Saudi Arabia: Driving Fintech Innovation

Post-pandemic, there has been a paradigm shift of balance in the payment industry. People are adopting new & innovative technologies the fintech sectors are offering. These transformations have led to the rise of new players in the market who are revolutionising & breaking every boundary of the fintech industry. Fintech utilises innovative solutions like mobile apps, digital platforms, blockchain networks & AI to deliver best-in-class financial services. The sudden gap in the industry has brought forth new opportunities & challenges for consumers & providers which are not limited to India but also within the Middle East & North Africa (MENA) region. 

Among MENA countries, Saudi Arabia stands out in the fintech sector due to its capacity to push the boundaries of technology and bring the fintech revolution to the region. Saudi Arabia has the largest economy in the region, with a GDP of USD 792 billion. Saudi Arabia is the home to the world’s most innovative & successful fintech startups and a vibrant ecosystem for investors, businessmen & corporate leaders. 

Today we will explore the drivers of fintech industries in Saudi Arabia, key segments & players in the country & its future in the industry. 

The Drivers of Fintech Growth in Saudi Arabia 

Saudi Arabia’s fintech sector has been growing at a tremendous rate. According to the report published by Mordor Intelligence, the Saudi Arabian fintech market is expected to grow with an annual CAGR of 12.5% from 2021 to 2026. The report suggests several factors that contribute to the growth of the Country: 

• Post-COVID-19 there has been a mass migration of the global population from cash-based payment to electronic-based payment. Due to this, Saudi Arabia has seen a massive surge in the use of digital payments, which has created the demand for new & innovative fintech products. 
• As per SAMA, the number of digital transactions has increased by 75% in 2020 compared to the previous year. Moreover, according to Statista, Saudi Arabia’s digital payment transaction value is estimated to reach USD 28.8 billion by 2025. 
• The launch of MADA Pay & Apple Pay enabled users to make contactless payments through their devices. 
• The introduction of the SADAD Account allowed users to link their bank account with their national ID number for making QR-based payments. 
• The development of e-commerce platforms such as noon.com & souq.com, has increased the demand for online payment systems that ensure hassle-free transfer technology. 
• Introduction of mobile wallets & payment aggregators such as STCPay and BayanPay, offered a convenient & secure transaction mechanism. 

Rise of Financial Inclusion Saudi Arabia has taken great measures to boost financial inclusion among its citizens, primarily focusing on the underbanked sections. According to SAMA’s report 2020, 82% of adults in Saudi Arabia had access to financial services which went up from 74 % in 2017. Additionally, World Bank data suggests that only 1.3% of adults in Saudi Arabia do not have a bank account and are not using any digital payment system which rose from 17% in 2014. 

Here are the top factors leading to the rise of financial inclusion in the country: 

• Introduction of SAMA’s National Strategy for Financial Inclusion in 2018, which aimed to boost the quality & affordable financial services for citizens & startups. 
• The establishment of SAMA’s Regulatory Sandbox enabled fintech startups to test their products & services in a controlled environment without requiring a licence. 
• The creation of CMA’s Fintech Lab in 2019, offered fintech startups a testing opportunity in the capital market sectors. 
• The emergence of new fintech startups such as Tamara, Wahed Invest, Aqeed & Zain Cash that have offered innovative, approachable solutions for lending, insuring, investing etc. 

 

 Supportive Regulatory Environment 

Saudi Arabia has adopted a proactive & progressive approach to regulate the fintech sector. This fell under its Vision 2030 agenda of economic diversification & digital transformation. SAMA & CMA are the primary regulators in the fintech sector, taking diverse initiatives to foster growth in the fintech sector. Some of the top regulations are: 

• SAMA’s payment service provider regulation in 2019 defines the need for licence & operational standards for payment aggregators, payment gateways & payment initiation services. 
• CMA’s Fintech Regulations in 2020, defined the need for licences for crowdfunding platforms, P2P lending platforms & Robo-advisors. 
• SAMA’s Open Banking Policy in 2021, outlined the framework for allowing third-party providers to access customer data for financial services through open API. 

Growing Investment & Funding 

According to Magnitt, Saudi Arabia secured second rank in MENA for raising USD 152 million in fintech funding in 2020. This funding has significantly boosted the economy and witnessed a 35% rise in fintech startups. Public Investment Fund, Saudi Venture Capital Company, and Fintech Saudi Initiative are some of the important fund houses actively funding fintech startups. 

 Vibrant Ecosystem 

Saudi Arabia has been actively developing a colourful & encouraging ecosystem for stakeholders to facilitate growth & success in the fintech sectors. These include accelerators, incubators, hubs, and mentors who offer fintech startups with guidance, resources, mentorships & networking opportunities. 

A few key players in the ecosystem are: 

• Fintech Saudi Hub is a physical space that hosts fintech events, workshops, & meetings. Moreover, it offers co-working spaces, and meeting facilities for fintech startups & stakeholders. 
• 500 Startups MENA, a global venture capital regional branch, focuses on early-stage startups. The firm has been investing in multiple fintech companies in Saudi Arabia and few of them are Tamara, BayanPay and Geidea. 
• Fintech Saudi Mentorship Network is a network of experienced professionals & experts that offers mentorships, advice, and financial advice to fintech startups & aspiring entrepreneurs in Saudi Arabia. 

  Key Players in Saudi Arabia’s Fintech Sector 

Saudi Arabia’s fintech market holds diverse portfolios such as payments, lending, wealth management, insurance, remittances, crowdfunding & blockchain. Each of these markets has been tapped by top Saudi-based fintech startups and developed game-changing products for the citizens.   Some of the prominent players in multiple fields are:

1. Payment 

1. STCPay 
2. Halalah 
3. BayanPay 
4. Geidea 
5. HyperPay 

 2. Lending 

1. Tamara 
2. Raqamyah 
3. Lendo 
4. Forus 

3. Wealth Management 

1. Wahed Invest 
2. Sarwa 
3. Haseed Investing 
4. Liwwa 

4. Insurance 

1. Aqeed 
2. Noon Insurance 
3. Tameeni 

5. Remittances 

1. ZainCash 
2. MoniGarr 
3. Rain 

6. Blockchain 

1. Rain 
2. Tabby 
3. BitOasis 
4. CoinMENA 

Future of Fintech in Saudi Arabia Saudi Arabia has a bright future in the fintech industry offering fintech startups with exceptional growth opportunities. The country is poised to become one of the top ten global fintech markets by 2030. Additionally, projections show that fintech will contribute USD 37 billion to Saudi Arabia’s GDP in the next decade. Furthermore, it is presumed that fintech transaction value will reach USD 33.1 billion by 2025 with an increase in user base to 9.6 million. This data depicts that Saudi Arabia is one of the fastest-growing nations in the world and is set to bring digital transformation through the fintech revolution. Fintech at par will help the citizens to manage their financial resources in an efficient & effective way, thus bringing an economic revolution in the MENA region & beyond.