One of the key measures of Saudi Arabia’s Vision 2030 program is a shift toward a digitized economy. Now the world’s focus is turning to new and emerging blockchain technologies that are integral to supporting and realizing digital economies — and the Middle East isn’t far behind.
Acknowledging these innovative solutions, the municipality of Riyadh partnered with IBM to introduce blockchain technologies that will improve services and procedures in a range of administrative and economic areas.
The Saudi central bank, SAMA, has signed an agreement with Ripple to help banks in the Kingdom improve their payments infrastructure using xCurrent. This ground-breaking pilot program is the first of its kind launched by a central bank. Participating banks will use xCurrent to instantly settle payments sent into and out of the country, with greater transparency and lower costs.
SAMA’s support of Saudi banks using blockchain technology has the potential to radically shift how banks in the country send money globally. Saudi Arabia now has access to every financial institution (banks and payment providers) on RippleNet, which will not only help modernize their payments systems, but also increase their reach into major corridors.
Bank customers also will benefit from faster, less costly and more transparent cross-border transactions. SAMA will provide Saudi banks using the program with management and training.
Agreements such as these will offer savings of roughly $200-$400 million per year system-wide since the cost of remittances is about 60 percent lower than cash transfers.
SAMA is the second central bank to support the use of blockchain technology to revolutionize payments following the Bank of England’s successful testing of the concept with Ripple in 2017.
Central banks around the world are realizing that blockchain technology can transform cross-border payments, resulting in lower barriers to trade and commerce for both corporations and consumers. Meanwhile, SAMA has announced that Saudi Arabia will develop its national cryptocurrency through a collaborative effort with the UAE.
State-backed cryptocurrencies will allow countries to adopt the latest financial technology, resulting in faster and more cost-effective cross-border payments. Digital currencies will be used mainly for bank-to-bank transactions.
Blockchain is a futuristic technology that is here to stay. Saudi Vision 2030 is revolutionary and digital transformation is one of its main pillars. With its built-in hardened security, transparency and efficiency, blockchain is the best option for digital transformation.
Businesses that do not implement blockchain risk becoming obsolete. With digital banking and blockchain-based solutions expanding for fintech, traditional banks may soon find themselves left behind.
Basil M.K. Al-Ghalayini is the Chairman and CEO of BMG Financial Group.