THE IMPACT OF ELECTRONIC PAYMENT ON SAUDI BANKS PROFITABILITY: CASE STUDY OF SADAD PAYMENT SYSTEM

Electronic payment system has made significant impact on banks Profitability in general and in Saudi Arabia in particular. Our study in this respect reveals that banks profitability predominantly capitalizes on e-payment pillars such comprisingConvenience, Choices Verities, Cost Reduction, Speedy Payments, Security, and Accessibility. This paper presents a case study of Saudi electronic payment system (SADAD)to analyze its impact on the Saudi banks' profitability. SADAD was initiated by the Saudi Arabian Monetary Agency (SAMA) to be the national Electronic Bill Presentment and Payment (EBPP) service provider for the Kingdom of Saudi Arabia (KSA). The main objective of SADAD is to facilitate and modernize bills payment transactions for end consumers through all channels of the Kingdom‟s Banks. The electronic payment (SADAD) system‟s impact is studied with reference to banks profitability by mainly focusing on Return on Assets (ROA) and Return on Equity (ROE). This study presents varied opinion on e-banking and profitability which is apparently divided into three groups i.e. one group argues there is no link between technology and profitability, the second group argues the opposite while third group agrees that there is link between profitability and technology with reference to network impact. We in this study have followed this line of arguments and present an empirical study of Saudi e-payment system (SADAD); firstly by developing pillars of electronic payment system based on literature survey, secondly examining the impact of electronic payment on the banks profitability based on empirical data collected in Saudi Arabia and finally develops relationship between e-payment pillars and pillars of bank profitability.This study is built on hypothesis, tests and analyses of the results to reach at conclusions.