LONDON: Saudi Arabia kick-started the evolution of its financial technology sector on Tuesday by approving the first fintech licenses for companies in the Kingdom.
The move, which granted permission to Manafa Capital and Scopeer to offer crowdfunding investment services on a trial basis, marked an important first step in realizing Saudi Arabia’s ambitions to become a fintech hub for the region, experts said.
“There’s huge potential in Saudi Arabia,” said Paul Alfing, a senior consultant at Payments Advisory Group, a Netherlands-based consultancy specialized in payments and financial transactions.
Actions like this show the Kingdom is becoming “a serious player in this field.”
This first step “is perhaps the most difficult” but subsequent licenses will follow more easily, he added.
The Capital Market Authority — the Saudi government’s financial regulatory authority — said it would be reviewing applications for more fintech licenses later in the year.
The Kingdom is driving development in the sector as part of its plan to diversify the economy away from oil and meet the targets outlined in the Vision 2030 reform plans.
Ambareen Musa, founder and CEO of souqalmal.com, a successful fintech startup based in the UAE, said: “With everyone from regulators, customers and businesses embracing fintech, and even established financial institutions ramping up investment in non-traditional technologies, the opportunity for fintech is enormous, in Saudi Arabia and in the region as a whole.”
Fintech expert Jim Marous said that new players and new innovations from existing financial services organizations across the MENA region are allowing firms to compete more effectively on a global stage.
“With innovation and digital transformation occurring across all industries, the consumers in the region are increasing their expectation of all organizations they engage with regularly. To keep pace with these expectations, new financial technology firms will emerge that are able to apply data and advanced digital technologies to improve the consumer experience,” Marous said.
“This disruption of the finance sector provides a tremendous opportunity for the Saudi fintech sector (and financial services firms in general).”
Pointing to the Kingdom’s large youth population, Alfing described a strong demand for “new solutions and products in the market.”
Competition is fierce in the region as other MENA countries look to take the leader in fintech but as the largest economy in the Arab world, Saudi Arabia is a stronger contender, Alfing said.