The Saudi Fintech sector is seeing unprecedented growth
A report by the Washington-based Saudi-American Business Council pointed to “unprecedented” growth in startup investment.
Saudi Arabia has one of the most developed financial services sectors in the Middle East and North Africa.
The report indicated that during August 2022, the Kingdom witnessed a 79 percent year-on-year increase in the number of operating fintech firms. Of the 147 active fintech companies operating in Saudi Arabia, only 10 were operational in 2018. This rapid expansion is due to liberalized business regulations, an active investment environment and well-developed technological infrastructure.
Meanwhile, venture capital funding in Saudi Arabia more than tripled to reach 2.2 billion Saudi riyals ($584 million) in the first half of 2022.
The Kingdom continues to invest in technology and digital transformation, ranking ninth globally in terms of the availability of investment capital, as shown in the Global Competitiveness Report 2022 issued by the International Institute for Management Development (IMD).
Albaraa Alwazir, director of economic research at the US-Saudi Business Council, said that in the first half of 2022, fintech accounted for the highest number of total investment deals.
“Fintech companies attracted investment from leading national and international firms such as Sequoia, 500 Global and Mastercard. Well-developed technology infrastructure such as readily available 5G and cloud services, high domestic demand for financial services and continued government support have all supported the ongoing growth,” said he to.
Saudi Arabia aims to reach a direct GDP contribution of SAR 13.3 billion (USD 3.6 billion) by 2030, up from SAR 1.2 billion (USD 317 million) in 2021. The fintech sector will account for 18,200 direct jobs and now 525 active fintech companies by 2030.
In addition to the record increase in licensed fintech companies, the Saudi cabinet approved the licensing of three local digital banks.
The report said the first was the conversion of STC Pay into a digital bank with SAR2.5 billion ($667 million) in capital, while the second involves Abdul Rahman bin Saad Al-Rashed and Sons Company, which established the Saudi Digital Bank with SAR1 0, 5 billion ($400 million) in capitalization. Most recently, D360 bank was licensed and became the third digital bank operating in Saudi Arabia. PIF joined key investors to support D360 Bank.
“These developments will introduce benefits that will provide payment services, consumer microfinance and insurance broking services without requiring a physical establishment,” according to the report.
It also noted that demand for a range of financial services among Saudi residents was particularly high, including banking, insurance, investment, asset management and Shariah-compliant financing.
The report pointed to a steady increase in the use of cards and electronic payments in Saudi Arabia since 2016, with a further acceleration due to the COVID-19 pandemic.
Saudi Arabian consumer habits have also adapted quickly to the digital economic transition. A 2022 Mastercard report found that 89 percent of people in Saudi Arabia have used at least one emerging payment method in the past year, according to the report.
