A bigger say for KSA’s young people opens door to fintech investment

A bigger say for KSA’s young people opens door to fintech investment

A bigger say for KSA’s young people opens door to fintech investment
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With two-thirds of its population under 35, Saudi Arabia has great expectations that young people will play a large part in achieving the Kingdom’s Vision 2030 program of social and economic reform. The population is well educated, with the country spending a higher proportion of its gross domestic product on education than the global average. Literacy rates in the Kingdom account for 95 percent of adults and 99 percent of young people.

Yet the unemployment rate has traditionally been relatively high, especially among those attempting to enter the labor market — young people and women face the highest unemployment rates and make up over half of unemployed Saudis. One of the main reasons for this high rate is the historic distortion between private and public sector employment in the Kingdom. The public sector employs over two-thirds of Saudis and provides higher wages, more comprehensive benefits, and greater job security.

But seismic labor market shifts are underway as part of Vision 2030. The results are already visible, with Saudi Arabia’s non-oil private sector economy continuing to expand last year. Over the past four years, the nation has created 555,000 new jobs as part of its plan to develop $1 trillion worth of new projects to meet its program of diversifying the economy away from oil. A further two million jobs are expected to be created by the end of the decade, most of them aimed at the younger generation. Spectacular progress is also being made to bring women into the labor force. For decades, Saudi Arabia had one of the lowest female labor force participation rates in the world — even among other Middle East and North African nations. This low rate is reflected in women’s lack of access to banks — according to a 2018 study by the King Khalid Foundation, women account for almost 60 percent of unbanked people in Saudi Arabia.

But in the last few years, something has been changing. The share of Saudi women in the labor market has jumped by an incredible 64 percent, moving from 20 percent of Saudi women in paid work in late 2018 to 33 percent by the end of 2020. These changes are not just among younger women. Female workers of all ages are finding jobs.

Saudi women between 40 and 54 were the largest female group to join the workforce, increasing their representation by 20 percent over this period. Most other age groups rose by at least 10 percent. This change is visible in Saudi society. Only five years ago it would be hard to imagine that women could go alone to a shopping mall, let alone sit in a coffee shop, but now the sight of coffee shops turned into co-working spaces where women can sit, and work is a common sight in Riyadh today.

However, beyond the impact of job creation and more women in work, the Vision 2030 plan has strong implications for the fintech market in Saudi Arabia and beyond.

As more young people and women enter the job market, become financially independent and gain access to their own bank accounts, they will put a premium on taking control of their finances. Following in the footsteps of their UK or US counterparts a decade earlier, a younger generation and engaged Saudi investors demand more control over their finances. They are keen to support local businesses, as well as brands and causes they care about, such as sustainability and climate change. Tech-powered financial planning, investing, budgeting, borrowing and money management are the fintech areas set to benefit from the tectonic shifts we are seeing in Saudi society. These fintech sectors are areas where the UK has established itself as an undisputed leader. A quarter of the UK’s largest fintech companies operate in the wealthtech industry, and the UK is home to wealthtech unicorns such as Revolut, Zepz and Blockchain.com. These are private firms that command a $1 billion valuation. Britain’s wealthtech sector has produced companies that have enticed established financial institutions — last June, US bank JPMorgan Chase paid close to £700m for Nutmeg, a digital wealth manager which has over 140,000 clients and more than £3.5 billion in assets under management.

The UK is also home to smaller, yet equally fast-growing weathtech firms whose values are aligned with the new generation of young consumer-conscious Saudis. For example, Kestrl, a London-based wealthtech app that helps Muslims budget, save and invest in line with their values, would find a friendly market among Saudi Arabia’s 13 million-stong young generation. So, it’s not surprising to see an increased desire for collaboration in the fintech industry, particularly in the wealthtech sector, between the Saudi and British kingdoms. Indeed, fintech is one of the three key strategic sectors of the Saudi UK Tech Hub, launched last October, that aims to connect entrepreneurs and allow them to share insights on UK opportunities and best practices from Britain’s leading fintech firms.

• Roxana Mohammadian-Molina is a board member of the Saudi British Joint Business Council, chief strategy officer of UK fintech company Blend Network, board member and special adviser to several organizations in the fields of technology and digital transformation.

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