Ghada Ismail
The 24 Fintech recently concluded, the new annual event hosted by the Financial Sector Development Programme (FSDP), Saudi Central Bank (SAMA), Capital Market Authority (CMA), Insurance Authority (IA), and co-organized by Fintech Saudi and Tahaluf.
Ran from 3-5 September, the brand new event aims to become a world-class annual occasion that will elevate Riyadh’s global financial technology ambitions and demonstrate the Kingdom’s commitment to shaping the future of finance.
The inaugural edition of 24 Fintech featured four stages hosting three days of programming including keynotes, panel discussions, and industry announcements, with dedicated areas for investment and startups, technology, and academia. Across the various stages, experts probed a host of themes including governance, regulations, interoperability, investment, and reimagining the financial services landscape.
The Kingdom of Saudi Arabia set a list of objectives within its Vision of 2030, and one of them is to establish the Kingdom as a tech-driven global financial powerhouse, and Riyadh as an international fintech hub, led by confidence in the enormous potential of this sector to attract gigantic investments into the Kingdom from all over the globe.
Saudi Government’s contribution to developing the Fintech scene
In the past five years, the Kingdom of Saudi Arabia has already taken significant strides in developing fintech into a flourishing industry marked by rapid growth, integrating it as a key factor with an increasing contribution to Saudi’s national economy.
In a report by the global consulting firm, Arthur D. Little (ADL), the author took us into a journey unfolding how the fintech scene elaborated in Saudi Arabia, it seems to be started with an initiative launched in April 2018 by the Saudi Arabian Monetary Authority (SAMA), in collaboration with the Saudi Capital Markets Authority (CMA), launching Fintech Saudi, an initiative aimed at strengthening KSA’s position as the leading fintech hub in the MENA (Middle East and North Africa) region.
Since then, Fintech Saudi played a prominent role in boosting, providing support, and representing the fintech industry in the kingdom through initiatives such as its Accelerator program, Career Fair, Fintech Tour, and the Summer Sessions.
From this time on, there has been an obvious increase in the number of fintechs operating in the kingdom. Over SAR 4 billion ($1 billion) has been pumped as investments into fintech companies in the Kingdom, and over 100,000 people have shown great interest in fintech-related events, training courses, and internships organized by the Fintech Saudi platform.
The kingdom's strategy to achieve its fintech vision
In May 2022, Saudi Arabia’s Vision 2030 approved its national fintech strategy marking the next stage of fintech development for Saudi Arabia, which was based on six main pillars:
(1) developing KSA as the fintech hub for the Middle East,
(2) creating a regulatory environment supportive of growth and innovation,
(3) funding for start-ups,
(4) training and skill enhancement,
(5) accelerating support infrastructure,
(6) driving local and international collaboration.
This strategy set four objectives to achieve, as part of high hopes of becoming a global fintech leader in the MENA Region. Those four objectives are as follows:
Establish at least 525 fintech companies (versus 200 in 2023).
Open 18,000 fintech job opportunities (versus around 5,400 in 2023).
Account for SAR $13.3 billion in direct GDP (versus around $1 billion in 2023).
Achieve SAR $12.2 billion in direct venture capital (VC) contributions (versus $1.4 billion in 2023).
The output then undeniably showed a range of areas, resulting in more convenient and accessible payment systems for consumers, new alternative financing platforms with services like debt crowdfunding, and service integration through aggregation platforms, providing a better user experience for the consumer. The number of fintech companies in KSA more than doubled in one year, from 89 in 2022 to ~200 in 2023.
In the digital payments realm, Saudi Arabia achieved a cutting-edge growth through establishing regulatory frameworks not only to regulate but also to nurture the licensing of payment companies and their service activities. Vision 2030 set an ambitious aim to beef up figures of non-cash transactions to 80% by 2030, from an 18% baseline in 2016. In fact, by 2021, non-cash payments were already 62% of all transactions, well ahead of the plan. Besides, multiple developments took place in parallel, including the emergence of digital wallets, local transfers, QR code payments, and SADAD system bill payments.
As for the alternative financing sector, particularly “buy now, pay later” (BNPL) and debt crowdfunding, has emerged as the second-largest fintech subsector in Saudi Arabia, one thing that reflects a shift in consumer and business financing preferences, increasingly opting for flexible and accessible options instead of traditional banking models.
In a report issued by SAMA, the investor base in the KSA crowdfunding market has witnessed a significant surge, rising from 302 in 2019 to over 92,000 in 2022. These investors have collectively issued over 1,800 loans worth more than SAR 1.1 billion since 2019, with about SAR 770 million in loans disbursed in 2022 alone. Interest rates in this market have escalated from 10% in 2019 to over 16% in 2022, and approval rates experienced mixed performance, dropping to 48% in 2021 before recovering to 66% in 2022.
24 Fintech conference recommendations to improve the Fintech scene
Adding to the nation’s continuous efforts to embrace digital innovation, the 24 Fintech Conference underscored the importance of fostering partnerships between industry leaders, startups, and regulators to drive sustainable growth. The event not only showcased the dynamism of the fintech ecosystem but also reinforced Saudi Arabia's commitment to becoming a global fintech hub.
the recommendations from Saudi Arabia's 24 Fintech Conference centered around several key themes aimed at advancing the fintech landscape in the region:
- Regulatory Support: Encourage the development of a more adaptive regulatory framework that supports innovation while ensuring consumer protection and financial stability.
- Collaboration: Foster partnerships between fintech startups, traditional financial institutions, and government entities to drive innovation and share resources.
- Investment in Talent: Promote educational initiatives and training programs to equip the workforce with the skills needed to thrive in the fintech sector.
- Focus on Cybersecurity: Prioritize the implementation of robust cybersecurity measures to protect sensitive financial data and build consumer trust.
- Financial Inclusion: Develop strategies that enhance access to financial services for underserved populations, leveraging technology to bridge gaps.
- Sustainability Initiatives: Encourage fintech solutions that align with sustainability goals, promoting eco-friendly practices within the financial sector.
- Innovation Hubs: Establish innovation labs and incubators to nurture emerging startups and facilitate knowledge exchange.
- Global Engagement: Strengthen international collaborations to share best practices and attract foreign investment into the local fintech ecosystem.
In conclusion, the evolution of Saudi Arabia's fintech ecosystem represents a remarkable journey of innovation, ambition, and transformation. Over the past few years, the Kingdom has emerged as a key player in the global financial technology landscape, fueled by a combination of visionary leadership, significant investment, and a commitment to digital transformation. The government’s strategic initiatives, such as Vision 2030, have laid a solid foundation for fostering a vibrant fintech environment, attracting both local and international talent.
The rise of innovative startups and the collaboration between traditional financial institutions and tech firms have led to the development of diverse financial solutions that cater to the needs of a rapidly evolving consumer base. From digital payments and blockchain technology to robo-advisors and lending platforms, Saudi fintech is pushing boundaries and redefining the financial services sector.
However, as the ecosystem continues to grow, challenges remain, including regulatory hurdles, cybersecurity threats, and the need for greater financial literacy among consumers. Addressing these challenges will be crucial for sustaining momentum and ensuring that the benefits of fintech reach all segments of society.
Looking ahead, the potential for Saudi Arabia’s fintech sector is immense. By embracing innovation, fostering collaboration, and prioritizing inclusivity, the Kingdom can solidify its position as a leading fintech hub in the region. As we witness this dynamic evolution unfold, it is clear that the future of finance in Saudi Arabia is not only promising but also integral to the broader vision of economic diversification and modernization. With continued commitment and strategic action, the Saudi fintech ecosystem is poised to thrive, creating new opportunities for growth and empowerment in the years to come.