RIYADH: Credit card loans by Saudi banks hit a record high of SR30.27 billion ($8.07 billion) in the third quarter of 2024, according to recent data.

Figures by the Saudi Central Bank, also known as SAMA, showed that this marked a 14.24 percent rise compared to the same period last year.

Consumer loans, excluding real estate financing, finance leasing, and margin lending, reached SR462.29 billion, reflecting a 4.01 percent increase. 

Among these, education lending experienced the highest growth, rising by 16 percent to SR8.24 billion.

Loans for vehicles and private transportation constituted the largest share within the sectors identified by SAMA, accounting for 3 percent of the total at SR11.93 billion.

Notably, the majority – 91 percent – of consumer loans were categorized as “Others.”

Consumer loans, which encompass a wide range of borrowing options, are typically characterized by fixed repayment schedules and lower interest rates.

These loans are often used for significant expenditures, including purchasing vehicles, or funding education, and they tend to represent a substantial portion of an individual’s overall debt.

In contrast, credit card loans are revolving facilities that allow users to borrow up to a predetermined limit, repayable at varying interest rates based on usage.

While this form of lending is currently significantly lower than consumer loans, their rapid growth can be attributed to several key factors.

Firstly, the increasing digitization of banking services has made them more accessible, especially to younger consumers who prefer online transactions and instant credit options.

This demographic shift is driving demand for flexible payment solutions. 

Secondly, the rise in consumer spending, fueled by government initiatives aimed at boosting the economy and diversifying financial offerings, has encouraged consumers to rely more on credit cards for everyday purchases.

Additionally, attractive promotions, such as cashback rewards and loyalty points, have made credit cards an appealing choice for many, incentivizing usage and increasing borrowing.

Moreover, the growth of e-commerce has further propelled credit card adoption, as consumers seek convenient payment methods for online transactions.

While these loans may currently represent a smaller portion of overall consumer debt, their rapid growth reflects changing consumer preferences and economic trends in Saudi Arabia, highlighting the importance of adapting financial products to meet evolving needs in a dynamic marketplace.

This trend aligns with the Kingdom’s Vision 2030 initiative, which aims to foster a cashless economy and enhance the financial landscape through digital transformation.

Data from SAMA indicated that by the end of September, the number of ATMs in Saudi Arabia decreased by 604 year-over-year, totaling 15,448. In contrast, the number of issued cards rose by 3.6 million, reaching 49.95 million.

This shift illustrates how the payment dynamics in the Kingdom are evolving, as the decline in ATMs reflects a diminishing reliance on physical cash, while the surge in card issuance highlights an increasing demand for contactless payment options.

Saudi Arabia has reached 98 percent adoption rate for contactless payments in in-person transactions, a significant rise from just 4 percent in 2017, according to Andrew Torre, Visa’s regional president.

Speaking to Arab News on the sidelines of a forum ahead of the Future Investment Initiative event in Riyadh, Torre attributed this transformation to government support, increasing consumer demand, and Visa’s technological initiatives, aligning with the goals of Saudi Arabia’s Vision 2030 to enhance digital commerce.

Torre noted that the transition to contactless payments, including mobile taps, has occurred rapidly and is among the fastest globally.

Saudi Arabia’s fintech-friendly regulatory environment, spearheaded by the Saudi Central Bank, has been crucial in facilitating digital evolution.

SAMA’s early adoption of a fintech sandbox has allowed for innovation in financial services. Additionally, e-commerce in the region has surged, growing at an annual rate of 30 percent, partly due to the pandemic’s push towards online shopping.

As digital payment adoption grows, it empowers small businesses with secure transaction options.

According to a study by GlobalData, the annual value of card transactions in Saudi Arabia’s cards and payments market is projected to reach $146.8 billion in 2024. The market is expected to grow at a compound annual growth rate of over 6 percent from 2024 to 2028.