1. Electronic Bill Payment Transformation in Saudi Arabia
Presentation to the ECB – MNB Conference
Budapest, November 2012

2. SADAD Payment System was incepted by SAMA to increase e-payment adoption in KSA
Executive Summary
SADAD Payment System is an initiative launched by the Saudi Arabian Monetary Agency (SAMA), with the mandate of developing e-Payment products & services for individuals, businesses and government. In 2007, SADAD EBPP was officially launched to consolidate and centralize bill payments in KSA
SADAD EBPP has generated several benefits for the Saudi macro-economy, including banks, billers, and consumers by increasing efficiency, reducing costs, and stimulating e-Payments adoption
SADAD has captured 90% market share processing more than 120m transactions with a value exceeding SAR100bn in 2011, thereby encouraging e-Payments adoption in KSA.
Going forward, SADAD is pursuing its ‘Next Horizon’ strategy, focusing on e-Commerce and SME e-Payment enablement through the launch of three new services: Online Payments e-Commerce (OLP), Biller Base Expansion (BBE), and e-Invoicing
SADAD Payment System

3. Today, Electronic Bill Payment Benefits All Stakeholders in Saudi Arabia
The Impact of SADAD
Consumers
Billers
Banks
Government
Macro-Economy
Stakeholders
One location for all payments
Increased convenience through ‘one-click’ payment
Freedom to pay through any bank via all bank channels
Reduced late fees and charges paid
Access to all customers through any bank
Rapid collection cycle (1 day settlement time)
Reduced cash management risk (fraud / errors)
Lower bill payment processing costs
Enhanced financial management
Significant reduction in cost of bill payment processing
No bill payment queues in branches
More equitable value proposition (previously no revenues for bill payments)
Maintain relationships with customers
90% of government bills collected electronically
Increased transparency of collection
Automated & centralized payment collection
Elimination of physical cash management
100% of utility bills collected through SADAD
Decreased dependency on cash in the economy
Increased capital efficiency for the national economy
Positive environmental impact due to reduced paper bill printing & delivery
Benefits
SADAD Payment System

4. SADAD Background SADAD EBPP SADAD Next Horizon Appendix
SADAD Background SADAD EBPP SADAD Next Horizon Appendix
SADAD Payment System

5. In the 1980s, SAMA mandated banks to facilitate consumer bill payments which lead to several challenges
Background
In the early 1980s, SAMA mandated that all Saudi banks must accept bill payments on behalf of utilities (electricity, telecom, and water) at no charge and regardless of the customer’s banking relationship.
Over the years, the process became operationally inefficient for several reasons. It placed an unduly large burden on banks resulting in:
High operational costs for banks
Late / missed payment processing
Risky cash management
Escalating complaints
As the market tried to self-correct, the distributed point-to-point model emerged between banks and billers. This fragmented approach further divided the market, thus lacking centralization and common standards
There was a clear need for a solution that satisfied and served consumers better, streamlined government collections, and increased cooperation between the government and the private sector
SADAD Payment System

6. As a result, SAMA incepted SADAD, a centralized payments initiative, to develop payments products and services
Mission and Principles of SADAD Payments Initiative
SADAD Governing Principles
SADAD Vision/Mission
Efficiency
Achieve goals and targets on time, in a productive fashion
Vision
One solution for all payments
Collaboration
Establish a collaborative environment with a collective focus on the end-result
Transparency
Share relevant information with all concerned stakeholders in an open and timely fashion
Mission
Develop new payment solutions to lead the financial services sector towards high level of services for individuals, businesses, and the government sector.
Accountability
Take accountability for own work, while maintaining a holistic view on the success of SADAD
Excellence
Maintain high standards to deliver high quality services
SADAD Payment System

7. SADAD Background SADAD EBPP SADAD Next Horizon Appendix www.sadad.com
SADAD Payment System

8. Perceived Problems and Issues Initial Bill Payment Network
Traditionally, consumer bill processing and payment in KSA was inefficient and complex
Perceived Problems and Issues
ILLUSTRATIVE
Long queues for bill payment at banks
Potential disconnection of service due to long delays in bill processing
Need to handle cash
Initial Bill Payment Network
Consumer
Comments
Majority of bills were paid by consumers with cash across bank counters
Some billers (e.g. SEC and STC) were developing individual arrangements with banks for streamlining bill payment processes
Bill presentment and payment volumes were anticipated to increase significantly in KSA over next few years
Usage of electronic channels for making payments is low but expected to pick up in future
Electricity
Bank A
Telecom
Bank B
Others (..??)
Water
Bank C
Government
Bank D
Long collection cycles
Inefficient processes
High level of customer complaints and dissatisfaction
Multiple separate linkages with different banks
Higher costs at branches for handling bill payments (often from non-bank customers)
Need to integrate separately with multiple billers
No revenue streams from handling bill payments
SADAD Payment System

9. Key Implementation Challenges Faced
The SADAD consolidator EBPP service was launched in 2004 to centralize point-to-point connectivity for payments
SADAD EBPP Model
ILLUSTRATIVE
SADAD EBPP 1 2 3
Strong resistance to change:
Historical reliance on largely manual and paper-based payment presentment and collection
Multiple parties (banks and billers) with limited technical capabilities throughout bank and biller community
Major banks and billers already had proprietary payment systems needing to be transformed
Changed business model:
Billers did not previously have to bear the cost burden of bill payment
Untested revenue sharing model with banks
Greenfield operation:
Lacking in infrastructure, manpower, technology, etc. requiring multi-stream program
Multiple 3rd parties supporting the overall effort
Untested technology:
Innovative technical platform developed for first time internationally
Key Implementation Challenges Faced 4
Consumer
Biller A
Bank A
SADAD
Biller B
Bank B
Biller N
Bank N
Reduce the burden on banks due to the inherent inefficiencies of bill payment in KSA
Rationalize connections between billers, banks and consumers through a single platform to enable the consumers to pay periodic/repetitive bills (e.g., utility bills, phone bills, etc.) at any bank
SADAD Payment System

10. SADAD Operational Model Overview
As such, typical transactions accessed bill information held in SADAD through existing bank and biller channels
SADAD Operational Model Overview
ILLUSTRATIVE
Customer authenticated by the bank prior to querying SADAD
Banks would communicate with SADAD through existing infrastructure
Billers would communicate with SADAD to upload new bills, exchange bill status and reconciliation reports
Branch
SADAD
POS
Customer
Biller
ATM
SADAD would provide information, update bill status accordingly and initiate the settlement process
Walk-in Customer(1)
Collection Center
Website
Internet Banking
Major Bank Channels
Banks
Biller Channel
1) Customers will still be able to settle their bills through Biller Channels
SADAD Payment System

11. Principles & Guidelines Split For Stakeholders
To promote cooperation, fees earned from the EBPP service were split between SADAD and banks
SADAD EBPP Fee Split
14 major banks are linked to SADAD and provide bill presentment and payment as a service to consumers and 120 biller
Principles & Guidelines
Represents a major shift in traditional bill payments, whereby an approach is taken to eliminate subsidies and fairly distribute costs and benefits
Consumers are not charged, as SAMA sought for this System to be a catalyst for market adoption; Billers pay a transaction fee for each bill paid
This ‘fee split’ structure ensures that costs are reduced at both macro and micro economic levels
Overall value creation for billers and banks is at SAR per bill
Average EBPP Fee
Split For Stakeholders
Banks provide bill presentment and payment capability to all consumers through all banking channels. Banks went from loss to making a small profit.
SADAD provides infrastructure and operational support capabilities
SADAD Payment System

12. Macro-Economic / Society
SADAD EBPP service has resulted in numerous macro-economic, biller, consumer and bank benefits
SADAD EBPP Benefits 1
Macro-Economic / Society
Lower dependency on cash in the economy due to increased penetration of e-Payments in KSA
Increased capital efficiency for the national economy
Increased transparency in government collection process
Biller settlement time reduced from days to 1 day
Significant reduction in the cost of bill payment processing 4 2
Banks
Billers
Reduced cost of bill payment processing
Retention of relationship with billers and consumers
Single point of linkage with multiple billers
Increased revenues from bill payment revenue split
SADAD
EBPP
Faster settlement time for bill payments
Access for all customers through any bank
Lower costs for paper, IT systems and staff as a result of service delivery through online channel
Reduced working capital requirements due to faster collection of bill payments 3
Consumers
Increased convenience due to ability to make e-commerce purchases possible through websites
Increased access to greater variety of products and services online
Availability of a number of different payment options
SADAD Payment System

13. Demand for SADAD’s EBPP has come from billers across several sectors with government entities serving as a major customer
Biller Sectors
Total Payments Value Processed
(2012)
Biller Sectors Using SADAD EBPP Services
Government Entities
Airlines
Financial Services
Chamber of Commerce
Customs
Department of Zakat (Tax)
Government Funds
Insurance
ISPs
Ministries
Municipalities
Postal Services
Press & Media
Telecom
Universities
Utility Services
Government created a fully fledged programme (jumped in)
Non-Government Entities
The majority of SADAD payment volumes are derived from payments to government entities
Government intervened with a full fledged program to automate its billing processes and established a PMO to integrate its agencies with SADAD
Government Entity
Non-Government Entity
SADAD Payment System

14. From a macro-economic perspective, KSA has significantly increased the use of non-cash retail payment instruments
Uptake of Non-Cash Retail Payment Instruments
SADAD Transaction Volume, m
In 2011, SADAD processed over 120 million online transactions, up approximately 25% from the previous year’s 98 million, signaling market acceptance of non-cash retail payment instruments
Volume of non-cash transactions, m
362
Cheque
POS – SPAN Debit
SARIE
SADAD
289
229
In 2011, SADAD processed approximately 34% of all e-Channel transactions in KSA, surpassing the usage of cheques (1.7%), and SARIE (11.7%)
220
155
1 03 84

15. For banks and billers, payment flows continue to rise, reaching SAR 107Bn total Payments value made to 110 onboarded billers
SADAD Growth
Over 120m e-Payment Transactions in 2011
Number of Active Billers
2005 – 2011
Total Payments Value Processed
SAR Bn, 2011
+47%
+120%
Total payments volume processed through SADAD is rising
Government and major billers continue to integrate with SADAD for electronic bill payment capability
Bill payments continue to rise through increased uptake, with 47% increased volume due to greater variety of billers and increased consumer usage
Further efficiency gains are seen by the usage of electronic bill presentment functionality, which amounts to almost ~ 791m requests (Bill Queries) per year
Includes all major government and utility billers in KSA, allowing for payment towards many items including traffic fines and telephone bills
Over the period of 2008 – 2011, SADAD successfully onboarded 60 billers (~120%)
Despite the ability for billers to collect bill payments directly through retail outlets, the efficiency of SADAD have pushed biller demand

16. Furthermore, consumer behavior has changed with increased usage of SADAD services through non-branch channels
Impact on Consumer Behavior
Branch initiated bill payments reduced by 96%
Consumers have increasingly become accustomed to using alternative channels for SADAD bill payments
Consumers have increasingly relied on SADAD for bill payments
Since inception, biller payments made at branches using SADAD have decreased 96%, as customers have migrated towards the use of alternative channels (e.g., ATM, Phone, Web)
81% of all SADAD payments processed were completed through two channels - web with 41%, followed by ATM with 40%
In 2011, 90% of all bill payments were processed through SADAD due to its ease of access and convenience, despite the continued availability of traditional bill payment channels (e.g., biller retail outlet, credit card, etc.)

17. SADAD received a number of awards and still continues to receive international recognition as a ‘market change catalyst’
UN Public Service Award
GCC e-Government Award
Injaz e-Government Achievement Award
ISO Quality Mgmt
ISO Information Security Mgmt.

18. SADAD Introduction SADAD EBPP SADAD Next Horizon Appendix
SADAD Introduction
SADAD EBPP
SADAD Next Horizon
Appendix

19. Prioritized Services for Next Horizon
Going forward, SADAD has detailed its next horizon strategy that entails a near-term focus on e-Commerce and SME Payments
Prioritized Services for Next Horizon
ILLUSTRATIVE 1
SADAD Next Horizon
Online Payment (OLP) e- Commerce
Biller Base Expansion (BBE) for SMEs
e-Invoicing
C2C
Direct Debit 2
Long-Term
(~3-5 Years)
Medium-Term
(2 Years)
Identification Services1
Near Term
1) Service is tentative as long-term-services are likely to be redefined and evolve as time progresses

20. Background on SADAD Next Horizon
Online Payments and Biller Base Expansion have been prioritized for immediate pursuit
Background on SADAD Next Horizon
Service
Description
Online Payments (OLP) e-Commerce
Creation of a secure, non-card based payment option to online merchants and consumers
Next Horizon services will be streamlined, highly-automated, self-serviced and will shift a major part of biller / merchant management responsibilities to banks
Immediate Focus
Biller Base Expansion (BBE)
Expansion of existing EBPP service offering to include Small and Medium Enterprises (SMEs)
e-Invoicing
Development of an automated and integrated invoice presentment and payment option available to B2B players

21. Thank you.
Questions & Comments