Saudi Arabia’s fintech sector driving digital transformation

Saudi Arabia’s fintech sector driving digital transformation
To date, more than SR4 billion ($1 billion) has been invested in local fintech companies, with over 100,000 individuals taking part in related events and programs. (SPA)
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Updated 12 May 2024
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Saudi Arabia’s fintech sector driving digital transformation

Saudi Arabia’s fintech sector driving digital transformation
  • More than $1 billion has been invested in local fintech firms, says report

CAIRO: Saudi Arabia’s fintech sector has made significant strides as it nears its goal to become a regional financial hub, according to a report by Arthur D. Little.  

In its latest study titled “Realizing Potential of Fintech in Kingdom of Saudi Arabia,” the international management consulting firm highlighted the rapid growth and innovation within the sector, spearheaded by initiatives such as Fintech Saudi. 

Launched in April 2018 by the Saudi Central Bank, also known as SAMA, and the Saudi Capital Markets Authority, Fintech Saudi has been a pivotal force in promoting the Kingdom as the leading fintech hub in the Middle East and North Africa.  

The initiative includes programs such as an accelerator, career fair, fintech tour, and summer sessions, contributing to a 20-fold increase in the number of fintech companies in the Kingdom since the program’s establishment.  

To date, more than SR4 billion ($1 billion) has been invested in local fintech companies, with over 100,000 individuals participating in related events and training programs, the report said. 

The adoption of a national strategy in May 2022 marked a significant advancement in the country’s fintech sector.  

The strategy is built 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.

Ambitious goals 

The Vision 2030 goals include the establishment of at least 525 fintech companies by 2030, up from 200 in 2023, the creation of 18,000 fintech job opportunities, up from approximately 5,400 in 2023, contribute SR13.3 billion to the gross domestic product, a substantial increase from around SR3.75 billion in 2023, and achieve SR12.2 billion in direct venture capital contributions, compared to SR5.2 billion in 2023. 

Fintech Saudi has catalyzed this growth through various initiatives, including the Fintech Accelerator Program, the Fintech Saudi Innovation Hub, and an online Fintech directory.  

Additionally, the establishment of a fintech regulatory sandbox by SAMA has allowed for controlled live testing of fintech innovations, easing their transition to the open market. Further boosting the sector, the Saudi Venture Capital Co., backed by CMA and the Financial Sector Development Program, 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. 

So far, SVC investment in 35 VC funds has facilitated over 900 deals and SR1.9 billion in investments. Additionally, the Saudi National Technology Development Program has introduced the Technology Development Financing Initiative, providing debt funding to support startups.

A cashless society 

“Saudi Arabia has embarked on a journey to transform society to be less dependent on cash transactions,” the report noted, highlighting the FSDP as instrumental in this shift by fostering a regulatory environment conducive to the growth of payment companies. 

The ambition of Vision 2030 is notably high, aiming to increase the proportion of non-cash transactions to 80 percent by 2030, up from just 18 percent in 2016.  

Remarkably, by 2021, cashless payments constituted 62 percent of all transactions, significantly surpassing the interim targets, the report stated. 

Saudi Arabia has embarked on a journey to transform society to be less dependent on cash transactions.

Mohammad Nikkar, principal at Arthur D. Little

This rapid adoption has been supported by the integration of innovative payment solutions, including digital wallets, local transfers, QR code payments, and the SADAD system for bill payments. 

“According to data released by SAMA, digital wallet usage has seen an exponential rise from 315,000 in 2018 to 17 million by 2022, representing over half of Saudi Arabia’s population,” the report stated.  

Initially, bank transfers dominated as the primary method for topping up these wallets, but by 2022, around 80 percent of top-ups were being made via debit or credit cards, indicating a shift in consumer behavior. 

The report also sheds light on the increasing reliance on digital wallets among expatriates for international transfers, with non-Saudi users of digital wallets increasing from 17 percent in 2018 to 45 percent in 2022.  

Among the leaders in this burgeoning market are stc pay and urpay. stc pay, in particular, has distinguished itself as the first fintech unicorn in the Kingdom, with a notable 25 percent year-on-year increase in profits in 2022, as stated in the report.

Alternative financing 

The report, co-authored by Mohammad Nikkar, principal at Arthur D. Little, and Arjun Vir Singh, partner at the firm, delved into Saudi Arabia’s alternative financing sector, notably buy now, pay later and debt crowdfunding, which has become the second-largest fintech subsector after Saudi Payments. 

BNPL usage has surged from 76,000 customers in 2020 to over 10 million in 2022, with market leaders like Saudi-based Tabby
and Tamara expanding across the Gulf Cooperation Council, the report explained. 

Debt crowdfunding is also growing as a vital funding source for SMEs. Since 2019, investors have issued over 1,800 loans worth more than SR1.1 billion, with SR770 million disbursed in 2022 alone.  

However, challenges persist with rising interest rates and fluctuating approval rates.

Challenges 

“While the future for fintech in Saudi Arabia looks bright, there are still some important challenges to overcome,” the report stated. 

Increasing Saudi Arabia’s visibility on the international stage is crucial. The report emphasizes the need to enhance the Kingdom’s global profile by articulating its unique fintech ecosystem offerings to attract more global entrepreneurs and investors. 

“Streamlining regulatory frameworks. Efforts to simplify the setup and licensing processes are underway to create a more navigable regulatory environment for fintech entities. Continued enhancements in this area will support both local and international ventures,” the report added.  

Furthermore, expanding funding avenues is also essential. The development of more accessible financial mechanisms such as accelerators and grants is expected to invigorate the investment climate, allowing a diverse range of fintech initiatives to flourish, the report explained. 

Addressing the talent gap is also a priority as strategies should be implemented to cultivate local expertise and address challenges like high turnover and competitive salary demands.  

Moreover, optimizing investment in infrastructure to reduce the cost of essential technology, while ensuring compliance with local data regulations, is also a vital aspect. 

Lastly, fostering international partnerships is key to the long-term success of Saudi fintechs, helping them adapt and thrive in the global market, the report explained. 

“By addressing these areas thoughtfully, Saudi Arabia can enhance its fintech ecosystem, ensuring robust growth and sustainable development in the years to come,” it added. 

Transformational drivers 

The consultancy identified six transformational drivers essential to overcoming existing challenges and ensuring robust growth within the Kingdom’s fintech landscape. 

The report emphasized the need for elevating Saudi Arabia’s global positioning in the fintech domain. The Kingdom aspires to enhance its international presence by illustrating its unique value propositions and inviting participation from global fintech innovators.  

This could be achieved through forging international alliances and showcasing Saudi advancements at global fintech symposiums, potentially increasing its influence not just in the MENA region but globally. 

On the regulatory front, the report suggests that Saudi Arabia refine its regulatory processes and align them more closely with international best practices, particularly in burgeoning sectors like open banking. 

Strengthening the angel investor network and fortifying public-private partnerships are also seen as vital steps to provide foundational support for early-stage initiatives and reinforce growth for mature firms. 

Additionally, the report advocates for significant investment in educational programs tailored to fintech and associated industries.  

Lastly, the report highlights the importance of managing infrastructure costs by encouraging a competitive tech provider market and local data-hosting solutions, supported by government incentives for technological advancements.


Saudi minister discusses logistics cooperation on visit to Port of Rotterdam

Saudi minister discusses logistics cooperation on visit to Port of Rotterdam
Updated 29 May 2024
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Saudi minister discusses logistics cooperation on visit to Port of Rotterdam

Saudi minister discusses logistics cooperation on visit to Port of Rotterdam
  • Discussions touched on encouraging Dutch infrastructure investments for metal processing in the Kingdom

AMSTERDAM: Saudi Arabia’s Minister of Industry and Mineral Resources, Bandar Ibrahim Alkhorayef, paid a visit to the Port of Rotterdam, where he discussed with the port authority ways to enhance cooperation in logistics services.

Opportunities provided by the Kingdom in this sector, the role that the Kingdom can play as a strategic supplier of vital minerals, and how to enhance the flexibility of global supply chains, leveraging the Kingdom’s position as a bridge between East and West were discussed.

The meeting with port officials also explored avenues for enhancing cooperation with Dutch companies in various fields, including developing processing and recycling capabilities in both countries, benefiting from Dutch expertise and technology.

Additionally, discussions touched on encouraging Dutch infrastructure investments for metal processing in the Kingdom to achieve the aspirations of both countries in developing the sector.

Alkhorayef reviewed the objectives of the National Industrial Development and Logistics Program (NIDLP), a program under Saudi Vision 2030, which focuses on investing in the Kingdom’s unique strategic location linking three continents and transforming it into a leading industrial power and global logistics center.

The minister also toured the port’s FutureLand area, where he was briefed on the various maritime services provided to ships and shipping companies, including towing, docking, repairs, shipbuilding, and ship supply.


Saudi Arabia and Austria sign MoU for economic cooperation

Saudi Arabia and Austria sign MoU for economic cooperation
Updated 29 May 2024
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Saudi Arabia and Austria sign MoU for economic cooperation

Saudi Arabia and Austria sign MoU for economic cooperation

VIENNA: Saudi Arabia’s economy ministry and its Austrian counterpart signed a memorandum of understanding to boost economic cooperation between the two nations.
The Saudi Ministry of Economy and Planning Austria’s Ministry of Labor and Economy in the deal on the sidelines of the Saudi-Austrian Joint Committee held in the Austrian capital.
 The MoU was signed by the Saudi Minister of Economy and Planning Faisal bin Fadel Al-Ibrahim, and the Austrian Minister of Labor and Economy, Martin Kocher.
 The MoU aims to diversify and strengthen economic ties, exchange experiences and information, and encourage cooperation in a number of fields, including trade, industry, research and development, tourism, small and medium enterprises.
Among the content of the MoU is the organization of conferences, seminars and the exchange of visits between experts, in addition to cooperation between government institutions and the private sector.
The parties are also committed to protecting intellectual property rights and exchanging information for the purposes specified in the MoU.
This MoU comes within the framework of a cooperation agreement in the economic, commercial, industrial and technical fields signed between the two governments in 2004.


Xi calls for more jobs for youth, migrant workers

Xi calls for more jobs for youth, migrant workers
Updated 28 May 2024
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Xi calls for more jobs for youth, migrant workers

Xi calls for more jobs for youth, migrant workers
  • (We should) insist that employment of young people including college graduates is a top priority: Chinese president

BEIJING: China’s President Xi Jinping called on Monday for efforts to promote high-quality and sufficient jobs for college graduates and migrant workers, while presiding over a Politburo group study session, state media Xinhua reported on Tuesday.

“(We should) insist that employment of young people including college graduates is a top priority,” the Xinhua report quoted Xi as saying at a group study session of the Politburo, a top decision-making body of the ruling Communist Party.

The Xinhua report did not give details on job promotion support measures or plans.

The survey-based jobless rate for 16-24 year-olds, excluding college students, was 14.7 percent in April, down from 15.3 percent in March, official data showed last week.

China’s statistics bureau revised its methodology by removing college students from the survey pool after youth jobless rate surged to around 20 percent last year.

Xi also said the government should take steps to promote the employment of migrant workers, guide them to return to their hometowns and for people to start businesses in the countryside.

He called for stabilizing the income of people who had been lifted out of poverty and preventing large-scale return to poverty due to unemployment, Xinhua said.

Companies and industries with strong job creation capabilities will be supported, the report said.

China created 4.36 million new urban jobs in the first four months, Human Resources Ministry data showed, 36 percent of its annual job creation target.


Saudis spent more money on electronic devices during the 4th week of May: SAMA data

Saudis spent more money on electronic devices during the 4th week of May: SAMA data
Updated 28 May 2024
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Saudis spent more money on electronic devices during the 4th week of May: SAMA data

Saudis spent more money on electronic devices during the 4th week of May: SAMA data

RIYADH: Saudi Arabia’s point-of-sale spending reached SR11.2 billion ($2.98 billion) in the fourth week of May, official figures showed.

The latest data from the Saudi Central Bank, also known as SAMA, revealed that spending on electronic and electric devices surged by 9.5 percent to reach SR240.4 million.

Beverages and food, which accounts for the largest share at 14.9 percent, saw a 5.9 percent decline, reaching SR1.66 billion, during the week from May 19 to 25.

Meanwhile, transactions at restaurants and cafes, holding a 14.6 percent share, recorded a slower decline of 4.8 percent, amounting to SR1.64 billion. 

Saudi spending on miscellaneous goods and services, including personal care items, supplies, maintenance, and cleaning, constituted the third-highest share and witnessed a 5.1 percent decline that week, reaching SR1.36 billion. 

Despite composing only 1 percent of the week’s overall POS value, spending on education recorded a minimal increase of 0.1 percent to SR152.48 million.

In the past few years, this sector has been allocated the largest share of government expenditure in comparison to other divisions of the economy. 

Efforts are underway to revamp the education system, aiming to equip the national workforce with the necessary skills to thrive in a technological and information-centric global economy.

The hotel sector experienced the largest decline in POS transaction value, dropping 10.9 percent to SR227.13 million.

According to data from SAMA, 35.44 percent of POS spending occurred in Riyadh, with the total transaction value reaching SR3.97 billion. However, this represents a 1.6 percent decrease from the previous week.  

Riyadh has undergone considerable expansion, evolving into a pivotal center for growth and progress. The city is witnessing a surge in new businesses setting up operations, drawn by its vibrant economic landscape and strategic prospects for investment and innovation.

Spending in Jeddah followed closely, accounting for 14.3 percent of the total and reaching SR1.60 billion; however, it marked a 3.1 percent weekly drop. 

The two cities that registered the highest declines in POS spending were Makkah and Madinah, with decreases of 11 percent and 6.8 percent, respectively. The value of transactions in Makkah reached SR380.98 million, while in Madinah, it was SR393.26 million.


Saudi healthcare to advance with major digital tech partnership

Saudi healthcare to advance with major digital tech partnership
Updated 28 May 2024
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Saudi healthcare to advance with major digital tech partnership

Saudi healthcare to advance with major digital tech partnership

RIYADH: The Saudi healthcare system is set to advance as two of the country’s major companies partner to leverage digital technologies to enhance the Kingdom’s capabilities.

SAMI Advanced Electronics Co., a wholly owned subsidiary of SAMI, the nation’s defense and digital solutions provider, has signed a cooperation agreement with the National Unified Procurement Co., a Public Investment Fund company.

The agreement, signed on May 27, will provide solutions for medication tracking and IT infrastructure and increase local content through medical devices manufacturing and maintenance.

This partnership demonstrates SAMI-AEC’s unremitting efforts to build a harmonious and applicable healthcare system in Saudi Arabia based on digital technologies.

Ziad Al-Musallam, CEO of SAMI-AEC, commented on the agreement, saying that they are honored to collaborate with NUPCO, as this deal underscores the unwavering commitment of both entities to bolstering efforts aimed at enhancing the healthcare ecosystem in Saudi Arabia.

“At SAMI-AEC, we firmly believe in the significance of augmenting public health services through digital solutions and delivering e-health services. This involves integrating effective, fast technologies to empower the healthcare sector, aligning with the objectives of Saudi Vision 2030,” he said.

Fahad Al-Shebel, CEO of NUPCO, highlighted the agreement’s importance and its role in fortifying the healthcare infrastructure and facilitating access to the integrated technology offered by SAMI-Advanced Electronics Co.

Aiming to upgrade the healthcare sector by improving its facilities in all public hospitals and medical centers in the Kingdom, NUPCO is the country’s largest central company providing medical purchasing, storage, and distribution services for medicines, devices, and supplies.

With a workforce of over 3,320 individuals, 85 percent of whom are Saudi nationals, SAMI-AEC has positioned itself as a leader in electronics, technology, engineering, and manufacturing. Its services span sectors such as defense and aerospace, digital, energy, and security.

Over 800 of the company’s employees are engineers and certified experts, reaffirming the dedication of SAMI-AEC, which was established in 1988, to excellence and innovation.

On the other hand, NUPCO was established in 2009 with SR1.5 billion in capital. It is the leading company in Saudi Arabia in procurement, logistics, and supply chain management for pharmaceuticals, medical devices, and supplies for governmental hospitals.