Build a strong FinTech sector in Saudi Arabia to support national ambitions

Build a strong FinTech sector in Saudi Arabia to support national ambitions

Thought Leadership



Written by Abdullah Al-Othman, Founder and Chairman of the Board of Geidea

The Fintech sector in Saudi Arabia has gained a lot of momentum in recent years, especially with innovative start-ups taking advantage of the explosive growth of advanced technology to innovate new financial services. A report issued by “Fintech Saudi” indicated that the number of financial technology companies in the Kingdom of Saudi Arabia has increased by 37%, which is reflected in the form of great opportunities for investors as the value of capital investments in these companies exceeded 1.3. billion Saudi Riyal (347 million US dollars). ) in 2021.

Investors are certainly aware of the importance of fintech solutions and their penetration into all aspects of life, and their role in accelerating financial inclusion and stimulating the digital economy. With artificial intelligence, analytics and machine learning, fintech companies can help all kinds of people. These companies provide crucial services, from the first bank account for young adults to setting up a start-up, buying a home or choosing the right field to invest in. .

This new reality reflects two permanent activities: the rapid and sustainable acceptance of the services of financial technology companies and the consequent inflation of the digital economy. Fintech companies in Saudi Arabia, in their efforts to promote these two activities, have to overcome special challenges posed by the new reality.

organizational challenges

It is important to realize that the fintech ecosystem includes many role players, such as fintech start-up innovators, technology developers, government institutions, financial clients, and traditional financial institutions. Fintech innovators are the key player in this system, and they need an appropriate regulatory environment to help them grow and prosper. Here comes the role of the relevant government agencies that are issuing new regulations or amending and amending some of the existing laws. to support innovation in financial technology. This is very important as well thought out procedures can reduce product development time and support expansion and investment plans.

Although Saudi regulators develop their own regulations and laws in this area, it remains a challenge for the Kingdom, as are many countries around the world. The number of permits granted to FinTech companies to operate in the Kingdom in recent years has been relatively low compared to more advanced financial centers. Notably, 35 fintech start-ups received approvals in 2020, while 16 received approvals in the third quarter of 2021. Although this growing pace indicates an improvement in this area, more speed is required. In view of the increasing number of start-ups in the field of financial technology around the world, which by 2021 amounted to about 26 000 companies. Although regulators are responsible for conducting prudential investigations and balancing economic security, it is important to provide ways to achieve this priority while speeding up the approval process.

An appropriate solution to this issue is to introduce more test boxes in the Kingdom. Currently, there are still many innovative developers who have applied for approvals and have not been invited to submit their ideas in a test box, due to the many requests, and once the test fund regulations were issued, these innovators would lose their opportunity to submit their ideas for a while longer. Therefore, the introduction of more test boxes contributes to the improvement of FinTech innovation, which provides an ideal testing environment for regulators and entrepreneurs to work together and ensure compliance with financial rules, as well as to provide greater confidence in the ecosystem as a whole.

It is good that the Kingdom is making tangible progress in this area, as the transition to instant payment services would not have been possible without the improvement of access to digital payment channels, which has been one of the main priorities of the Saudi Central Bank in recent years. . All of this has resulted in significant achievements in the context of this major transformation, as the Central Bank recently announced that the number of point-of-sale devices within the Kingdom has exceeded the one million mark.

These achievements have been achieved thanks to good cooperation with the financial sector and financial technology companies such as Geidea, which alone has deployed more than 700,000 devices across the Kingdom, and continues its efforts to provide a range of solutions aimed at developing of the e-commerce sector, such as providing a service Integrated Payment Gateway, Link Payment Service. These achievements clearly reflect the important role that regulators have played in paving the way for fintech companies to work together effectively through enabling innovation and collaboration.

The talent competition

The development of the Fintech sector, as is the case in almost all sectors, depends on innovation in the private sector, and it is very clear that decision makers in the Kingdom want to offer all forms of support for innovation and creativity rather than to obtain it, that is, to take advantage of the free capitalist system rather than to restrict it This sector by the great potential possessed by the government. Therefore, Saudi Fintech, the pioneering initiative launched by the Saudi Central Bank in collaboration with the Capital Markets Authority in April 2018, supported financial technology entrepreneurs at every stage of their development and their acquisition of the necessary skills and knowledge. to develop this sector.

However, skills represent a real challenge for the development of the financial technology sector in the Kingdom, as the recruitment of specialized talent in the digital field to design and develop digital financial services extensive experience, good background, skills and a deep understanding of requires customer needs, and this is a challenge for all FinTech companies, especially for traditional financial companies, such as banks, which may not have a legacy of creativity or innovation in financial technology to base on.

Banks face significant challenges in attracting and retaining the best fintech innovators in the Kingdom as they strive to compete with emerging fintech companies. The true extent of these challenges is reflected in Fintech Saudi Arabia’s annual report for the year 2021, which showed that 38-40% of financial technology companies in the Kingdom consider attracting and hiring talent as the biggest obstacle for them, and 88% of those companies see “the right thing to do” finding skills “as one of the key challenges in recruiting talent.

To enable success at national level

Joint work, collaboration and the exchange of skills and experiences between the different players in the financial technology ecosystem are essential factors in the success of this system, and this is exactly why we see many traditional financial institutions adopting open banking and open APIs as an important method of generating innovation.

More specifically, this collaboration involves the companies and financial institutions involved in the use of data to enable them to develop more appropriate products and services, which in turn leads to increased innovation, improved competition and increased acceptance of digital services. Other important factors, such as the high penetration rates of smartphones in the UK, which are 80%, and the presence of a large population of young people under the age of 25, are expected to increase the demand for investors. in this sector, with the UK’s increasing reliance on non-cash payments.

In short, FinTech companies are behind a lot of innovation in the financial sector in the UK, and therefore it is essential that they are supported by a proactive regulatory approach that is not merely in response to developments in this sector. In fact, the UK’s regulators have done well to nurture new ideas in the Fintech field within the Central Bank of Saudi Arabia’s Regulatory Test Fund, which has played an important role in allowing new businesses to enter the market quickly and efficiently. . By taking advantage of this support, open banking and open APIs, fintech companies in the Kingdom can nurture and develop the talent this sector needs for the future.

We are confident that the economic opportunities we are looking for are great and rewarding, with the continued prosperity of the financial technology system in the Kingdom, and the convergence of modern technologies and the empowerment of all in our societies without exception. With cooperation, innovation and appropriate regulatory support, Saudi Arabia’s strong FinTech sector is certainly capable of enabling success on a national scale.

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