The rise of technological advancements in the Middle East has spun across all sectors, with financial technology becoming a trademark for innovation. The fintech sector has become one of the most important industries in the world, gaining the attention of entrepreneurs, investors and governments. Arab News reports that every year the industry witnesses unprecedented growth by doubling the number of investments and players participating in the sector. This year, the region experienced startup funding in millions, innovation programs for the masses, and development strategies at national levels.
Saudi Arabia is one of the most active countries in the Middle East and the world, as it is encouraging financial technology like never before. The country has determined its fintech goals to position itself as a regional financial technology hub in coordination with Saudi Vision 2030. It is already halfway there after the Saudi Cabinet approved the Financial Sector Development Program, which is set to reshape the country’s entire industry.
“Fintech development will harness a more globally connected Saudi economy, with a wider range of international financial products and services being offered by companies and enjoyed by citizens,” the development plan stated. The strategy aspires to increase the number of fintech companies in the Kingdom to 525, create 18,000 jobs, increase the sector’s contribution to the gross domestic product to $3.5 billion, and increase venture capital investments to $3.2 billion by 2030.
The Kingdom’s ambitious goals are becoming a reality, as the plan also indicated the launch of an open banking program in the sector by 2023. The Saudi Central Bank, also known as SAMA, issued the regulatory framework for open banking while announcing that all banks and financial institutions in the Kingdom will be ready to launch it in the first quarter of 2023. Open banking enables third-party developers to link applications and services to financial institutions by creating data transparency.
SAMA’s regulated environment sandbox licensed over a dozen fintech companies in 2022, with over 80 still in the pipeline. The country also licensed D360 Bank, its third digital bank, in February 2022, further accelerating the Kingdom’s digital transformation. SAMA’s Fintech Saudi initiative has also played an important role in the transformation of the ecosystem, launching multiple innovation programs and accelerators.
According to Fintech Saudi’s 2022 annual report, the Kingdom witnessed a 79 percent increase in fintech firms compared to last year, with currently 147 active companies, just three figures down from the target of 150 set by the development plan. “This year has been a significant year for the development of the Fintech industry in the Kingdom with the launch of the Fintech Strategy, which will drive Saudi Arabia to become a global fintech hub,” Nezar Alhaidar, director of Fintech Saudi, stated in the report. The report also stated that fintech companies in the infrastructure segment saw a 600 percent increase as the Kingdom prepares for its open banking launch.
Swinging into action
Companies have also set a record for funding in 2022, raising around $400 million, an 11 percent increase from the year before, with 20 funding deals in Saudi–based startups. Two of the largest funding rounds in the region in 2022 included Tamara raising $100 million in August and Foodics’ $170 million in April. Regional players have recognized the Kingdom’s efforts as fintech companies are opening offices and expanding into the market.
UAE fintech companies YAP, Qashio, Pyypl and baraka have all announced plans to expand into the Saudi market in 2022. “The Kingdom has adopted the world’s leading standards for equity investing, and we look forward to being a long-term partner to investors here in the future,” Feras Jalbout, CEO and founder of baraka, told Arab News.
Tarabut Gateway has also widened its Saudi presence by opening an office in the Kingdom and hiring a local team. In addition, India’s fintech enabler M2P has also dedicated its regional expansion efforts to support Saudi Arabia’s financial institutions.
Fintech firms Zywa and FOO raised funds in 2022 to boost their entry into Saudi Arabia, while Egypt’s ValU entered the market through a local partnership with Alhokair. These companies have been keen to enable economic and digital transformation in Saudi Arabia in support of Vision 2030.
Ahmed Coucha, the co-founder of fintech company FlapKap, told Arab News as he announced the company’s plans to enter the Saudi market that the Kingdom provides 10 times the potential to grow compared to Egypt and five times compared to the UAE. Jordan-based fintech HyperPay’s founder, Muhannad Ebwini, stated, “Saudi Arabia is now ready to adopt digital payments. And that is why they are way ahead of anyone in the region.” Other companies like Egypt’s Paymob and UAE’s Pemo have announced their plans to launch officially in the Kingdom by 2023. “We feel incredibly welcomed and very encouraged by the remarkable effort that Saudi Arabia has demonstrated toward boosting the fintech sector,” CEO and Founder of Pemo, Ayham Gorani, told Arab News.
Moreover, global giants Visa and Mastercard stated that Saudi Arabia had witnessed one of the biggest digital transformation curves in history, with over a 90 percent penetration rate in digital payments. International and regional recognition is a significant milestone for the Kingdom as more fintech players are heading to the market to become part of the historical transition.
As 2022 ends, the Kingdom’s fintech sector is still warming up with its ambitious plans to create financial literacy and technological advancement for its people in line with Vision 2030.
