From Disruption to Digital Transformation: The COVID-19 Shock and Digital Payment Adoption in Saudi Arabia

This study examines how the COVID-19 period is associated with changes in digital payment usage, rather than simply whether adoption increased, in Saudi Arabia using monthly data from January 2019 to July 2025. An Interrupted Time Series (ITS) approach is employed to assess both the immediate and long-term effects associated with the pandemic on a digital payment Intensity (DPI) index constructed from national point-of-sale (POS) transaction data to capture aggregate electronic payment usage relative to cash withdrawals. The results show that the onset of the COVID-19 period is associated with a sharp and statistically significant one-time increase of approximately 7 to 13% in digital payment intensity, followed by stabilization at a higher level rather than sustained acceleration. This finding challenges the common view that digital payment adoption followed a continuously accelerating path, instead showing that the pandemic induced a discrete upward shift without altering the underlying growth trajectory. The estimated effects remain robust across multiple model specifications, including dynamic ITS models, seasonal adjustments, alternative break dates, exclusion of overlapping usage variables, and parsimonious infrastructure-only models. Inflation and ATM usage consistently show negative associations with digital payment intensity, highlighting the role of macroeconomic stability and cash substitution in shaping payment behavior. The study therefore offers a more nuanced interpretation of post-pandemic digital adoption by showing that the main effect of COVID-19 was a one-time level shift rather than a lasting change in growth dynamics. Focusing on aggregate usage intensity rather than access or account ownership, it provides a system-level perspective on digital payment behavior in response to large-scale shocks. Overall, the evidence suggests that the pandemic period coincided with a discrete upward realignment in digital payment usage in Saudi Arabia, reflecting the interaction between crisis-driven behavioral change and strong pre-existing digital infrastructure under Vision 2030.