What has the Kingdom of Saudi Arabia been up to with respect to its wider fintech and digital ecosystem in 2022?
The largest country in the Gulf Cooperation Council (GCC), Saudi Arabia has made very significant transformations in such a short period of time.
As highlighted in The Fintech Times‘ Fintech: Middle East and Africa 2021 report, the Kingdom is undergoing massive economic development transformations that are centred around its national economic development strategy, Saudi Vision 2030.
This has seen a prioritisation such as with its financial services sector and digital transformation as a whole. One of its original delivery programmes is the Financial Sector Development Programme (FSDP), which would aim to make Saudi have a strong financial services sector and one that is both modern and innovative.
As part of its economic development, this saw the creation of the catalyst Fintech Saudi, launched in 2018 by the Saudi Central Bank (SAMA), which aims to boost the growth and maturity of the Kingdom’s fintech market.
It is not just growing the Saudi fintech system and furthering the digitalisation of financial services, but also accelerating financial inclusion for both the local unbanked and underbanked.
SAMA and various other entities, in partnership with the G20 Global Partnership for Financial Inclusion (GPFI) and the World Bank Group, identified that the youth, women and small and medium enterprises (SMEs) are the three groups that require all-in assistance and support to embitter financial inclusion via digital and other regulatory incentives.
Just this summer, the FSDP launched the Fintech Strategy Implementation Plan, which will aim to further accelerate the Kingdom’s fintech sector on a global stage and make Riyadh in particular a global fintech hub.
This is so important that it is actually a new pillar in FSDP. It is expected that the benefits of fintech in the Kingdom will spill over to other sectors beyond just financial services – such as retail, hospitality, real estate, healthcare, transportation and investment.
As part of this, the Kingdom plans to triple the number of fintechs it has by 2025 (at present it is 82 so by 2025 that would be 230 fintechs), and plans to increase digital transactions of all financial dealings to 70 per cent within the next three years.
Also, it aims for fintech to contribute to 4.5 billion SAR ($1.2billion) to the gross domestic product (GDP), creating 6,000 new jobs by 2025. By 2030, the vision is to have 525 fintechs in Saudi Arabia and to have created nearly 18,000 jobs.
Last January, SAMA announced it was developing its open banking initiative and services. According to the Fintech Saudi 2020-21 annual report, “The open banking policy issued by SAMA highlights the objectives of implementing an open banking framework, in addition to the expected positive impacts it would have on the Kingdom’s financial sector.” It is planned for SAMA to go live with open banking sometime this year.
In December last year, SAMA announced the launch of the first version of the open data platform. This step comes as part of SAMA‘s commitment to providing accurate and up-to-date information and data for specialists and stakeholders about economic, financial and monetary statistics and indicators of the Kingdom.
In terms of VC funding, between January and August last year, Saudi Arabia saw 16 venture investments in fintech with a total deal value of $157.2million, a significant increase from 2020 with $7.8million with seven venture investments and in 2019 with six venture investments totalling $18million.
With respect to those fintechs in Fintech Saudi’s database, almost one-third (32 per cent) are in payments and currency exchange, followed by lending and finance in second place at 19 per cent, in third place are personal finance/treasury management, in fourth place are business tools at 12 per cent and in fifth is private fundraising at 10 per cent.
Capital markets are in sixth place at seven per cent, banking and banking infrastructure at two per cent while other verticals represented five per cent of fintechs.
With respect to digital, the Kingdom announced over $6.4billion in investments in future technologies and entrepreneurship earlier this year at the inaugural LEAP conference in Riyadh, which will further sector them to have the largest digital economy in the Middle East and North Africa (MENA) region.
They include Aramco Venture’s Posperity7 Fund with $1billion, and another $1billion from NEOM Tech & Digital Company with a focus on future technologies.
Telecom giant stc announced MENA HUB, a $1billion investment in regional connectivity and infrastructure, which will support Saudi Arabia’s rapidly expanding digital and cloud sector. Also, the launch of the world’s first cognitive metaverse, XVRS, was announced that will serve residents and visitors of the smart giga-project.
Consumers in Saudi have been embracing fintech and wider digital solutions. Last year SAMA announced that Saudi Arabia witnessed the highest adoption of contactless payments through Near-Field Communication (NFC) with 94 per cent, the highest in MENA region, above of the European Union (EU) average, and ahead of Hong Kong SAR and Canada.
Fintech has its strategic pillar in Saudi Arabia, a more positive sign that it will further play a stronger role in its future growth to economic development and diversification.