Saudi Arabia’s fintech sector driving digital transformation
Saudi Arabia’s fintech sector has made significant strides towards its goal to become a regional financial hub, according to a report published by US management consultancy firm Arthur D. Little in May.
It said initiatives such as Fintech Saudi, which was launched in 2018 by the Saudi Central Bank (SAMA) and the Saudi Capital Markets Authority (CMA), had been a pivotal force in promoting the Kingdom as the leading fintech hub in the Middle East and North Africa region.
The initiative includes programmes such as the Fintech Accelerator and the Fintech Saudi Innovation Hub, as well as an online Fintech directory, career fair, fintech tour and summer sessions, which had contributed to a 20-fold increase in the number of fintech companies in the Kingdom since its establishment.
To date, more than SR4 billion (USD1 billion) has been invested in local fintech companies, with over 100,000 individuals participating in related events and training programmes, the report said.
The adoption of a national strategy in May 2022 had also marked a significant advancement in the country’s fintech sector. The strategy is built on six pillars, which include establishing the Kingdom as a regional fintech hub, fostering a regulatory environment conducive to growth, providing funding for start-ups, enhancing skills training, accelerating support infrastructure, and promoting local and international collaboration.
The Vision 2030 goals include the establishment of at least 525 fintech companies by 2030 (from 200 in 2023), the creation of 18,000 fintech job opportunities (from 5,400 in 2023), contribute SR13.3 billion to the GDP (from SR3.75 billion in 2023), and to achieve SR12.2 billion in direct venture capital contributions (from SR5.2 billion in 2023).
The establishment of a fintech regulatory sandbox by SAMA had further allowed for controlled live testing of fintech innovations, easing their transition to the open market, while the Saudi Venture Capital Co. had launched a SR300 million fund focused on fintech start-ups. The Saudi National Technology Development Programme has also introduced a Technology Development Financing Initiative, providing debt funding to support start-ups.
“While the future for FinTech in Saudi Arabia looks bright, there are still some important challenges to overcome,” the report stated, emphasizing the need to enhance the Kingdom’s global profile by articulating its unique fintech ecosystem offerings to attract more global entrepreneurs and investors.
“Streamlining regulatory frameworks. Efforts to simplify the setup and licensing processes are underway to create a more navigable regulatory environment for fintech entities. Continued enhancements in this area will support both local and international ventures,” the report said.
Further strategic priorities identified in the report, were cultivating local expertise to address challenges like high turnover and competitive salary demands, optimising investment in infrastructure to reduce the cost of essential technology and fostering international partnerships to help Saudi fintechs to thrive in the global market.
“By addressing these areas thoughtfully, Saudi Arabia can enhance its fintech ecosystem, ensuring robust growth and sustainable development in the years to come,” it added.
