Saudi Arabia’s Fintech Sector Soars Towards Regional Hub Status
Saudi Arabia’s fintech sector has experienced remarkable progress as it approaches its goal of becoming a regional financial hub, as outlined in a report by Arthur D. Little.
Titled “Realizing Potential of Fintech in Kingdom of Saudi Arabia,” the report from the international management consulting firm underscores the rapid growth and innovation within the sector, spearheaded by initiatives like Fintech Saudi.
Fintech Saudi, launched in April 2018 by the Saudi Central Bank (SAMA) and the Saudi Capital Markets Authority, has played a crucial role in positioning the Kingdom as a leading fintech hub in the Middle East and North Africa.
Driving Growth and Innovation
Programs under Fintech Saudi, such as accelerators, career fairs, fintech tours, and summer sessions, have contributed to a 20-fold increase in the number of fintech companies in Saudi Arabia since its inception.
With over SR4 billion ($1 billion) invested in local fintech companies and more than 100,000 individuals participating in related events and training programs, the sector has witnessed substantial development.
Strategic National Vision
A national strategy implemented in May 2022 marked a significant milestone for Saudi Arabia’s fintech sector.
The strategy, built on six pillars, aims to position the Kingdom as a regional fintech hub, establish a conducive regulatory environment, provide funding for startups, enhance skills training, accelerate support infrastructure, and promote local and international collaboration.
Achieving Ambitious Goals
Vision 2030 targets for the fintech sector include increasing the number of fintech companies to 525 by 2030, creating 18,000 job opportunities, contributing SR13.3 billion to GDP, and achieving SR12.2 billion in direct venture capital contributions.
Initiatives like the Fintech Accelerator Program, Fintech Saudi Innovation Hub, and fintech regulatory sandbox have propelled this growth, supported by investments from the Saudi Venture Capital Co. and the Technology Development Financing Initiative.
Transition to a Cashless Society
Saudi Arabia’s shift towards a cashless society has been accelerated by innovative payment solutions like digital wallets, local transfers, and QR code payments, reducing dependence on cash transactions.
Digital wallet usage has surged exponentially, with over 17 million users in 2022. Leaders in this space, like stc pay and urpay, have made significant strides, with stc pay becoming the first fintech unicorn in the Kingdom.
Rise of Alternative Financing
The report also explores the growth of alternative financing in Saudi Arabia, particularly in buy now, pay later and debt crowdfunding.
BNPL usage has skyrocketed, with market leaders expanding across the Gulf Cooperation Council, while debt crowdfunding has emerged as a vital funding source for SMEs.
Addressing Challenges for Sustainable Growth
While the future looks promising for fintech in Saudi Arabia, challenges remain. Enhancing visibility on the international stage, streamlining regulatory frameworks, expanding funding avenues, addressing talent gaps, optimizing infrastructure investment, and fostering international partnerships are key focus areas for sustained development.
Transformational Drivers for Future Success
The report identifies six transformational drivers essential for overcoming challenges and ensuring robust growth in Saudi Arabia’s fintech landscape. Elevating global positioning, refining regulatory processes, strengthening investor networks, investing in educational programs, and managing infrastructure costs are crucial steps to drive sustainable growth and innovation in the sector.