“If you’ve somehow missed the happenings in Saudi Arabia’s fintech scene, now is the time to pay serious attention,” said Abdulaziz al-Dahmash, CEO – Kingdom of Saudi Arabia (KSA), Network International.
“Firstly, this is not just a market to watch for fintech; it is “the market”, says al-Dahmash.
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Saudi Arabia is the largest market in the six-nation Gulf Cooperation Council (GCC), representing almost 50 percent of the region’s GDP, with a population where 65 percent is under 30 and the largest youth population.
“They are tech savvy and users of social media and new technology,” he notes.
Abdulaziz al-Dahmash, CEO – Kingdom of Saudi Arabia (KSA), Network International. (Included)
Second, the Kingdom’s population of nearly 35 million people has one of the highest rates of fintech adoption in the region.
Fintech Adoption Survey
According to the Fintech Saudi National Fintech Adoption Survey, 74 percent of individuals have had experience using at least one fintech solution, and fintech transaction values have increased by more than 18 percent between 2017 and 2019 year-on-year, reaching over 20 billion USD in 2019 and expected to exceed USD 33 billion in 2023.
And thirdly, but most importantly, the Saudi government recently announced plans to triple the number of fintech companies in the kingdom by 2025 under a new national strategy with a goal of transforming Riyadh into a global fintech capital to rival London and Singapore.
The strategy seeks to increase the fintech sector’s contribution to gross domestic product (GDP) to SAR 4.5 billion ($1.2 billion) and create nearly 6,000 jobs by 2025.
In addition, it aims to increase the proportion of digital transactions without cash to 70 per cent by 2025.
The FinTech strategy is a new pillar of the Saudi Vision 2030 Financial Sector Development Program (FSDP), and the addition of an explicitly independent FinTech strategy is an unequivocal indicator of the weight and importance of fintech for the government from both a strategic and positioning perspective.
Adding a specific fintech pillar to the Saudi national vision furthers the country’s goal of diversifying the economy away from oil and expanding the financial sector to build and grow new revenue streams, and stimulate foreign investment.
The fintech industry worldwide has seen some of the fastest growth rates in venture capital investment over the past decade. The previous annual record for global venture activity in fintech was $53 billion in 2018. Global venture activity in 2021 has already surpassed $80 billion.
Saudi Arabia’s fintech sector generated approximately $157.2 million in venture capital (VC) investments in the first eight months of 2021, a staggering increase from $7.8 million in 2020 and $18 million in 2019.
In 2022, the Saudi Arabian VC market saw a record funding of $584 million in the first half of the year, representing a remarkable 244 percent increase compared to the same period in 2021. Fintech was also the industry of choice by number of deals in Saudi Arabia, accounting for 22 percent of total transactions within the first six months of 2022.
Al-Dahmash who has worked with the Saudi Central Bank (SAMA) and is an active member in the fintech industry, says “in my experience from a government perspective, I have yet to see a clearer and more specific implementation plan dedicated to fintech in any other market. “
While governments around the world are championing their fast-growing fintech sectors, most national visions only set out high-level strategies without defined goals.
In Saudi Arabia, by contrast, al-Dahmash says the plan’s specific and ambitious goals are set to trickle down to various public entities, particularly by enabling financial institutions to support private sector growth, attract foreign investment and strengthen capital markets. “
“Although the fintech strategy has been added as a pillar in the development program for the financial sector, I do not see this as a vertical strategy, but rather a horizontal one,” he adds.
This strategy – which was jointly designed by the Central Bank of Saudi Arabia (SAMA), the Capital Markets Authority (CMA), the Ministry of Finance, the Ministry of Communications and Information Technology, the Ministry of Investment, the General Authority for Small and Medium Enterprises (Monsha’at), and Fintech Saudi – aims to highlight the Saudi identity globally, strengthen the regulatory framework, support the sector, develop local talent, promote technical infrastructure and improve cooperation at local and global levels.
“To me, this means that we can expect major changes in the processes, procedures and regulations to attract foreign fintechs as well as encourage and facilitate the set-up of local ones,” he adds.
“This also means that we will see collaboration across all the various entities creating great dynamism, flexibility and agility in the government. In fact, we, as Saudis, have started to feel and live the positive changes from the government at a very fast pace. »
This fintech strategy will also be fundamental to accelerating the growth of the country’s overall digital economy.
Globally, the pandemic-induced accelerated digitization has led to a massive demand for high-tech solutions and a subsequent increase in their market share.
Development of technology-based financial services and solutions will help enable other sectors in the Kingdom, including retail, hospitality and real estate. Innovation in these sectors is expected to help increase assets under management to reach 50 percent by 2030.
Meanwhile, SAMA’s Regulatory Sandbox and CMA’s FinTech Lab, and the release of regulations for a range of different fintech activities, have helped boost confidence among investors to deploy more funds to fintech firms.
“With all these elements in mind and considering the rapid pace at which Saudi Arabia is operating its fintech industry, there is no doubt that the nation is moving forward to become a global fintech hub,” says al-Dahmash.
Read more: SAMA launches Fintech Saudi initiative to enable fintech sector
