eBanking in Saudi Arabia: Trends and Perspectives - Panel Contribution

Title in English: 
eBanking in Saudi Arabia: Trends and Perspectives - Panel Contribution
Abstract in English: 
Saudi banks created on-line, real-time, 24X27 systems in the 1980's. Saudi Banks are working together on shared e-system for B2B payments and authentication. Because they have already cooperated through SAMA (Saudi Arabian Monetary Agency) in developing shared payments systems (SARIE, ATM, POS) and have established processes for future cooperation. There are three ways in which e-Government; e-Commerce and e-Banking can benefit each other: 1. eGovernment and e-Banking: Banks as "payments facilitators", Banks as "trusted 3rd parties", Banks as "identity guarantors", Government as "funds conduit". 2. eGovernment and e-Commerce: Commerce as "traffic stimulator, Commerce as "process initiators, Government as" process completers", Government as "traffic stimulators" 3. eBanking and e-Commerce: Banks as "payments facilitators", Banks as "identity guarantors", Commerce as "funds conduit". The aim of the paper is to describe Saudi e-banking systems. The paper will address the following: the Saudi Arabian Monetary Agency role, Saudi Banks experience in e-banking and the role of the Saudi Government. It was concluded that business projects in Saudi Arabia are now moving into electronic banking, but the move is gradual. A lot of customers are still very control-oriented, because the people who authorize the transaction may have not necessarily made the transition [to e-commerce]. Introduction It is only about 10 years ago that the Saudi Arabian Monetary Agency (SAMA) took its first initiative to lay the foundation for a modern payment system. In 1986 it established an automated cheque clearing system that permitted efficient cheque clearing and interbank settlements. However, for many reasons cheques did not flourish as a payment medium and to fill the void, the banking industry moved rapidly towards plastic cards. Recognizing this trend, SAMA developed a national ATM transaction switch that linked all ATMs and permitted all customers to access their accounts with any bank in the Kingdom. This system, known as the Saudi Payments Network (SPAN), went live in 1990, and was enhanced to support point of sale transactions in 1993. The SPAN system has expanded rapidly, and by March 1998, it linked 1600 ATMs and 16000 Point of Sale terminals and provided round the clock access to their accounts for over 3 million cardholders anywhere in the Kingdom. Also, in the late 1980s, SAMA introduced two key initiatives, important for further rapid development of the payment systems in the Kingdom. First it required all Saudi banks to use the SWIFT network for international payments, and second in 1990 it launched the Electronic Securities Information System (ESIS). The latter is an electronic floorless share trading and settlement system that is operated and supervised by SAMA. This system, which has almost entirely dematerialized share trading, achieves T + 1 settlement as standard, and will soon be moving to delivery vs. payment (DVP). Despite these advances, Interbank settlements until early 1997, continued to be effected by cheque clearing or account transfer at SAMA's head office and branches. This suffered from all the inefficiencies and risks associated with a paper based system. Consequently there was a clear need for an Electronic Funds Transfer (EFT) system that would permit automated inter-bank payments and settlements and become the backbone of the Saudi payments system. SAMA recognized that such a system would need to combine the functionality of both a high value and a high volume payment system that would be the cornerstone for its future payment system strategy. This paper describes what is going in Saudi e-banking. The paper's outline is as follows. Section 1 describes the role of the Saudi Arabian Monetary Agency. Section 2 describes the Saudi Banks experience in e-banking. Section 3 describes the role of the Saudi Government.