenue growth.”

The Evolution of the KSA Payments Landscape
The KSA payments sector has witnessed considerable progress due to a blend of elements like the gradual shift from cash to electronic transactions.
Predictions for 2023 to 2027 indicate a CAGR of 13.1% for transactions in the KSA. This anticipated upsurge is influenced by the nation’s steady transition from cash to digital commerce, catalyzed by technological innovations in payment systems and bolstered by government policies. Economic growth and a shift towards digital payments among consumers are expected to fuel this growth trajectory further.

Multiple disruptions characterized by technological innovations and the entry of new market players are transforming the KSA payments industry. Over 5,000 fintechs globally are imprinting their significance in the payments domain, contributing to a substantial fraction of the industry’s revenue. KSA-based enterprises are strategizing to retain their competitive advantage.
Digital Currency Advancements
As KSA positions itself at the forefront of the global payment transformation, notable strides are being made in exploring digital currencies. The Kingdom’s local regulator continues its in-depth analysis and development in digital currency, homing in on domestic wholesale applications. This ongoing initiative is facilitated in partnership with local banking and fintech sectors, reflecting a broader international trend of central banks delving into digital currency domains.

Charting the KSA Payments’ Future Trajectory
BCG’s report underscores four key domains influencing the strategic orientation of KSA’s payments industry:

• Operational Resilience: Prioritizing steadfast operational efficacy is paramount. While international trends yield diversified outcomes, KSA’s organizations should accentuate operational resilience and cost efficiency. This strategic alignment is expected to optimize operational results and synchronize business and financial strategies to amplify shareholder returns.
• Generative AI: The emergence of GenAI is unlocking transformative opportunities for the payments sector. Early KSA adopters are already reaping their dividends. Harnessing high-impact GenAI applications promises significant productivity enhancements. A long-range perspective should zero in on embedding GenAI throughout organizational workflows, spotlighting pivotal customer interactions.
• Risk Management and Compliance: An evolving regulatory framework in KSA calls for comprehensive risk and compliance evaluations, with a proactive approach to bridging identified lacunae. Crafting a targeted operating blueprint will fortify long-term resilience and uplift risk management protocols.
• Mergers and Acquisitions: The investment dynamics within KSA’s fintech landscape mirror international patterns. A perceptible shift from voluminous transactions to skill-centric acquisitions necessitates a reassessment of partnership blueprints. This recalibration will facilitate the pinpointing and exploitation of prevailing M&A prospects, underpinning sustained growth and prosperity.

Khan added: “When dissecting the KSA payments sector, operational resilience and cost optimization imperatives emerge prominently. GenAI’s role is amplifying, underscored by its comprehensive integration into foundational organizational processes. The evolving regulatory landscape requires robust risk and compliance frameworks, with the M&A trend emphasizing the significance of acquisitions centered on specific skills and expertise. In this context, organizational agility emerges as a crucial prerequisite for success. “