A report by the Washington-based Saudi-American Business Council pointed to an “unprecedented” growth in the field of startup investments.
Saudi Arabia has one of the most developed financial services sectors in the Middle East and North Africa region.
The report indicated that during August 2022, the Kingdom witnessed a 79 percent year-on-year increase in the number of operating fintech firms. Of the 147 active fintech companies operating in Saudi Arabia, only 10 were operating in 2018. This rapid expansion is due to liberalized business regulations, an active investment environment, and well-developed technology infrastructure.
Meanwhile, venture capital financing in Saudi Arabia more than tripled to reach 2.2 billion Saudi riyals ($584 million) in the first half of 2022.
The Kingdom continues to invest in technology and digital transformation, ranking ninth globally in terms of the availability of investment capital, as stated in the Global Competitiveness Report 2022 issued by the International Institute for Management Development (IMD).
Albaraa Alwazir, Director of Economic Research at the US-Saudi Business Council, said that in the first half of 2022, fintech accounted for the highest number of total investment deals.
“Fintech companies attracted investments from leading domestic and international firms such as Sequoia, 500 Global, and Mastercard. Well-developed technology infrastructure such as widely accessible 5G and cloud services, a high domestic demand for financial services, and continued government support have all supported ongoing growth,” he added.
Saudi Arabia aims to reach a SAR13.3 billion ($3.6 billion) direct GDP contribution by 2030, up from SAR1.2 billion ($317 million) in 2021. The fintech sector will account for 18,200 direct jobs and reach 525 active fintech companies by 2030.
In addition to the record rise in licensed financial technology companies, the Saudi Cabinet approved the licensing of three local digital banks.
The report said that the first was the conversion of STC Pay into a digital bank with SAR2.5 billion ($667 million) in capital, while the second involves Abdul Rahman bin Saad Al-Rashed and Sons Company, which established Saudi Digital Bank with SAR1.5 billion ($400 million) in capitalization. Most recently, D360 bank was licensed and became the third digital bank operating in Saudi Arabia. The PIF joined key investors in backing D360 Bank.
“These developments will introduce advantages that will provide payments services, consumer microfinance, and insurance brokerage services without requiring a physical business,” according to the report.
It also noted that the demand for a variety of financial services among Saudi residents was particularly high, including banking, insurance, investment, asset management, and Shariah-compliant financing.
The report pointed to a steady surge in the use of card and electronic payments in Saudi Arabia since 2016, with a further acceleration due to the COVID-19 pandemic.
Saudi consumer habits have also adapted quickly to the digital economic transition. A 2022 Mastercard report found that 89 percent of people in Saudi Arabia have used at least one emerging payment method in the last year, according to the report.