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Why Fintech is seeing rapid growth in Saudi Arabia

Saudi Arabia is one of the fastest growing digital consumer markets in the world right now. But, what’s even better is that most of the market is still untapped. That’s why information technology companies across the globe are planning their entry into the Kingdom. While many IT sectors have seen massive growth in recent years, it’s fintech that has emerged as one of the top industries in the technology startups arena in KSA.

Let’s dive into the rise, growth, and future of the fintech sector in Saudi Arabia, why fintech startups around the world are keen on entering this market, and how to expand your existing fintech business in the largest economy of the Middle East.

The fintech ecosystem in Saudi Arabia

The rising demand for simpler financial products and services, changes in consumer behavior due to Covid-19, and new opportunities for innovation created by technology are the primary reasons why fintech has witnessed record-breaking growth in Saudi Arabia. This when bundled with active regulatory support and initiatives from the government, the scale and growth opportunities that the Kingdom offers to fintech companies is unparalleled.

The Financial technology (fintech) sector, comprising financial services provided by technology-enabled companies as well as companies offering technology services to financial institutions, is expected to reach $33 billion in transactional value by 2023 in Saudi Arabia.

Until recently, setting up fintech startups in the Kingdom was a bit challenging due to lack of infrastructure and regulation. However, this narrative changed with the launch of the nation’s strategic plan for the next decade called Vision 2030, which focuses on transforming the country into a digital economy with emphasis on development and growth of the fintech sector. This led to the creation of Fintech Saudi, Financial Sector Development Program, and other initiatives, to provide the right environment that allowed entrepreneurs, both local and international, to establish, scale and grow their fintech companies in the country.

What is Fintech Saudi?

Fintech Saudi – launched by the Saudi Central Bank, formally known as the Saudi Arabian Monetary Authority (SAMA), in partnership with Capital Market Authority (CMA) in April 2018, is an initiative aimed at “transforming Saudi Arabia into an innovative fintech hub with a thriving and responsible fintech ecosystem.” Its focus is to develop the infrastructure required for fintech industry, support fintech entrepreneurs, and build skills and knowledge to encourage growth of the fintech sector.

The role of SAMA and CMA

SAMA and CMA are the two main bodies that regulate the fintech framework in Saudi Arabia. SAMA’s launch of the sandbox environment in 2018 paved way for local and international fintech startups to test new financial solutions. In January 2020, SAMA launched regulations to supervise and oversee the safety and efficiency of payments transactions and in February 2020, it issued rules governing insurance regulation activities. While Payments is the leading category in the fintech industry enjoying maximum market share followed by Personal Finance, the new regulations in insurance is expected to fuel the growth of InsurTech in the country.

To facilitate fintech growth in the capital market, CMA launched Fintech Lab to provide entrepreneurs and innovators with a platform to test their fintech products, services, and business models related to the capital markets.

Some of the successful fintech startups to be born in Saudi Arabia over the last few years:

  • STC Pay founded in 2018 – a mobile wallet used for money transfers and payments

  • Penny launched in 2020 received a – a cloud-based procurement management solutions for businesses. It received a seed funding of $1.35 million

  • Tammwell founded in 2019 – a platform to compare loan on the basis of interest rates, credit score, and more, was born out of the Badir Program for Tech Incubators and Accelerators

  • Lendo founded in 2019 - online marketplace for invoice financing solutions for SMEs

In recent years, the Kingdom has attracted fintech investors and entrepreneurs from all over the world. Here are some of the major reasons why.

  • New and wide market with immense scope for growth

  • Limited competition

  • Young, tech-empowered and skilled local workforce

  • Geographical advantage linking three continents – Asia, Africa, and Europe

  • 100% Foreign ownership with no minimum capital requirements in certain sectors

  • Government initiatives and regulatory support

  • Sandbox Testing Environment, Incubator and Accelerator support

Saudi Arabia has all the ingredients it needs to become a global fintech hub. If you’re a fintech company looking to expand your operations to another location, Saudi is arguably the best place right now to do that.

How to establish a fintech company in Saudi Arabia

You can establish a fully independent business in the Kingdom with 100% foreign ownership without the need of a local agent or partner. Here are the steps you need to follow to setup a fintech company in KSA.

  1. Obtain a MISA license

  2. Get a commercial registration

  3. Obtain a SAMA approval

  4. Register a national address and register with Wasel

  5. Set up a bank account, register with Municipality, General Authority of Zakat and Tax, Social Insurance

  6. Have a physical office in KSA

You can read more about this in Fintech Saudi’s Fintech Access Guide or you can talk to one of our experts at AstroLabs.

If you’re looking to get help with the licensing and registration processes of your new company so you can focus your energy and time on building your fintech product/service, the AstroLabs can take care of the complete business setup process for you.

The future of fintech is exciting!

According to the data from Fintech Saudi, there are 60 fintech companies operational in KSA right now as compared to last year’s 20, and more than 100 firms currently in the pipeline.

A large and open market, medium to low competition (though not for too long), and progressive government regulations make Saudi Arabia one of the most lucrative business expansion options for any growing and upcoming fintech company. This is especially true for the year 2021 as moving to the Kingdom now will give you a first-mover advantage before the market becomes crowded and the competition gets stiffer.

With emerging technologies that new-age fintech typically uses such as Blockchain, Artificial Intelligence, Cloud, and open APIs still in their nascent stage, the future of fintech innovation is hard to imagine or predict. But, it’s certain that the industry will continue to grow with time as it sees wider market adoption in B2B as well as B2C segments. The companies entering this marketplace now will have leverage and can become one of the strongest players of this high-growth sector in the coming decade.

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