RIYADH: In its 2020 global report, research organization Startup Genome named Riyadh as one of the top 20 cities to watch for its achievements in financial technology (fintech).
The firm analyzed dozens of countries across the globe based on factors including funding, exits, talent and focus, as well as the impact of ecosystem players such as policymakers and founders.
Bahrain and Riyadh were the only two locations in the Gulf Cooperation Council to be included in the report. The top five fintech locations globally were named as Silicone Valley, New York, London, Singapore and Beijing.
The report highlighted some factors as to why the Saudi capital enjoys a strong fintech ecosystem and is one of the top cities to watch within the sector.
It pointed out that the Kingdom has seen strong support for Saudi-based logistics firms, which received 65 percent of all startup funding in 2020. Educational technology is also a growing sector, accounting for 11 percent of funding, as the coronavirus disease (COVID-19) pandemic emphasized the need for distance-learning platforms.
Within the fintech environment there is healthy demand, with the report pointing out that, since 2019, there has been a 352 percent increase in smartphone payment transactions and a threefold increase in the number of fintech startups setting up in the Kingdom.
One of the most important factors is government support, with the report highlighting the fact that international entrepreneurs can obtain an entrepreneurship license, with 100 percent ownership of their company, in under three hours. The Saudi Ministry of Investment has issued 350 such licenses in 2020.
The proliferation of venture capitalists in the Kingdom, with 15 licensed by the ministry to set up offices in Saudi, along with organizations such as Saudi Arabia’s Venture Capital and Private Equity Association and the General Authority for Small and Medium Enterprises “Monshaat,” have helped to nurture the development of the community.
The development of the fintech community in Saudi Arabia is a reflection of the growing diversification of the economy, which is a core goal of the government’s Vision 2030 strategy.
Tariq Javed, CEO of Carlyle Square Consultancy, said the Kingdom has benefited significantly from fintech during the last few years and its importance has significantly increased since the outbreak of the pandemic.
“The government and the regulators, including the Saudi Central Bank, the Capital Markets Authority and Fintech Saudi, have been investing significantly to promote fintech in the economy and the financial sector under Vision 2030. A number of events have been organized to promote awareness around fintech. For example, the central bank, under the G20 presidency this year, sponsored a Tech Sprint initiative in collaboration with Banks for International Settlements,” he said.
He added that the rise of fintech will have many benefits, such as efficiency and cost reduction, improvements to customer service and an increase in Saudization.
Javed believes fintech opportunities are available in almost all sectors of the economy, from transportation to entertainment and from healthcare to finance. The most obvious benefits are for the banking sector, with the technology providing solutions for capital and liquidity adequacy documents; staff productivity and efficiency; real-time anti-money laundering; cybersecurity and taxation; financial stress-testing tools; 24/7 compliance; faster digital faster payments; and enhanced cloud computing and cybersecurity.
He said the benefits also varied from sector to sector. In the health sector, the positive moves include the development of tools to enhance digital interaction with experienced doctors, online booking platforms for appointments, improved medical record facilities and the use of artificial intelligence to preempt diseases.
Haitham Bu-Aisha, a founding partner at Vision Ventures Capital, believes Riyadh will easily rise up in the rankings in future reports. “I believe involving blockchain in the process of coding financial instruments would help advance the achievements and performances of the financial sector. Banks and traditional financial institutions need to be more lean and agile in order to cope up with the flow,” he said.