Electronic Commerce

The Saudi business community is becoming increasingly aware of the value of electronic commerce. There are more than 90 companies that have implemented electronic commerce technology in Saudi Arabia. The list is expected to grow to about 150 companies by the end of 1998 or early 1999. Most of these companies are commercial enterprises. Saudi Arabian Monetary Agency (SAMA) is the only government agency that has implemented electronic commerce. Other government agencies are in early planning stages.

SAMA has successfully carried out two financial projects relating to electronic commerce:

• The Saudi Payment Network (SPAN), created in April 1993, allows different banks to use online electronic funds transfer (EFT) capabilities for their automatic teller machines (ATMs) and POS terminals.

• Inter-bank settlements are done through an EFT switching system known as Saudi Arabia Riyal Inter-bank express (SARIE). This was launched in August 1997 with the help of Logic, a UK-BASED company. Previously, all inter-bank transactions were settled by paper.

The electronic commerce market in the Kingdom can be divided into two categories:

1. Saudi trading partners (distributors and agents) of major international suppliers, and transportation companies.

2. Major national companies that procure from a large number of local and international suppliers.

Among the commercial sector:

• Saudi-Aramco is the most advanced in their electronic commerce program. The program in its fourth year of implementation connected a large number of their local suppliers with Aramco computers for electronic exchange of purchase orders and acknowledgment

• Saudi Arabian Basic Industries (SABIC), one of the world's largest petrochemical companies

• Saudi Consolidated Electricity Company (SCECO)

• International Airports Project Administration (IAP)

• Saudi Arabian Airlines

The presence of electronic commerce vendors is helping the companies to accelerate their efforts in adopting this crucial technology and redesigning operational procedures to maximize productivity. Saudi Arabia is a major market in the region and has a well-advanced commercial sector. Given that the Saudi commercial community is already implementing electronic commerce in their commercial environmental, soon they will look to government institutions that participate in trade facilitation to have a supporting electronic commerce infrastructure to be able to process trade transactions electronically.

A study which was conducted in the Eastern Province of Saudi Arabia on Electronic Funds Transfer at Point of Sale (EFT/POS) in Saudi Arabia. The study reported advantages for Saudi retailers including reduction of paper work, reduction in exposure to losses arising form bounced checks, guaranteed payment, carrying less cash, control over counter clerks, and most importantly, improved services to customers. Saudi consumers were said to benefit from having a convenient way to make payments for purchases without having to carry large sums of money or carrying checkbooks. Saudi banks benefit by increasing the loyalty of retailers, for whom they have installed the Point Of Sale (POS) terminals, and from the fees paid by retailers for the service. In addition, by providing their customers with accessibility to funds at the point of purchase, the need for customers to visit banks or Automatic Teller Machines (ATM) for cash withdrawals is eliminated, thereby reducing the rush at banks and the likelihood of standing in long lines.

In Saudi Arabia, the EFT/POS network is operated by the Saudi Payments Network (SPAN), which was established by the Saudi Arabian Monetary Agency (SAMA), to facilitate inter-bank money transfers and easy access by bank customers to their funds through ATMs. The SPAN system was first used to service an EFT/POS network in 1992. Since then the system has witnessed a tremendous expansion in the Saudi commercial environment.

The latest figures from SAMA indicate that as of June 1997, there were 16,112 POS terminals in Saudi Arabia, representing a 55% increase over the 10,400 terminals at the beginning of 1995. In 1996, over $ 853 million worth of purchases were paid through the system, representing an increase of more than 60% over the 1995 figure of $533 million. It is expected that the electronic commerce will be even more widely used in the country after the year 2000. This increase will be mainly attributed to the new telecommunication network being installed and the introduction of the internet. If such growth should continue and it’s expected to, the Saudi market is expected one of the largest in the region.