By Ali Bailoun

General Manager for Saudi Arabia – Visa

THE launch of Apple Pay last month and Mada Pay last year mark key milestones in Saudi Arabia’s digital transformation agenda and one that is instrumental in ushering the adoption of contactless payments in the Kingdom.

Digital wallets and mobile payments are one of the fastest moving payment technologies globally. It is estimated that by 2022, the payment volume of mobile payment apps will reach nearly $14 trillion signifying the fast-pace of the industry. Across the globe, many consumers have already transitioned from paying in cash for their purchases to using a card or digital wallet.

According to a recent Visa whitepaper, “Contactless & ‘the Pays’: the catalyst for digital payments growth”, in Saudi Arabia, the demand for a better alternative to cash – such as contactless payments - is driven by high smartphone penetration (74%) and a technologically savvy millennials constituting 40% of the population. Furthermore, it is observed that among Saudi consumers there is an overall desire to try new solutions - 80% of respondents in KSA that had performed a contactless transaction were open to doing so again.

But, is it secure?

When payments transactions are contactless, there is bound to be some apprehension regarding its security especially among non-users. However, Visa contactless chip cards, protected by cryptography and the latest fraud-detection technology, are as secure as “standard” Visa Chip cards that require cardholders to enter PIN for every payment transaction. Let’s consider two likely scenarios of card data theft:

- A fraudster attempting to steal cardholder data during a contactless transaction: For every contactless transaction using a contactless card, a unique/one-time encrypted code is created without containing any details of the cardholder thereby securing cardholder’s information. So, if the fraudster attempts to skim off a cardholder’s information during a transaction, it is rendered useless to him as the code cannot be copied and used for any other transactions.

- Card is lost or stolen: The cardholder is immediately notified of the unauthorized activity on his/her account through SMS alerts and the cardholder should immediately report it to the bank. Also, In KSA there is a payment limit set to contactless transactions without cardholder validation up to SR100 per transaction.

Like contactless cards, mobile wallets – such as Apple Pay, Samsung Pay, Google Pay, and mada Pay (the Saudi national payment scheme) - use the same NFC (Near Field Communication) technology. Visa tokenization is a key enabler for mobile wallets, securing mobile payments both in-app and in-store, making them safe for cardholders to use. Tokenization keeps sensitive account information safe on the Visa network and away from the mobile device itself. It replaces information like the 16-digit account number on the card by a unique digital identifier, known as a “token”, which allows the payment to be processed without exposing any account details, thereby reducing the threat of sensitive cardholder data being compromised.

Tokenization is also helping power the growth of eCommerce and mCommerce platforms enabling them to deliver innovative retail experiences to consumers without the burden of handling sensitive payment account data.

Furthermore, embedding biometric technology in the smartphone device or the activation of a mobile passcode adds an extra layer of security, which effectively means that the device never leaves the cardholder’s hand when making a payment, thereby putting the cardholder in control of the transaction.

So, while the convenience aspect of contactless cards and enabled devices is a given – allowing cardholders to pay with a simple tap, it is indeed security features safeguarding cardholder data that is driving the growing preference for contactless payments among users.

The initial response among consumers following the launch of Apple Pay and Mada Pay has been very positive – we’ve seen double-digit growth in the usage of wallets and contactless payments in the Kingdom. This shows how quickly the tech savvy Saudi consumers are embracing digital wallets and integrating it into their daily lives as it meets their need for convenience and security better than cash does.

For merchants, the benefits of accepting contactless mobile payments include (i) speedy checkout, (ii) loyalty (e.g. you can integrate your loyalty programs directly into the hands of your customers), and (iii) supports with knowing your customers better (e.g. Digital wallets can be a conduit for gathering an extra layer of consumer data and using it to enhance the purchasing experience). To accelerate the use of Apple Pay in Saudi, Visa recently collaborated with Hardee’s and Starbucks to run joint customer promotions across all their respective outlets in the Kingdom.

Besides clear benefits for consumers and merchants, the adoption of contactless payments is an important step forward in supporting the government’s efforts to achieve a fully digital economy by 2030.

So, it is evident that contactless payment is the future and here to stay. Consumers’ growing preferences for easy, reliable and security ways to pay combined with government’s digital transformation efforts is likely to boost its adoption and acceptance levels in Saudi Arabia in the coming years.