Saudi Arabia’s new e-commerce law introduced in October last year will unlock the country’s significant potential as a regional e-commerce hub, led by an affluent and tech-savvy population seeking the convenience and security of digital experiences.
The Kingdom enjoys one the highest internet penetration and mobile usage numbers in the region. According to recent data, 74.81 percent of the Saudi population were internet users in 2018 and this, a figure estimated to grow to 96.44 percent in 2023 while smartphone users in the Kingdom are expected to grow from 19.4 million to 21.3 million.
It is not surprising that the Kingdom is considered one among the world’s 10 fastest growing states in e-commerce, with a growth rate exceeding 32 percent annually.
The new law applies to e-commerce platforms registered in the Kingdom as well as to businesses or individuals not registered in Saudi but engaged in offering products and services to Saudi consumers. It is a significant step to enhance consumer confidence – offering consumers protection against fraudulent operators, data breach and other common malpractices in an electronic retail environment.
The Saudi government is continuing to take several measures including improving digital payments, streamlining licensing, and activating affordable e-commerce enablers such as lower set-up costs and providing e-commerce software for trials.
The law provides a comprehensive regime for Saudi’s e-commerce market and will not only put the retail sector on a growth trajectory but enable it to become a significant contributor, around 80 percent, to the Kingdom’s economic growth and diversification as part of the Vision 2030 plan.
The role of digital payments in Saudi’s e-commerce growth
Much like e-commerce, digital payments are a major component of the Vision 2030 reform plan, with the Kingdom expecting to achieve an e-payment target of 70 percent by 2030. Saudi Payments is collaborating with global tech players and local banks as part of its mission to develop a secure, interoperable national payment infrastructure, and expand digital payment acceptance across the Kingdom.
Contactless payments and mobile wallets – such as Apple Pay and mada Pay – are gaining traction in the Kingdom. Increased accessibility to these forms of payments, electronic commerce and mobile commerce are certain to experience unpreceded growth in Saudi.
With consumers increasingly shopping online or in-store using their mobile phones, the need for a frictionless and secure digital payment experience becomes crucial. Tokenization technology can play a role in solving this challenge.
A key enabler for mobile wallets and online transactions, tokenization replaces sensitive account information, such as the 16-digit account number, with a unique digital identifier called a token. The token allows payments to be processed without exposing actual account details that could potentially be compromised. Tokenization also provides online retailers with an innovative and secure way of handling payments – such as tokenizing cards saved on file – leading to higher authorization approval rates and a seamless payment experience for online shoppers.
For merchants and issuers, 3-D Secure provides an added layer of security for e-commerce transactions prior to authorization. The new 2.0 version of the technology enables merchants and issuers to exchange greater contextual data to verify a cardholder identity, avoiding the need for every shopper to actively authenticate with a password.
In addition, the implementation of a new industry-wide payment initiative known as EMV Secure Remote Commerce will simplify card payments across web and mobile sites, mobile apps and connected devices. The new interoperable checkout solution, expected to be available globally later this year, will help merchants to reduce shopping cart abandonment rates and offer multiple card brands for digital checkout in one seamless integration. The vision for the future of digital commerce is that the new button will replace the current guest checkout process and this technology perfectly ties in with that goal.
E-commerce a bright spot in Saudi’s economic future
As digital consumer behavior and preferences evolve so should the technologies, services and regulations that support e-commerce.
Within this context, Saudi Arabia is making the right moves to achieve its e-commerce ambitions. Whether it is accelerating the adoption of digital payments, or regulating market activities and protecting consumer rights, the Kingdom has clearly envisioned its route towards a thriving e-commerce market.