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SADAD Payment System
Saudi Arabian Monetary Agency
Saudi Arabia

The Problem

In the early 1980s, the Saudi Arabian Monetary Agency (SAMA) -The Central Bank of Saudi Arabia- mandated that all Saudi Banks (Banks) should subsidize utilities’ bills collection by accepting bill payments on behalf of utilities (electricity, telecom, and water) at no charge, whether the payer is a customer of the bank where the bill is being paid or not, in return Banks recovered a small portion of the collection costs through float income. When this mandate was issued the number of bills was limited, however this changed dramatically in the late 1990’s with the introduction of mobile telecom services, where in 2004 the number of mobile subscribers surpassed landline and electricity subscribers combined with an annual growth rate of 67%.


SAMA mandate placed an unduly large burden on Banks, and resulted in high costs for Banks in many areas, which led Banks to resist providing collection services to any new service providers (Billers) who are primarily government agencies (who pressured SAMA to force Banks to do so), where some has developed different payment instruments (e.g. prepaid cards, checks, cash, etc.) that only increased the complexity and bureaucracy, and created a fertile ground for fraud. Other agencies succeeded to work with one or two Banks, but because this means that these Billers’ consumers, mostly individual citizens and small businesses, have to have a bank account in these Banks to be able to pay for these services; it greatly limited the benefit to consumers and Billers. This created a black market for prepaid coupons, and for banks payments where some people who have accounts at these Banks charged others to pay their payments. This led to consumers’ complaints due to unlawful extra charges, and the inconvenience and time consuming process of paying government services.


With time, utilities started developing electronic links with Banks that replaced the old manual collection process, which enabled consumers to use their bank’s electronic channels to view and pay bills. This was done through direct links between utilities and the 12 Banks. This model was very hard to sustain especially with the increasing number of billers (especially after the liberation of the telecom market in Saudi Arabia and the introduction of five new operators). Other sectors’ payments also grew, where it’s estimated that the payment marker exceeds 120 million payments annually in sectors like government, airlines, insurance, financing, real-estate, and education. Continuing this spaghetti like model would mean that there will be hundreds of direct links between Banks and Billers, with multiple standards, and with limited customers’ satisfaction. Where In a survey conducted by SAMA it was concluded that the top consumer issues concerning bill payment were that the process is very time consuming, with postage delays and loss of bills, disconnection of service due to delays in bill processing, overlooking payment dates, and handling large cash amounts.


There was a great need for a solution that satisfies and serves consumers better, streamlines government collections, addresses certain deficiencies in the bill collection market, and greatly increases the economy’s competitiveness, with cooperation between government and private sector.

Solution and Key Benefits

 What is the initiative about? (the solution)
In response to consumers needs and government and nongovernment collection requirements; SAMA introduced SADAD Payment System (SADAD) initiative, which managed to create a unique concept to fix the bill collection market issues, through a customized solution that provides all Billers with access to Banks channels without discrimination, through a single shared national platform that provided capital efficiency to the national economy, and increased efficiency of bill payments by streamlining the presentment and collection process of all major Billers, allowing their customers to use any of these channels, without creating duplicated investments due to the proliferation of non standard multiple interfaces. It also minimized fraud in manual transaction, and provided an audit trail and data reporting for each transaction. This enabled SADAD to reduce the overall cost of bill payment (estimated at SAR 1,250M annually) by 20-25%, through addressing the structural drivers, by eliminating all direct links between Banks and Billers, and replacing it with a central Electronic Bill Presentment and Payment (EBPP) system. SADAD has increase transparency of government collection process, and took over accountability of sustaining the growth of this market.


Consumers were benefited by significantly reducing the time spent in paying bills, by reducing dependency on physical channels, where an estimated 12-15 million man-hours were spent annually by consumers paying bills at Banks branches (branches usage went down from 66% in 2003 to 10% in 2007). All Consumers in Saudi Arabia now have access to pay electronically for the services of 27 Billers (mostly government agencies, and expected to reach 60 Billers by end of 2008) 24/7 through all the banking channels in Saudi Arabia (Automated Teller Machines, Phone Banking, Online Banking, and Bank Branches), instead of only 3 utilities before SADAD, providing real-time payment services (currently processes 3.5 million transactions monthly and expected to reach 5.6 million in 2008, with every transaction is processed under two seconds), proactive reminder service through electronic bill presentment, flexibility in payments, reduction in service cuts, less cash handling, and eliminating all paperwork related to payment.


SADAD was a major shift in service delivery, which achieved a more equitable sharing of costs and benefits between stakeholders, by eliminating subsidies and changing the business model, SADAD doesn’t charge consumers directly for the service provided; instead Billers pay a transaction fee per bill and a significant proportion of the revenue generated is passed on to Banks to compensate them for the usage of their channels. In return SADAD will facilitate the availability of funds in Billers’ accounts within 1 business day (instead of 14-60 days), reduce complexity of Interfaces by maintaining a single interface with SADAD instead of separate interfaces with 14 different Banks, reduce reconciliation cost by 80-90%, and lower cost of service disruption due to customers wrongly disconnected due to delays in bill payment by providing real-time payment notification. SADAD also benefited Banks by reducing complexity of Interfaces, reducing reconciliation cost by 50-60%, encouraging better banking transaction practices, and providing a stable growing revenue stream.

Actors and Stakeholders

 Who proposed the solution, who implemented it and who were the stakeholders?
The SADAD Initiative was the product of policy makers and public managers in response to consumers, government and private sector needs, represented by SAMA and its Banking Technology Department (BTD) whose role was to create an efficient national E-payment infrastructure to help Saudi Arabia to be more competitive and defend it from local and global market challenges, by developing and operating a series of initiatives that significantly contributed to the development of the financial sector, these initiatives includes the Electronic Stock Market (Tadawul), The national ATM and POS switch (SPAN), and the national Real Time Gross Settlement system (SARIE). SAMA endorsed the initiative and provided all needed funding and support, where it played a vital role in rallying Banks and Billers to allocate time and resources to ensure SADAD’s success.


The SADAD team has been mobilized around a program management structure that was managed by the head of BTD, assembled a dedicated team to lead the project, setup a steering committee with senior management from Saudi Telecom Company, Saudi Electricity Company, Al Rajhi Bank, National Commercial Bank, Arab National Bank, and Riyad Bank as members. It also hired the management consulting firm Booz Allen Hamilton (BAH) to help establishes the market potential and demand for electronic bill payment services, identifies main concerns and issues with current status, through primary market research surveys on consumers in Saudi Arabia, which was used by SAMA to develop the business case and framework for quantifying benefits to Billers and Banks from joining SADAD, outline the overall design of the SADAD solution, develop key business processes, finalize functional and technical design, and develop RFPs for implementation of the solution and business process operation outsourced basis.


In building and outsourcing major operations; SAMA used Atos Origin Middle East (AOME) who was recently acquired by Hewlett-Packard (HP). SAMA maintained the management control over SADAD overall operations and on the appointment of senior managers, while AOME appointed the personnel of the other functional departments according to a set of policies imposed by SAMA. The business processes were outsourced on the basis of that SADAD Managing Director (MD) and management team (who are selected and appointed by SAMA) are responsible for achieving revenue and profitability targets and business plan, and AOME is responsible for operations, IT and finance and admin activities only according to agreed service level and cost targets.


During the build phase SAMA and AOME were responsible for market requirements gathering, team mobilization and infrastructure setup and planning, finalizing detailed functional and technical designs, managing the implementation, configuration and customization activities, testing and integration activities with Banks and Billers, quality assurance (QA) audit, integration with SARIE, developing test plan and test scripts, prototype development, preparation of operational environments, training material development, documentation, and resourcing.


Banks and Billers also participated in integration activities from their sides, most notably the Ministry of Finance (MOF) who led the integration of all government agencies with SADAD by dedicating human and financial resources for this project.

(a) Strategies

 Describe how and when the initiative was implemented by answering these questions
 a.      What were the strategies used to implement the initiative? In no more than 500 words, provide a summary of the main objectives and strategies of the initiative, how they were established and by whom.
SAMA used different strategies to ensure SADAD’s success, by building on market’s requirements in order to create a universal system that can be easily expanded to a wider range of industries and markets. Lots of experience was gained by visiting leading EBPP in the UK, Norway, and Sweden, and reviewing other experiences in South Africa, Australia, and the US, to develop a unique approach that fits Saudi Arabia.


Another strategy was conducting national “Consumers Survey” on a random sample of bill payers in many different cities (urban and rural) which provided many important insights that were used in designing SADAD, and ensured acceptance of about 70% of consumers for such initiative. Feedback was also solicited from Major Billers and Banks through initial meetings before finalizing high level designs and business model.


SAMA created a Program Management Office (PMO) structure to handle the large complexity, risk and uncertainty associated with building such infrastructure. The PMO ensured the needed coordination and efficiency through managing progress tracking & reporting, communication, resource, issue, etc. It addressed governance and planning challenges by setting up a steering committee with senior management of major stakeholders as members, it improved monitoring and control, identified gaps in realization of strategic objectives, escalated current risks and identified potential risks earlier, and it ensured the commitment, support, and sense of ownership of SADAD.


SAMA hired BAH to facilitate the process but not to dictate solutions, where it helped in eliminating the learning curve, and their contribution to the project focused on supplying the bases for the PMO structure, procedures and functions, and it helped in developing the high level functional design and business model. BAH has also provided the needed strategic support and guaranteed a higher level of results and outputs by everyone involved in the project, that is usually expected from world class corporations. BAH fully transferred knowledge to SADAD’s employees through formal and hands-on training to ensure the continuation of the same level of work quality.


SADAD was built as a standalone and nonbiased entity with functional departments (e.g. finance, marketing, QA, etc.), and outsourced major operation to a third party to reduce the risk involved without the need to develop the needed skills in-house, and passing it to a more mature organization that own such skills and ability to hire better talent fast through its network of operations and offices around the world.


The last strategy was the extraordinary step (in Saudi Arabia) of depending heavily on women to run and operate SADAD, where they constitute more than 60% of its workforce and 100% of SADAD operational team, this step was a great success and proved that Saudi women are ready to handle every challenge they may encounter in the business world of Saudi Arabia, SADAD is considered nationally as a top social initiative to boost women role in the development rather than just reducing the cost.

(b) Implementation

 b.      What were the key development and implementation steps and the chronology? No more than 500 words
3rd Quarter 2003:
 SAMA assembled a team headed by the BTD head to build SADAD.
 SAMA issued an RFP to seek the services of a top consulting firm to help in the development of SADAD.


4th Quarter 2003:
 BAH was selected to be the management consulting partner.
 Commence development of the business case, business and financial model, Billers pricing engine, and Banks compensation structures.
 Commence development of high level functional and IT designs.
 RFP was issued for acquiring world class system integrator services.
 AOME was selected as the system integrator.
 A PMO was constructed to oversee the project development.
 Assist Wave 1 Banks and Billers in performing impact analysis to assess their readiness from all business and technical aspects, and develop a transition plan.
 Finalizing the development of Billers pricing engine and Banks compensation structures.
 Commence the development of SADAD systems design and architecture.
 Billers and Banks establish project structure, staff resources, and began Impact Analysis and transition activities.


1st Quarter 2004:
 Commence SADAD application development, prepare development environment, and build reference designs.
 Banks and Billers completed Impact Analysis.
 Assist Wave 1 in transition planning, draft system documentation, finalized test environments.
 Banks and Billers complete and initiate transition plan, and re-design processes and procedures for operation and reconciliation.
 Develop SADAD operating model, draft Bank & Biller service levels agreements (SLA).
 Back office integration completed, and install production data center.
 Banks and Billers continue systems and processes modifications and prepare service level expectations.


2nd Quarter 2004:
 Prepare production environment, and training materials and methods.
 Banks and Billers continue systems and process modifications, and begin systems tests.
 Install disaster recovery data center, conduct training, perform systems testing, and deploy systems.
 Establish business process outsourcing (BPO) by SADAD through AOME.
 Banks and Billers initiate systems integration test, and finalize training.


3rd Quarter 2004:
 Schedule other entrants to system (Banks and Billers).
 Begin Post Implementation Support.
 Banks and Billers complete systems integration and deploy across all channels.


4th Quarter 2004:
 Banks and Billers agree on service levels with SADAD.
 Commenced live operations on October 4th.

(c) Overcoming Obstacles

 c.      What were the main obstacles encountered? How were they overcome? No more than 500 words
In dealing with government agencies; SAMA faced difficulties dealing with government agencies resisting changing their old obsolete collection methods to an outside party that ensured fraud elimination and consumers satisfactions due to fears of losing control over the process coupled with job loss. This obstacle was overcame by the full cooperation of MOF, who supplied the required leadership to transform all government collection to SADAD, by taking the lead on this matter and used all its influence on the other agencies to comply by issuing regulations to all other agencies to use SADAD as their sole collection mechanism, and providing all the needed resources (financial, human, and technical) to ensure all agencies discontinue using all other collection channels.


Changing the landscape of bill payment in Saudi Arabia without introducing major changes to consumers was a major obstacle for developing SADAD; where utilities had to pay for the service after years of enjoying almost a free service from Banks. Convincing utilities to do so was the hardest obstacle that SADAD’s faced. However it was overcome by cooperating and working together and engaging them from the beginning on a top management level to align goals and interests of all parties. Another factor to achieve that was by delivering superior services and functions than the current situation, that will ensure utilities that their money is well spent, and by developing a very detailed cost benefit analysis for utilities that clearly showed that SADAD is the right choice by developing a framework for quantifying the benefits to Billers. The same was done for Banks, since some Banks have already invested in real-time linkages with utilities that gave them advantage over other Banks, and felt that SADAD will level the playing field for all Banks to provide the same level of service to their customers. It was estimated that each utility company will gain a one-time benefit of SR 16.0M, and recurring benefits of SR 88.3M. And all Banks will gain One-time benefits of SR 16.0M and recurring benefits of SR 115.5M.


Another obstacle to overcome was women recruitment and office setup without touching the values of the community, or undermining their dignity, this was achieved by clearly balancing all aspects of the issue and implemented a very female friendly environment with careful and thorough recruiting process, keeping in mind that most of SADAD’s partners will deal with its female employees on daily bases either through daily operation or periodical training sessions that are done primarily by female employees to primarily male employees. The experience of employing and empowering women in the workplace helped in highlighting the invaluable contributions women can make and in changing the social attitudes and norms associated with women participation in the workforce market that was traditionally dominated by men.


Last obstacle was that the Saudi market is very dynamic and growing fast, and finding the right solution that fits the local market was complicated, the reason for that is the different initiative around the world were designed to fit their markets, and taking them as is will only complicate the situation, so SADAD had to develop something that fits the local market, by having a creative product development team and an in-house software development team.

(d) Use of Resources

 d.      What resources were used for the initiative and what were its key benefits? In no more than 500 words, specify what were the financial, technical and human resources’ costs associated with this initiative. Describe how resources were mobilized
SAMA assembled a dedicated team to lead the project, who has been mobilized around the PMO structure that is managed by the head of BTD, setup a steering committee of senior management of major stakeholders. It also hired the management consulting firm (BAH) to help establishes the market potential and demand for electronic bill payment services, and identifies main concerns and issues with current status.


After the RFP process SAMA selected AOME to build the IT infrastructure with the initial estimated cost of SR 35 million; however the actual cost increased to SR 46 million. This includes software licenses (27%), hardware (26%), integration and implementation (40%) and other costs (7%). Application licenses include EBPP application, back office application, integration software and other 3rd party products. Other cost also included the management and legal consultation fees. The initial cost does not include the cost of implementing changes within Banks and Billers systems and channels, changes in work practices and retraining of personnel within Banks and Billers; these costs are directly borne by respective Banks and Billers.


SAMA also chooses to outsource SADAD’s majors operations to AOME, with maintaining management control and appointment of senior managers, while AOME mobilized its human resources to cover all other needed functions according to a set of policies imposed by SAMA and according to agreed service level and cost targets. SADAD operating cost is mainly composed of employees remuneration and hardware and software maintenance and upgrade cost. SADAD personnel are distributed over SADAD’s different departments. Employment for SADAD started with the hiring of four people that covers project management, business development, information technology, finance and administration. Employment grew as estimated in the business plan, where at the first year of operations, SADAD’s need in personnel was mainly for Operations and IT in order to launch the entity and operate it properly. Other activities such as Finance and Business Development began with fewer employees and expanded in following years. It was estimated that 27 FTEs are needed in the first year of operations (2004). SADAD headcount reached its steady state in 2006 with 65 employees. The split of SADAD personnel over the different functions is 45% operation, 20% IT, 18% business development, 8% management, 5% finance, and 5% support functions. The total payroll for the first five years of operations is estimated to be around SR 45M, representing 34% of the total cost from 2003 till 2008.


Annual IT systems maintenance and upgrade cost is around 15% to 20% of the initial applications license cost, and hardware and operating system annual maintenance and support cost around 15% of the initial cost; this would result in a total maintenance cost of SR 6.4 Million for the first five years of operations. Other costs of SR 21 Million in the first five years of operations included public relations and advertising, office rent, communications, utilities, stationary, consulting, training etc. The total cost of SADAD over 5 years is projected at SR 134M.

Sustainability and Transferability

  Is the initiative sustainable and transferable?
SADAD was positioned to be a national infrastructure and backbone for all e-government initiatives that requires payment and was chosen by MOF and the Government E-Transaction Program (Yesser) as the payment infrastructure which they built their infrastructure over it. SADAD started as an e-billing platform to streamline payment of basic and periodic customer bills, it moved to be an e-payment engine that supports multiple types of electronic payments, and working on becoming an e-services backbone for building a wide variety of electronic services, and a catalyst for all electronic payments. This was done by having the right business model and moving from the subsidies business and providing stakeholders clear benefits and value.


SAMA plans to spin off SADAD in few years, with clear governance structure, solid business model, strong strategic direction and resourceful partners; which should ensure its growth and revenue sustainability without government subsidy. The governance structure was established to improve oversight and economic efficiency, which involves primarily a set of relationships between the SADAD’s management, its board of directors, shareholders, and other stakeholders, where SAMA will act as a regulatory body. It’ll provide the structure through which the objectives of SADAD are set, and the means of attaining those objectives and monitoring performance are determined.


As for replicating and disseminating SAMA experience nationally and internationally; SADAD case was presented to the public in numerous local and regional conferences, and Harvard University's Ash Institute selected SADAD to develop a case study that’ll serve as a model in the study of government innovations for improving the performance of public and private sector and their service delivery to consumers.


Since SADAD is a national infrastructure it’s hard to be replicated nationally, however many different organizations uses the same foundations that were used to build and operate SADAD, from the project management structure and business model to the outsourcing model, where SAMA conducted several workshops with government organizations to spread the accumulated know-how and experience, and MOF managed to replicate SADAD’s PMO structure, which enabled it to link most of the government agencies with SADAD in record time. SADAD is also actively participating in Yesser program, which aims to transform the delivery of government services through electronic channels, and replaces the old paper based system to electronic means in order to streamline all government tasks. SAMA also worked closely with MOF to eliminate all cash payments for government services.


Internationally, there is a growing interest from different countries in the region (UAE, Jordan, Egypt, and Azerbaijan ) to replicate its model, where SADAD has investigated such opportunities as part of its growth initiatives, and created three different international growth models that includes franchising SADAD brand and functions to different countries, another approach is to sell SADAD software and business processes, and finally is by having a central processing model through SADAD headquarter in Riyadh, Saudi Arabia and having only support activities in different countries. These options are currently discussed with several countries in the region. Overall, Saudi Arabia’s experience in adopting SADAD system as an effective innovation in service delivery indicates that countries with similar problems can adopt the system idea and carefully adapt or reinvent some of its operational elements to fit local needs and requirements.

Lessons Learned

 What are the impact of your initiative and the lessons learned?
Building and operating SADAD was full of meaningful lessons and experiences, one of the most important lessons was that organization who is in charge of creating such national infrastructure and don’t have proven capabilities internally to do so should always seek outside help. In the case of SADAD, even though SAMA has developed major financial infrastructure before, this project was different by going beyond the financial industry where Billers from all types of industries are involved. So SAMA had to prepare detailed market studies that clearly identify market needs and issues, develop a business case, and create financial and business models. SAMA has to obtain the services of a top management consulting firm help define the objectives and help perform the above tasks.


SAMA has learned that for any new system to be successful, sustainable, and efficient it has to be managed as a semi-autonomous or independent agency, with ability to hire talented professionals and keep them, ability to approve spending for developing its business initiatives with minimal bureaucracy and clear governance structure.


Fighting for change and never giving up if you are confident of the initiative to convince all the parties to abandon their old way of doing business and invest in participating; required SADAD team to develop a business plan and strategy that ensure their cooperation. SADAD has to develop a tight business case for every major participant, that clearly list all benefits and costs involved, quantify each one of them in numbers that can be logically defended. Another lesson is use a top-bottom approach, especially if the concept is a major shift in how organizations do business, SADAD team met with the top management of each major organization, presented the current issues in the billing market, introduced the new concept, benefits, business case, and timeline. The team was always prepared for each meeting, which means that it did all the required research, conducted all needed studies and calculations, and customize its presentation to fit the mindset of that organization.


Another lesson is that large complex projects like SADAD with many different participants requires a more structure project management approach, while in operation an outsourcing arrangement with the right control and management would provide access to a larger pool of talent from all over the world, (SADAD employees represent 16 different nationalities with heavy dependency on Saudi nationals), and reduce the risks of the building and operating such projects.


Copying another system from other countries usually doesn’t work due to different market needs, which can only be identified by being close to the market, and never treat it as an IT project where technology was used as a mean to help overcome the current challenges, and always put business objectives in front.


Abandon traditional reliance on male employees and heavily relaying on female employees was another lesson, where women proved that they are as professional as men counterparts, and can do a great job without compromising traditional values.

Contact Information

Institution Name:   Saudi Arabian Monetary Agency
Institution Type:   Government Agency  
Contact Person:   Nezar Almugren
Title:   SADAD Business Development Director  
Telephone/ Fax:   +966506480660
Institution's / Project's Website:   +96612013163
E-mail:   nalmugren@sadad.com  
Address:   King Fahad Rd. Tawaren Center 5th Floor, PO Box 300467
Postal Code:   11372
City:   Riyadh
State/Province:   Riyadh
Country:   Saudi Arabia

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