While the number of reported COVID-19 cases in the emerging markets Oxford Business Group (OBG) covers is, for the moment, much lower than elsewhere in the world, no one can deny the impact of the virus on international business. In an interview, Faisal Omar Alsaggaf, CEO, National Commercial Bank, talks about the enabling role of Saudi banks amid COVID-19 and beyond. This is part of OBG"s new series, COVID-19 Economic Impact Assessment, covering each of our markets. This series will focus on specific sectors in the markets we cover, to give clarity to the situation on the ground. Here are the excerpts: Q: To what extent has the outbreak of COVID-19 accelerated the shift towards digital payments? ALSAGGAF: The spread of COVID-19 introduced significant health and economic challenges. Saudi authorities are proactively confronting the pandemic through the introduction of strict social- distancing measures, generous support programs, and swift action to adapt regulations and governmental services to this critical period. Digital solutions provide an essential avenue to ensure continuity of service and maintain operations in such a way that increases the safety of our customers, staff and community. As of end-2019 over 97% of our retail customers conducted transactions through digital channels, accounting for more than half of sales. The current circumstances will facilitate further uptake of digital solutions, with new users adopting digital banking and existing ones conducting more transactions. Regulation and government services also play a key role in the transition to a cashless society. The Saudi economy is conducive to the adoption of digital solutions, as the country enjoys a large, tech- savvy population, integrated e-government infrastructure and a supportive regulatory environment. These factors have also been beneficial to the fight against Covid-19, as the authorities were able to take proactive and technology-based measures. Most recently, in April 2020 the Nafith digital platform was launched, enabling banks to expand their digital financing offerings to customers. Q: What role can the banking sector play in helping realize Vision 2030’s goals, particularly in terms of expanding the role of small and medium-sized enterprises (SMEs)? ALSAGGAF: The banking sector plays a fundamental role in fostering economic growth. In line with Vision 2030, financial services are a direct contributor to a number of Vision Realization Programs that are expected to drive diversification plans, including the Financial Sector Development Program, the Housing Program and the Public Investment Fund Program. Corporate banking also focuses on financing large infrastructure projects such as Neom, the planned smart city on the border with Jordan and Egypt. Meanwhile, visa regulatory reforms have positioned emerging sectors such as tourism, entertainment and hospitality for growth in the coming years. Financial institutions in the Kingdom have played an increasingly important role in supporting SMEs, as they do not have the same level of financial capacity as bigger corporations, but remain one of the fundamental backbones of the local economy. Individual loans are dominated by mortgages, a segment that experienced a sharp increase of almost 40% in 2019. This trend is expected to continue in the coming years, driven by population growth, demand for housing, and the expansion of the real estate and construction sectors. Q: How can Saudi Arabia position itself as a dominant financial center in the Middle East, and what is the Kingdom’s competitive edge in this regard? ALSAGGAF: Saudi Arabia is the largest economy in the Middle East and, as a member of the G20, will host the next summit in Riyadh in November 2020. This situation places the country in a solid position to become the next regional financial center. The government has recently introduced several measures to improve the regulatory framework and attract foreign investors, all of which will pave the way for further expansion. A positive development in this regard includes the recognition of Saudi Arabia as a member of the Financial Action Task Force, an intergovernmental organization to combat money laundering. This is in addition to reforms by the Capital Markets Authority to streamline regulation and increase access to issuers and investors. Asset quality and liquidity in the financial sector are well established through balanced oversight by regulatory authorities and sound banking practices. The Saudi Arabian Monetary Authority (SAMA), the main financial regulator, has enabled the banking sector to become resilient due to strong capitalization, high credit quality and healthy profitability. At the same time, SAMA continues to create the space for innovation in financial technology (fintech) among banks. The government is committed to creating an enabling environment that attracts international investors, while financial institutions have the experience to help them navigate the local market and source attractive investment opportunities. Over the years Saudi Arabia has carried out a number of reforms, earning the country a spot in the top-10 global business-climate improvers, according to the World Bank’s “Doing Business 2020” report. Similarly, the Kingdom rose 10 spots to place 26th out of 63 countries on the IMD World Competitiveness Rankings 2019. Q: In what ways has the rise of fintech disrupted the traditional banking sector, and how are established banks reacting to this? ALSAGGAF: In recent years fintech has become prevalent on a global scale. Saudi banks have adapted to this digital transformation and now provide clients with easy access for daily transactions. Today, the majority of our customers use our digital channels. Over 60% of retail customers used our digital platforms in 2019, including a rapid transition to the mobile banking app. This trend is expected to continue in the future, as customer journeys become digitalized due to the convenience of online banking. We are also embracing this digital transformation in our bank branches. We are able to speed up the delivery of services through self-service technology and specialized customer service options. Today’s branches are smaller and more digitally orientated than in previous years. In 2014 we averaged more than 14 employees per branch; whereas today, the average is fewer than 10 employees, and only six in our newest locations. — OBG