Role of digital payments in accelerating the growth of Saudi Arabia’s retail and tourism industries

The MENA region is undergoing a remarkable digital transformation with countries like Saudi Arabia and UAE accelerating digitization efforts as part of their economic development agendas. High smartphone penetration rates and technologically savvy millennials seeking hyper-personalized shopping experiences and seamless payments are driving demand for a better alternative to cash such as contactless payments. It is critical, therefore, for retailers to enhance their digital payment proposition if they want to grow their business.

The Retail Leaders Circle MENA Summit held recently in Riyadh, where Visa was the exclusive payments partner and a headline sponsor, brought together industry experts to share insights about the exciting growth opportunities in the region’s retail sector and the necessary steps required for advancing digital commerce.

Madhur Mehra, Visa’s Head of Merchant Sales and Acquiring – MENA shares his insights

1.​What trends have you observed among GCC, specifically Saudi, travelers?

Some of the key trends that are common among GCC travelers include:

Duration of trips: Globally trips may be getting shorter but GCC travelers still favor longer trips. For instance, the global average is now eight nights (down from 9.5 nights on average in 2015). However, the average trip length for KSA travelers is 14 nights.

To spenders: The top five spenders are travelers from KSA (intend to spend a median of US$4,800 on next trip), China (US$4,034), Australia (US$3,529), the United States (US$3,500) and Kuwait (US$3,474). Travelers from the UAE (US$3,430) also plan to spend more than the global median amount of (US$2.443).

In the GCC, the majority of spending during the planning and booking phase of a trip is done via card payments; 84 percent in UAE, 55 percent in KSA and 60 percent in Kuwait. KSA travelers say that the main reason for this trend is that their agent/booking website prefers card payments.

2.​What role does technology play in the travel/tourism industry?

According to findings from Visa’s Global Travel Intentions (GTI) study conducted in 2018, 93% of Saudi travelers like the rest of GCC countries rely heavily on online sources at every stage of travel. Technology is indeed helping some travelers navigate their destinations better. More and more GCC travelers use a mobile device to access the internet during their trip.

Technology is integral at every stage of the modern GCC travelers’ journey, from planning through to the destination and returning home. And hence it is vital for the travel industry to understand how travelers gather information and make decisions. The increasing use of online tools means we should be using these platforms to connect with our consumers at every step of their journey.

And within this context, digital payments are relevant because travelers want a reliable, secure and convenient experience, without the worry of carrying cash. Visa’s cashless solutions offer travelers the freedom of acceptance at more than 53 million merchant locations worldwide, the peace of mind of being protected by Visa’s global, secure network – backed by multiple layers of security, and the added benefit of a competitive exchange rate when they pay in local currency. As more people travel internationally in 2020, Visa looks forward to helping travelers make the most of their trips.

3.​What is the region’s tourism spending like?

In the MENA region, inbound (tourism) spending growth kept pace with domestic spend, with tourists shelling out increasing amounts on Food retail.

In 2019, 9% of Saudi Arabia’s retail volumes came from inbound spending. Saudi Arabia expects tourist numbers to rise from 40 million to 100 million and tourism-related jobs are set to rise from 3% to 10% of GDP by the year 2030. And this is an achievable target considering the kingdom’s mega projects worth hundreds of billions of dollars. This includes NEOM, a US$500 billion (RM2.1 trillion) futuristic megacity on the northern Red Sea coast, conversion of 50 islands and other pristine sites on the Red Sea into luxury resorts, and the upcoming Qiddiya “entertainment city” which would include high-end theme parks, motorsport facilities and a safari area.

4.​Please provide an outlook on Saudi’s ecommerce sector and the role of digital payments?

According to recent reports, Saudi Arabia’s retail spend will continue to be strong, with private spending on retail expected to grow at 4.5% CAGR to reach $170 billion in 2025. Food and beverages will be the largest vertical reaching $94 billion in 2025, followed by personal care and accessories at around $20 billion.

Within this context, it is critical for Saudi eCommerce players to simplify payment methods as well as offer a variety of payment options if they want to enhance the user experience, improve loyalty and increase their customer base. Besides, offering a diverse range of payment options would limit the chances of a customer abandoning a transaction midway and making an eCommerce business vulnerable to loss of sale. Findings from Visa’s Stay Secure campaign showed that among Saudi online shoppers and eCommerce users, card payments remained the predominant mode of payments (66%) driven by factors such as security (82%), budget management (66%), and availability (60%).

Visa works closely with merchants, financial institution partners and the government, enabling them to leverage Visa’s APIs (Application Program Interface), brand, and world’s largest payment processing and acceptance network, to unlock new commerce opportunities and develop seamless consumer solutions.