ADL reports significant acceleration toward Saudi Arabia fintech leadership

RIYADH: In its latest industry report, Arthur D. Little unveils the rapid growth and evolving landscape of the fintech sector in Saudi Arabia, illustrating significant strides towards transforming the Kingdom into a leading global fintech hub.

The report highlights the Saudi Arabian Monetary Authority’s (SAMA) and other regulatory bodies central contribution in driving the sector’s expansion, outlining strategic milestones, critical developments, and the dynamic prospects that are defining the future of fintech in the region.

Saudi Arabia’s fintech industry has demonstrated remarkable progress over the past five years, buoyed by strategic measures to stimulate innovation. Notable developments include the doubling of fintech companies from 89 in 2022 to over 200 by the end of 2023 and substantial investments amounting to over SAR4 billion (~US$1 billion) into fintech startups from several local, regional and global investors. These advancements are underpinned by pivotal programs such as Fintech Saudi, the Fintech Regulatory Sandbox, and substantial startup funding from entities like the Saudi Venture Capital Company.

“The Kingdom’s commitment to fostering a dynamic and inclusive fintech ecosystem is evident, with SAMA and CMA’s regulatory enhancements and the strategic infusion of capital from Saudi based investors into the sector,” said Arjun Vir Singh, Partner and Global C-Head of Fintech at Arthur D. Little. “In order to become a leading global fintech hub, the need to address emergent challenges of regulatory enhancement, broadening of funding avenues, and greater talent cultivation are key to maintaining the necessary momentum.”

The SAMA Annual Fintech report, published in 2023, shares the significant growth in digital payments, alternative financing like ‘buy now, pay later’ and debt crowdfunding, and financial product aggregation. Simultaneously, over 100,000 people have engaged in fintech-related events, training courses, and internships organised by Fintech Saudi. Those advancements reflect a shift towards more accessible and consumer-friendly financial services, aligning with the needs and preferences of today’s digital-savvy users, reflecting the goals of Vision 2030 to create a diversified and sustainable economy.

This impressive growth has been catalysed by a range of measures fueled by SAMA and other regulators to stimulate innovation, with four in particular standing out:

1. The establishment of Fintech Saudi was a catalyst for change, leading to the Fintech Accelerator program, the Fintech Saudi Innovation Hub, an online fintech directory, and regulatory enhancements in collaboration with SAMA & CMA.
2. The SAMA-established sandbox which allows controlled live testing of fintech innovation, therefore facilitating a smooth transition into the open market.
3. Start-up funding in a variety of financial support mechanisms such as Saudi Venture Capital Company (SVC), supported by CMA and the Financial Sector Development Program (FSDP) launching a SAR 350 million fund focused on fintech start-ups.
4. Fostering Financial partnerships to encourage cross-border collaborations and supporting Saudi fintechs in their international ventures, which will be instrumental for long-term success.

“Saudi Arabia is prioritising visionary leadership and proactive policy-making to cultivate a thriving fintech landscape,” added Arjun Vir Singh. “The Kingdom is not only addressing, but capitalising on strategic areas of improvement to propel forward its national economic ambitions of Vision 2030.”

While the trajectory for fintech in Saudi Arabia points upwards, the journey involves strategic refinement in areas such as enhancing international positioning, fostering international partnerships, streamlining regulatory frameworks, broadening funding avenues, cultivating talent, and optimising infrastructure investment. By keeping momentum in these sectors, Saudi Arabia reinforces its fintech infrastructure, supporting both local and global investors and innovators.

Arthur D. Little projects a future where fintech not only thrives as a sector but acts as a cornerstone in realising the broader Vision 2030 objectives of Saudi Arabia. Continued dedication to innovation and adaptive strategies are pivotal in maintaining the Kingdom’s leadership in the fintech arena.