Projections indicate that the GCC’s digital assets market will grow by 5.22% between 2024 and 2028, reaching a market volume of $13.25 billion by that time. The UAE and Saudi Arabia are championing developments in the region’s burgeoning sector. In a recent report titled “Realizing the Potential of Fintech in the Kingdom of Saudi Arabia,” Arthus D. Little, an international management consulting firm, spotlighted initiatives by the Kingdom to revolutionize the fintech sector in the region.
According to the report, more than SR4 billion ($1 billion) has been invested in local fintech companies within the Kingdom, with over 100,000 individuals participating in related events and training programs. The Saudi Capital Markets Authority (SAMA) was launched in 2018 to spearhead developments in Saudi Arabia’s fintech landscape. In May 2020, the Kingdom adopted a multi-faceted strategy to usher in fintech literacy and innovation among the Saudi population. The strategy rested on six pillars, which include establishing the Kingdom as a regional fintech hub, fostering a regulatory environment conducive to growth, providing funding for startups, enhancing skills training, accelerating support infrastructure, and promoting local and international collaboration.
Investments to achieve ambitious goals
As part of its Vision 2030 goals, the Kingdom aims to establish close to 525 fintech companies and create 18,000 fintech job opportunities, up from approximately 5,400 in 2023. Using focused investments in the sector, the Kingdom aims to contribute SR13.3 billion to the gross domestic product, a substantial increase from approximately SR3.75 billion in 2023, and achieve SR12.2 billion in direct venture capital contributions, compared to SR5.2 billion in 2023. To encourage rampant innovation in the fintech sector, Saudi Venture Capital Co., backed by the Capital Markets Authority (CMA) and the Financial Sector Development Program (FSDP), has launched a SR300 million fund focused on fintech startups, with plans to invest an additional SR6 billion in startups and small and medium enterprises across various sectors.
Building a cashless society
Mohammad Nikkar, principal at Arthur D. Little, emphasized the Kingdom’s efforts to transform its society to be less dependent on cash transactions. The ADL report states that 62% of all transactions recorded in the Kingdom in 2021 were cashless. Thereby demonstrating a higher digital asset adoption rate than forecasted in interim targets. Though ambitious, Saudi Arabia hopes to increase cashless transactions by nearly 80% by 2030. The establishment of fintech infrastructure in the form of digital wallets, quicker local transfers, and QR code payment modes has enabled users to switch to non-cash-based transactions. The report highlighted the achievements of stc pay and urpay in the Saudi market. stc pay, a fintech unicorn that hails from Saudi Arabia, reported a notable 25% year-on-year increase in profits in 2022.
The challenges that lie ahead
No ambitious feat is free from hurdles. The most dominant one for the Kingdom’s fintech sector is boosting its visibility on the international stage. The ADL report emphasized the importance of strategically positioning itself as a leader in the fintech sector. “Efforts to simplify the setup and licensing processes are underway to create a more navigable regulatory environment for fintech entities.” Lastly, the ADL report highlighted the importance of fostering strategic relations with global contemporaries that dominate the fintech landscape.
