Arab News, Tuesday, Aug 16, 2022 | Muharram 18, 1444
Saudi banks shut down 42 branches in 12 months, increase digital presence
Saudi Arabia: Saudi banks shut down
42 branches over the year ending in June, revealed the Saudi Central Bank, also
known as SAMA.
The number of bank branches in Saudi Arabia also
inched lower to 1,927 in the second quarter this year from 1,932 in the same
quarter last year.
So, what are the reasons behind this decreased
number of bank branches, and when did this trend begin?
The most common assumption would be the COVID-19
pandemic and its prolonged effect on the entire economy, including the financial
and banking sectors.
Between the fourth quarter of 2019 and the first
quarter of 2021, which includes the peak of the pandemic, 68 branches were
closed.
Also, bank branches continued to decrease
quarterly long after lifting COVID-19 restrictions, albeit there was no clear
trend.
Between May 2020 and June this year, 137 bank
branches in the Kingdom shut shop.
It is worth mentioning that branches that have
closed are not second-tier or underperforming banks but some of the largest and
well-performing ones. For instance, Al Rajhi Bank, which had 543 branches in the
fourth quarter of 2020, reduced it to 515 by June this year.
While COVID-19 sparked the digital revolution,
advanced and innovative technologies did the job.
The past three years of the pandemic slowly began
the transformation toward digital banking, which can be seen closely in the
Saudi banking sector.
More banks are switching to increased virtual
interactions and digitalization, and new banks are opening entirely on that
premise.
Last February, SAMA licensed and welcomed the
Kingdom’s third digital bank D360 Bank, following the launch of STC and Saudi
Digital Bank in June last year.
Similarly, according to SAMA, 19 Saudi fintech
companies have been authorized to provide payment services, consumer
microfinance and electronic insurance brokerage over the past few months.
So, what does the future of digital banking in the
Kingdom hold and will the population accept this digital revolution?
In a survey conducted by Ipsos in the Kingdom
in October 2021, the research major pointed out that 61 percent still trust
traditional banks, while 47 percent counted on mobile service providers and 40
percent depended on popular digital brands to carry out financial transactions.
The report added: “63 percent said that they will
be making all their financial transactions through digital banking in the
future, and 58 percent believe that people would no longer use cash as a payment method.”