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  • Writer's pictureNadim Samna

The most comprehensive analysis of banking distribution in KSA part 1

Updated: Aug 12, 2019

Building an efficient distribution strategy for a bank in KSA is challenging

The kingdom of Saudi Arabia stretches along 2.2 km² where a population of 33MM lives and growing at 2% each year.

Any bank would like to build a distribution strategy that provides a maximum coverage of its targeted customers at a minimal cost, which in the case of a bank operating in KSA is quite challenging given that the average density of the population is less than 15 individuals per square kilometer. In the meantime, around 80% of Saudis live in ten major urban centersRiyadh, Jeddah, Mecca, Medina, Hofuf, Ta'if, Khobar, Yanbu, Dhahran, Dammam.

Banks in KSA invested a lot of resources to develop their digital capabilities to offer their clients alternative distribution channels and additional services with the objective to improve the customer’s experience. Developing both physical and digital channels is complementary and serves banks main objective to serve their clients as much as they can.

As we, at Stratexis, are specialized in assisting financial institutions in building their strategies, we wanted to take a closer look at the distribution strategies followed by the main 12 banks in KSA. We find that the physical distribution network composed of banking branches and ATM can be real differentiator for banks and most revealing of their global strategy. That is why, we decided to focus our analysis on the physical distribution of banks in KSA.

In this article, we will firstly study KSA banking market by comparing several banking indicators such as the physical distribution density and growth between several Middle Eastern markets. After this first part, we will analyze the growth of branches and ATM of the main banks in KSA.

All these findings will provide insights to identify the distribution strategy followed by each bank in KSA in light of their target in terms of customers’ segments.

Saudi Arabia offers the highest density of physical banking distribution in the Middle East, mainly composed of ATM

The first insights we learn about the banking market in KSA is that the population in KSA is well covered by banks despite the large geographical area of the country, mainly using ATM. Banks in KSA deployed the highest number of ATM per 100,000 adults in the region. In terms of physical branches, it’s the opposite. Banks in KSA highly privileged developing ATM than expensive physical branches.

Banking distribution in all GCC countries seems rather homogeneous in terms of density. We would expect Qataris to be the most covered by banking branches given its smaller size, but surprisingly the Omani population that seems to be most covered by banking branches.

At Stratexis, we wanted to study the growth of banking distribution in the past 12 years to get more insights. Given the large growth of the population in Middle Eastern countries, coping with such growth can be challenging and indeed banks in each country made distinct decisions.

It appears that all countries privileged investing in their ATM network, cheaper than branches. The development of digital channels is also an important factor that impacted the choice to rationalize investments in banking branches. These findings confirm that banks in the Middle East follow growth patterns observed in other emerging markets.

On the other hand, Stratexis studies in Egypt found out that banks in Egypt are those who increased the most the size of their network, both in terms of branches or ATM. We, at Stratexis, suggested that a lot of catching up is necessary, which made banks grow their ATM network each year in average by 16%, on top of population growth.

Banks in KSA also opened new branches and ATM at a rate higher than population growth, which confirms their willingness to expand in the market.

Eventually we’ve looked at the banking penetration rate of each country, and the results are aligned with branches density confirming our conclusions that physical branches are an effective channel for financial inclusion.

Banking penetration in Saudi Arabia is in the average of GCC countries, higher than other Middle Eastern countries such as Jordan or Egypt. With 72% of Saudi adults having access to financial services, banking penetration in KSA still has growth potential, at least until it reaches the 88% of UAE.

We can conclude that the banking distribution in KSA is fairly developed compared to its neighbors. When compared to mature countries, we can confirm that there is still room for expansion, particularly concerning banking branches. The average density in Europe is 28 branches per 100 000 adults or 3 times the density in KSA. Even when compared to other emerging countries (Turkey 19, Mexico 14, Iran 31, Indonesia 18), KSA remains lower in terms of branches density. What should be developed is agile branches of smaller size that can best meet expectations of penetration while reducing required financial investments.


In the coming articles, we will go deeper in our analysis of the banking distribution in KSA by focusing on the 14 main banks operating in KSA in terms:

  • Analyzing the growth of branches and ATM in 2017

  • Comparing the net profit per branch to the network size

  • Evaluating the reach and geographical distribution



Nadim Samna

Managing Partner

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