E-wallets and stored valueالمحافظ الإلكترونية والقيمة المخزّنة

An e-wallet is an app a customer keeps a balance inside, to spend later within the app or out of it.

That balance is what is called stored value (القيمة المخزّنة). The customer moved money out of their bank and into the app, and the number they now see on the screen is a promise from the company rather than a bank account in their name.

Which is where the danger starts. That number appears in the company's books as if it were company money, when it is a liability owed to its customers.

Why does a wallet need a licence? I only hold the customer's balance

Plenty of founders make this objection. The app does not lend and does not invest. It holds a balance until its owner spends it. So where is the problem?

The problem is that this money is not yours, and it will sit in your bank account looking exactly as if it were.

Picture an app with a hundred thousand users averaging two hundred riyals each. That is twenty million riyals in the company's account. They will not all withdraw on one day; most of it will sit still for months.

The temptation is obvious. Twenty million doing nothing, and a company that needs cash for salaries or marketing or expansion. Nobody would notice a temporary borrow.

And that is where the collapse happens. On the day withdrawals run above normal, the app has nothing to pay with. Nobody stole anything in the direct sense, and customer money is gone.

Hence the rules you are about to read: customer money segregated into a separate account where it is never mixed with company money, a prohibition on using it for operations, and a daily reconciliation proving the account equals the sum of customer balances. Not administrative burden. The thing that stops your success from becoming a disaster.

A balance is not a bank deposit

Value issued by a company after receiving funds in exchange is called electronic money, or stored value. A customer can spend, transfer, or redeem it under the product's terms. Displaying the balance beside a currency symbol does not turn the company into a bank. Deposit-taking and electronic-money issuance are different regulated activities.

A depositor has a claim against a bank subject to specific capital, liquidity, and banking rules. Eligible deposits may also fall within a country's depositor-protection scheme. A wallet holder instead has a claim against the electronic-money issuer. Deposit insurance usually does not cover that balance because it is not a bank deposit.

This does not mean wallet funds automatically disappear when an issuer fails. Regulators apply another protection called safeguarding customer funds. Money attributable to customers must remain separate and identifiable. Under the applicable insolvency rules, it is meant to be returned to payment users rather than consumed by the company's ordinary operating creditors.

That differs from a bank promising repayment from its balance sheet. A wallet provider is not supposed to lend the customer's money or use it to fund growth. It receives one riyal, issues one riyal of electronic value, and keeps the supporting funds away from its expenses. Operational and legal separation are therefore the centre of the protection.

An account that does not pay salaries

The separate bank account holding customer money is a safeguarding account (حساب الصون). It should not collect the company's fees, equity, or commercial revenue. It should not pay salaries, office rent, or marketing bills. Its purpose is to hold funds received for payment transactions or electronic-money issuance.

The total pool of customer money held is often called the float (الأموال العائمة). "Float" does not mean ownerless cash available for unrestricted investment. It supports specific liabilities recorded in the wallet ledger. Funds may remain for days or months before spending or redemption, but they stay protected for the customer's purpose.

Float attracts a finance director's attention for an obvious reason. One million customers holding SAR 100 each create a bank balance of SAR 100 million. The account may produce economic value depending on its arrangement and governing rules. Regulation and contract determine who may benefit from it. In Saudi Arabia, an electronic-money institution cannot promise customers interest linked to how long they hold the electronic money.

The company cannot describe a withdrawal from the safeguarding account as a short loan to itself. Even if it intends to return the money on Friday, Thursday's protection is deficient. If the company fails first, customers bear an expense that never belonged to them. Commingling customer and company funds is therefore a fundamental breach that can trigger supervisory action and loss of authorisation.

Daily reconciliation exposes the truth

The provider's ledger starts with many small records. One customer may own SAR 37, another SAR 820, and a third may be waiting for a refund. The system totals outstanding liabilities at a defined cut-off. It then compares them with the safeguarding-account balance and understood transactions still in transit.

This process is daily reconciliation. It is not an optional accounting review performed at year-end. Under SAMA's rules, the safeguarding account must have a daily reconciliation mechanism. The process demonstrates that outstanding electronic money and relevant payment transactions match the funds actually protected.

A difference does not always prove theft. A bank transfer may arrive after the wallet's day closes. A processor may record a refund before sending the settlement file. A technical notification may repeat even though the bank movement did not. Every difference still needs a documented cause, an owner, and a deadline for resolution.

A capable team separates a timing difference from a genuine shortfall. A known movement expected in the next cycle explains a timing difference. A shortfall means customer liabilities exceed money available to protect them. It requires immediate correction and escalation, not an obscure entry labelled "pending expense."

The ledger also needs one unique identifier for each movement. When a customer loads SAR 200 by card, the gateway, wallet, and bank settlement each see part of one event. The provider must not count it three times. If settlement later fails after value was issued, the ledger needs a controlled reversal path.

The life of one riyal

A riyal enters when a customer loads the wallet or receives a permitted transfer. The provider checks the customer's identity, transaction source, and limits. It records a liability and safeguards the corresponding funds. The amount is not company revenue because the company owes its use or redemption to the customer.

The riyal moves when the customer pays a merchant or sends it to another user. If both remain inside the same wallet system, two ledger entries can change without an external bank movement. If funds settle to an outside merchant, money leaves the safeguarding account for the permitted purpose. The wallet liability must decrease by the correct amount.

The riyal's lifecycle ends when the customer redeems it to a bank account or spends it and settlement completes. Applicable rules and terms may allow stated verification steps or lawful fees. The provider cannot obstruct redemption to manage its own cash shortage. A wallet balance is not permanent customer financing for the business.

This also reveals the difference between an available balance and a ledger balance. An app might reserve SAR 20 for a transaction that started but has not completed. The amount remains part of the provider's liability, although it is temporarily unavailable for another purchase. The customer needs a clear description of the hold, its expiry, and a dispute route.

A small feature can contain a large activity

A founder might begin with a simple in-app refund feature. The product suggests leaving a returned purchase as "balance" instead of sending it back to the card. If that balance can later be spent across sellers, transferred, or redeemed, the product may have entered regulated stored value. A label such as "cash points" does not change the economic function.

Company-funded promotional value is different from money paid by a customer. A shop granting a SAR 10 discount voucher has not necessarily received customer funds. A platform taking SAR 100 and promising to hold it for a later purchase has created a financial liability. Both display a number, but funding source, redemption rights, and acceptance scope determine their treatment.

A product can operate through a licensed institution rather than seek its own licence on its first day. The institution opens wallets, verifies customers, and safeguards funds while a partner builds the interface. The contract does not remove every responsibility from that partner. It still needs accurate records, clear identification of the issuer, and promises that fit the authorised product.

The SAMA context

SAMA regulates electronic-money issuance and wallet opening under the Payments and Payment Services Law and its Implementing Regulations. A provider must safeguard relevant funds upon receipt and use a designated account serving no other purpose. That account is subject to daily reconciliation and cannot be opened, closed, replaced, or merged without the relevant regulatory requirements.

SAMA also expects policies, controls, and defined authority over management of the safeguarding account. This matters because one employee who can edit the ledger and move the bank balance can conceal a shortfall. A sound provider separates payment creation, approval, and reconciliation review. It logs every manual intervention for audit.

You can assess a wallet through five connected questions. Which legal entity issued the balance? Where is the supporting money? Who can move the safeguarding account? How does the provider prove the match each day? What happens to your balance if the company stops operating? A better interface does not repair unclear answers.

This prepares you for a different banking model. A wallet takes funds and issues its own liability. Open banking gives an app limited authority over an account that remains at your bank. The next question moves from custody of money to the boundaries of permission and how you revoke it.