Cross-Border Payment Innovation: SAMA Blockchain-Based Settlement and Remittance Frameworks

Saudi Arabia’s annual outbound remittance volume of SAR 150 billion ($40 billion) makes it one of the world’s largest remittance-sending countries. SAMA’s cross-border payment innovation program, anchored by the Project Aber bilateral DLT pilot and participation in the BIS Project mBridge multi-CBDC platform — which Saudi Arabia joined in June 2024 alongside China, Hong Kong, Thailand, and the UAE, processing $22 million in trial transactions at MVP stage —, targets 50-70% cost reduction in cross-border payments through distributed ledger technology. Four initial settlement corridors — UAE, India, Philippines, and Egypt — are in development, collectively covering over 75% of Saudi outbound remittance volume.

Current Cross-Border Payment Infrastructure

Saudi Arabia’s cross-border payment system relies on three primary channels:

Correspondent Banking Network: The traditional channel for high-value interbank transfers, using SWIFT messaging and nostro/vostro account structures. Average settlement time: 1-3 business days. Average cost: 0.5-2% of transaction value for commercial transactions.

Licensed Exchange Companies: Specialized remittance providers (12 licensed entities) serving the expatriate worker population. Average settlement time: same-day to 24 hours. Average cost: 3-7% of transaction value, varying significantly by corridor.

Digital Payment Channels: Licensed fintech providers including stc pay and other SAMA-licensed payment service providers offering digital remittance services. Average cost: 2-4% of transaction value. Growing rapidly but still representing less than 15% of total remittance volume.

Inefficiency Analysis

SAMA’s analysis identifies four primary cost drivers in the current system:

1. Intermediary chains: Average of 2.4 intermediary banks per cross-border transaction, each adding processing fees and time
2. FX conversion costs: Multiple currency conversions in multi-hop transactions, with each conversion adding 0.3-0.8% in spread
3. Compliance duplication: Each intermediary performs independent AML/CFT screening, creating redundant processing costs
4. Liquidity management: Pre-funded nostro/vostro accounts require banks to maintain significant capital buffers in foreign currencies

DLT-Based Settlement Corridors

Saudi-UAE Corridor (Active)

Building on Project Aber, the Saudi-UAE corridor is the most advanced DLT-based payment corridor:

• Technology: Hyperledger Fabric-based dual-issuance DLT
• Participants: 4 Saudi banks, 3 UAE banks, SAMA, CBUAE
• Transaction volume (pilot): SAR 2.1 billion processed in 2025 testing
• Settlement time: 2-7 seconds (versus 1-2 days on conventional systems)
• Cost reduction: Approximately 60% versus correspondent banking
• Status: Extended pilot, commercial launch targeted Q4 2026

Saudi-India Corridor (Development)

India is the largest remittance destination for Saudi Arabia, receiving approximately SAR 45 billion annually:

• Technology: Under evaluation; candidates include CBDC bridge (mBridge framework) and private DLT solution
• Partners: Reserve Bank of India (RBI) in discussion with SAMA
• Target: Same-day settlement at cost below 2% for amounts up to SAR 10,000
• Status: MOU signed Q1 2026, technical feasibility study in progress

Saudi-Philippines Corridor (Development)

Philippines receives approximately SAR 18 billion in annual remittances from Saudi Arabia:

• Technology: Payment token-based corridor using licensed stablecoin infrastructure
• Partners: Bangko Sentral ng Pilipinas (BSP) in discussion
• Target: Near-instant settlement at cost below 3%
• Status: Pre-feasibility discussions ongoing

Saudi-Egypt Corridor (Planning)

Egypt receives approximately SAR 22 billion in annual remittances from Saudi Arabia:

• Technology: To be determined pending regulatory discussions with Central Bank of Egypt
• Target: Same-day settlement with transparent, competitive FX rates
• Status: Early planning stage, regulatory dialogue initiated Q4 2025

BIS Project mBridge Participation

SAMA is an observer participant in BIS Project mBridge, a multi-CBDC platform developed by the BIS Innovation Hub with the central banks of China, UAE, Thailand, and Hong Kong. mBridge enables:

• Direct CBDC-to-CBDC cross-border settlement without correspondent banking intermediaries
• Real-time foreign exchange conversion at competitive market rates
• Embedded AML/CFT compliance at the protocol level
• Atomic settlement (simultaneous exchange of payment and value)

SAMA’s observer status allows participation in technical development and pilot testing, with a path to full participation once the digital riyal reaches sufficient technical maturity. Full SAMA participation in mBridge is projected for 2028, coinciding with the planned digital riyal launch.

Regulatory Framework for Cross-Border Digital Payments

SAMA has established regulatory requirements for all DLT-based cross-border payment services:

Licensing: All entities providing DLT-based cross-border payments must hold a SAMA payment service provider license or operate under a sandbox authorization

FX Compliance: Cross-border digital payments must comply with SAMA’s foreign exchange regulations, including reporting requirements for transactions exceeding SAR 50,000

AML/CFT: Full travel rule compliance, enhanced due diligence for high-risk corridors, and blockchain analytics deployment

Consumer Protection: Clear fee disclosure, exchange rate transparency (real-time rate display), and complaint resolution mechanisms

Data Residency: Transaction data involving Saudi persons or entities must be stored in the Kingdom, even for cross-border transactions

Impact Projections

SAMA’s economic impact assessment for DLT-based cross-border payments:

The SAR 5-8 billion in projected annual cost savings represents a significant economic benefit for Saudi Arabia’s 10+ million expatriate workers, who currently bear the majority of cross-border payment costs. Cost reduction also supports the Kingdom’s labor market competitiveness under Vision 2030 objectives.

Integration with Tokenization Ecosystem

Cross-border payment innovation creates infrastructure synergies with Saudi Arabia’s tokenization ecosystem:

1. Tokenized securities settlement: DLT-based cross-border settlement corridors can support delivery-versus-payment for tokenized securities traded by international investors
2. Stablecoin infrastructure: Licensed SAR stablecoins can serve as settlement media for cross-border digital asset transactions
3. Sukuk distribution: Cross-border digital payment rails enable automated coupon payment distribution to international sukuk holders
4. Institutional custody: Cross-border settlement requires corresponding cross-border custody infrastructure, driving demand for multi-jurisdictional digital asset custody solutions

GCC Payment Integration

GCC cooperation on cross-border payments extends beyond bilateral corridors. The GCC Real-Time Gross Settlement (RTGS) system — operational since 2020 — provides the existing infrastructure for interbank settlement across the Gulf. SAMA’s DLT-based innovation builds on this foundation:

AFAQ Payment System: The GCC-wide instant payment system, launched in phases since 2023, enables consumer-to-consumer and business-to-business payments across all 6 GCC states. AFAQ processes SAR-denominated transfers in near-real-time, providing a complement to the DLT corridors for GCC-specific flows.

Tokenized Securities Settlement: The DLT corridors being developed for remittances can be extended to support tokenized securities settlement. When a UAE-based investor purchases Saudi tokenized sukuk on Tadawul’s platform, the AED-to-SAR payment leg can settle through the Saudi-UAE DLT corridor, completing the payment simultaneously with the token delivery through atomic settlement.

Stablecoin Cross-Border Use: SAMA’s regulatory framework permits licensed SAR stablecoin operators to facilitate cross-border payments, subject to the same AML/CFT and Travel Rule requirements as traditional cross-border channels. Two licensed stablecoin operators are piloting cross-border corridors using SAR-denominated tokens.

Technology Architecture Comparison

The cross-border payment corridors under development employ different technology approaches:

The technology diversity reflects the varying stages of central bank digital currency development across partner jurisdictions. India and Philippines are developing their own CBDC programs, which may eventually enable direct CBDC-to-CBDC settlement similar to the Saudi-UAE corridor.

AML/CFT for Cross-Border DLT Payments

Cross-border DLT payments introduce specific AML/CFT challenges that SAMA’s framework addresses:

• Jurisdictional coordination: Each corridor requires bilateral AML/CFT cooperation agreements specifying information sharing, suspicious transaction reporting, and sanctions screening responsibilities. SAMA has executed cooperation agreements with counterpart regulators for all active corridors
• Embedded compliance: The Saudi-UAE corridor embeds compliance checks directly in the DLT protocol — transactions are screened against sanctions lists before settlement, and Travel Rule data is transmitted as part of the transaction metadata
• Cross-border STR coordination: Suspicious transaction reports involving cross-border DLT payments are filed simultaneously with SAFIU and the counterpart jurisdiction’s financial intelligence unit, enabling coordinated investigation
• FATF mutual evaluation: Saudi Arabia’s 2024 FATF mutual evaluation assessed the cross-border DLT payment framework as “largely compliant” with FATF Recommendation 16 (wire transfers), with recommendations for enhanced monitoring of high-volume remittance corridors

Vision 2030 Alignment

Cross-border payment innovation directly supports Vision 2030 Financial Sector Development Program objectives:

• Financial sector GDP contribution: Reducing cross-border payment costs improves the competitiveness of Saudi Arabia’s financial services sector, supporting the target of 24.5% financial sector GDP contribution
• Digital payment adoption: Cross-border digital payment channels contribute to the 70% digital payment adoption target
• International competitiveness: DLT-based cross-border settlement positions Saudi Arabia’s financial infrastructure as among the most technologically advanced globally
• Labor market: Cost-efficient remittance channels support the retention and attraction of expatriate talent needed for Vision 2030’s economic diversification agenda

Regulatory Challenges and Risk Mitigation

Cross-border DLT payment corridors introduce regulatory challenges that SAMA addresses through bilateral frameworks:

Jurisdictional Arbitrage: Different AML/CFT standards across jurisdictions could create opportunities for regulatory arbitrage. SAMA mitigates this by requiring bilateral cooperation agreements with counterpart regulators that specify minimum compliance standards for all corridor participants. FATF membership (Saudi Arabia since 2019) provides the baseline standard.

FX Risk Management: DLT-based corridors with near-instant settlement reduce but do not eliminate FX risk. SAMA requires licensed corridor operators to maintain real-time FX rate feeds and execute conversion at the point of transaction initiation, locking the rate before settlement occurs. For stablecoin-based corridors, the stablecoin’s peg stability adds an additional layer of FX consideration.

Operational Resilience: Cross-border DLT corridors must maintain business continuity plans that account for failures in either jurisdiction’s infrastructure. SAMA requires annual disaster recovery testing for all corridor participants, including simulated scenarios where one jurisdiction’s DLT infrastructure is unavailable.

Consumer Protection: Cross-border payment disputes involve multiple jurisdictions and regulatory frameworks. SAMA requires licensed corridor operators to maintain clear dispute resolution procedures, with maximum 30-day resolution timelines and transparent fee disclosure in both originating and destination currencies.

Financial Inclusion and Expatriate Workers

Cross-border payment innovation has direct financial inclusion implications for Saudi Arabia’s 10+ million expatriate workers:

Current Pain Points: Expatriate workers — particularly low-income workers in construction, hospitality, and domestic services — face the highest cross-border payment costs (5-7% for small remittances below SAR 2,000). Many rely on informal transfer channels that operate outside AML/CFT oversight, creating both consumer protection and financial crime risks.

DLT Corridor Benefits: The DLT corridors prioritize the highest-volume remittance destinations (India, Philippines, Egypt) that collectively serve the majority of Saudi Arabia’s expatriate population. Cost reductions from 5-7% to 1-2% would return approximately SAR 3-5 billion annually to expatriate workers — money currently absorbed by intermediary fees.

Digital Wallet Integration: Cross-border DLT payments are designed to integrate with existing digital wallets, including stc pay (12 million customers) and other SAMA-licensed payment service providers. Expatriate workers can initiate cross-border transfers from their existing mobile wallets without opening new accounts or visiting physical exchange offices.

Receiving-End Accessibility: The corridors under development consider receiving-end financial infrastructure. India’s UPI system, the Philippines’ InstaPay, and Egypt’s Meeza card network provide domestic last-mile delivery channels, ensuring that DLT-settled cross-border payments reach recipients quickly even where recipients lack bank accounts.

Resources

• Digital Riyal CBDC — CBDC and Project Aber
• Payment Token Framework — Payment infrastructure
• Stablecoin Regulation — Cross-border stablecoins
• AML/CFT Compliance — Cross-border compliance
• Blockchain Settlement Infrastructure — Domestic settlement
• GCC Cooperation — Regional payment integration
• CMA International Cooperation — Bilateral agreements

Related network sites: Saudi Tokenized Real Estate | Dubai Tokenisation | UAE Tokenization Regulations | Capital Tokenization

SAMA’s cross-border payment innovation program positions Saudi Arabia at the forefront of international digital settlement infrastructure, with the convergence of Project Aber bilateral capabilities and BIS mBridge multilateral participation creating a comprehensive cross-border payment framework that directly supports the Kingdom’s objective of enabling international tokenized securities settlement across GCC and Asian markets.

For cross-border payment inquiries: info@sauditokenisation.com