Fertile fintech scene driving digital banking in Saudi Arabia

Special Fertile fintech scene driving digital banking in Saudi Arabia
Saudi Arabia has undergone a significant transformation in its banking sector. Shutterstock
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Updated 17 June 2024

Fertile fintech scene driving digital banking in Saudi Arabia

Fertile fintech scene driving digital banking in Saudi Arabia

RIYADH: The digital revolution within Saudi Arabia’s banking sphere has significantly enhanced the nation’s economic panorama, facilitating effortless financial transactions for customers, experts have told Arab News.

Situated in the heart of the Middle East, the Kingdom stands out not just for its deep-rooted history and cultural legacy but also for its swift embrace of digital advancements, notably within the banking domain.

In recent years, the nation has undergone a significant transformation in its banking sector, propelled by the ambitious Vision 2030 program led by Crown Prince Mohammed bin Salman.

This visionary endeavor seeks to broaden the economic landscape, diminish reliance on oil income, and propel the country forward into a new age of prosperity. 

In an interview with Arab News, Saudi-based economist Talat Hafiz set out how the digital transformation has positively impacted the overall economic landscape of the country. 

Hafiz said: “It has allowed (customers) to perform financial transactions and conduct financial businesses related transactions real-time around the clock and year round, which has facilitated  doing business in the Kingdom and in turn have reflected positively on the overall economy, as it has saved time and efforts and ultimately cost reduction to businesses.”

Fabrice Franzen, partner at Bain & Co., told Arab News that the Kingdom has been one of the first countries to avail full digital banking licenses without the need for branches. 

“SAMA (Saudi Central Bank) has actively promoted the digital bank model, and three licenses were issued to local investors and companies, which should go live imminently,” he added.

Franzen anticipated that this should create healthy competition with the traditional players and drive further innovation and enhance customer experience.

Infrastructure and government support

The journey toward digitalization commenced with substantial investments in telecommunications infrastructure. 

This effort positioned Saudi Arabia as a frontrunner in digital regulatory maturity and network speed among G20 nations. 

According to the International Telecommunication Union’s Digital Regulatory Maturity Index, the Kingdom secured the top spot in the Middle East and Africa and ranked ninth among G20 countries. 

Notably, Saudi Arabia stood sixth globally in terms of the fastest data download speed in fifth-generation networks, showcasing its remarkable progress. 

The rise of digital banks and banking solutions

STC Bank was given the go-ahead in 2021. Screenshot

Demonstrating the government’s backing for digital transformation within the banking sphere, the Saudi Cabinet greenlit the licensing of two local digital banks in 2021: STC Bank and the Saudi Digital Bank.

This involved the conversion of stc pay into a local digital bank, now known as “STC Bank,” equipped to conduct banking operations in the Kingdom with a capital of SR2.5 billion ($670 million). 

Furthermore, an alliance of companies and investors spearheaded by Abdul Rahman bin Saad Al-Rashed and Sons Co. established another local facility named the Saudi Digital Bank, with a capital of SR1.5 billion. 

The introduction of the Saudi Arabian Riyal Interbank Express, also known as SARIE – which translates literally from Arabic as “fast” – marked a significant turning point for the digital banking sector in the Kingdom. 

This system not only boosts the efficiency of the national payment infrastructure but also aligns seamlessly with the ongoing developmental trajectory observed within the Kingdom’s payments sector.

According to Hafiz, this system provides the mechanism for all Saudi commercial banks to make and settle payments in riyals. 

The economist added: “It provides the basis for improved banking products and services and is the foundation for the payments system strategy of the Kingdom.” 

Hafiz asserted that SARIE is a “state-of-the-art payment,” as it provides the mechanism for banks to exchange funds transfer and direct debit messages safely and efficiently on behalf of their customers as well as for their own trading purposes. 

SAMA has consistently demonstrated a strong interest in promoting safety and enhancing efficiency within payment systems, aligning with its overarching focus on financial stability, according to the economist. 

As a result, the central bank plays a pivotal role in both the development and operation of payment systems in the Kingdom. 

SARIE, for Hafiz, has undoubtedly represented a significant milestone, profoundly impacting consumer behavior and the operational efficiency of financial institutions across the nation.

Saudi Arabia’s support for fintech companies

The rollout of accelerator programs aimed at bolstering the expansion of emerging fintech companies marked a significant catalyst for the sector’s advancement. 

This initiative was crafted to facilitate the transfer of best practices, tools, and resources to empower emerging firms in the financial technology domain, fostering their growth and amplifying their presence within the Kingdom.

SAMA has been actively supporting the emergence of the fertile fintech scene in Saudi Arabia, providing a wide range of licensing options, according to Bain and Co. 

“Local investors (institutional, family offices) are also actively investing in fintech, providing a healthy flow of seed capital and supporting subsequent capital raises,” the partner told AN.

He added that Saudi fintechs benefit from a sizable domestic market of over 30 million residents, enabling rapid scaling.

Hafiz noted the significance of this program particularly when it comes to supporting new startup fintech companies because such programs are carefully designed to help fintech companies accelerate their growth by providing different services that help them through a fast-track program to scale up their businesses. 

“The national Fintech Strategy goals and objectives are to create 525 Fintech companies in the Kingdom that create 18,000 Fintech job opportunities and contribute SR13.3 billion to the Kingdom’s Gross Domestic Product by 2030,” the economist highlighted.

The Saudi Central Bank has supported the growing fintech scene in the Kingdom. File

Rapid growth in electronic payments

By the end of 2021, the retail sector in the Kingdom witnessed a significant milestone in digital transformation: electronic payments accounted for 57 percent of total transactions, surpassing the target set by Vision 2030, according to data from the central bank. 

Additionally, Saudi Arabia achieved the highest adoption rate of Near Field Communication, NFC, payments, reaching 94 percent, outpacing even nations in the EU, as well as Hong Kong, Canada, and the Middle East and North Africa region.

Financial literacy and inclusion

Financial inclusion in Saudi Arabia aims to provide affordable financial services to all citizens, aligning with government efforts to enhance financial literacy and economic participation. 

This is becoming a major concern for the financial authorities in Saudi Arabia, according to Hafiz. 

He attributed it to the aim of making financial services available to all individuals in the Kingdom at affordable pricing, supporting the government’s efforts connected to raising the financial literacy in the society. 

One of the main goals and objectives of the Financial Sector Development Program – a Saudi Vision 2030 program – is to raise individuals’ financial literacy through proper financial planning and investment.

“Policymakers in Saudi Arabia have implemented robust policies that encourage and ensure the enhancement of financial inclusion, since it has been identified as imperative for economic growth,” Hafiz added.

According to Franzen, the Financial Services Development Program has set an ambitious trajectory to develop the sector as a way to support financial inclusion, literacy, and efficiencies.

“This is benefiting the economy and Saudi citizens as they have enhanced access to cheaper and more secure banking solutions,” he added.

Diverse digital banking ecosystem

The digital banking landscape in Saudi Arabia is vibrant, offering a range of services to cater to evolving consumer needs. 

“With three full digital banking licenses approved, Saudi Arabia is at the forefront of promoting full digital banking solutions – at par with the UAE and well ahead of other GCC (Gulf Cooperation Council) countries,” Franzen said.

He observed that the Kingdom could rely on advanced regulations for biometric customer identification and centralized databases, greatly easing digital onboarding and authentication.

Online banks, neo-banks, challenger banks, and Banking-as-a-Service all play roles in the digital revolution. 

“While neo-banks and challenger banks are still nascent in the market, one should expect that they will drive a higher speed of innovation and will put pressure on traditional players,” Bain and Co. partner emphasized.

“Similar trends have been observed in other markets such as the UK when new digital banks came to challenge the High Street incumbents,” he continued, adding: “This has led to cheaper and more reliable financial services becoming the norm in the UK market (no or very low fees, instant solutions), to the benefit of the customer.” 

According to a report by KPMG, a global network of professional firms providing financial services, neo-banks hold a 20 percent market share in Saudi Arabia’s digital banking sector.

Furthermore, online banks claim 30 percent, while the Banking-as-a-Service segment is projected to reach a market valuation of $7 trillion by 2030, with a yearly growth rate of 26 percent.

Enhanced customer experience

Banks are prioritizing improving customer experience through advanced technologies. AI-driven chatbots offer instant support, and data analytics enables personalized financial advice. These advancements streamline operations and cultivate customer loyalty.

“In Saudi Arabia, 95 percent of people who hold bank accounts and have access to the internet prefer digital over traditional banking channels, such as physical branches and phone banking,” according to a report by Backbase, a Dutch financial technology company.

Bain and Co. partner said that “while customers have grown accustomed to managing their lives from the comfort of their home on their phone (ride-hailing, food delivery, online shopping, home entertainment), they expect a similar service from the banks.”

Franzen added that mobile solutions offer an attractive alternative for those living in remote areas of the Kingdom where branch density is much lower than in the main urban hubs. It also offers cheaper banking solutions for those with lower income.

Future trends and projections

With the rise of pure digital banking entities intensifying their operations, a notable trend is emerging: a surge in account openings, both initially and for secondary accounts, as customers explore branch-less alternatives. 

Franzen said that as confidence in these digital-only players grows, a shift towards them serving as primary banks is anticipated, akin to the trajectory witnessed in countries like the UK, where neo-banks have secured over 25 percent of primary banking relationships.

“One key potential technology unlock to drive digital financial services would be increased flexibility on cloud usage and data residency rules,” he added.

AlUla participates in global forums to strengthen Saudi-China cultural ties

AlUla participates in global forums to strengthen Saudi-China cultural ties
Updated 10 sec ago

AlUla participates in global forums to strengthen Saudi-China cultural ties

AlUla participates in global forums to strengthen Saudi-China cultural ties

RIYADH: Saudi Arabia and China have deepened their cultural ties as the Royal Commission for AlUla participated in key global forums in Istanbul and Luoyang.  

The RCU attended the Silk Road Dialogue and the International Ancient Capitals Forum to enhance collaboration and showcase AlUla as the world’s “largest living museum.” 

The events, held from June 27 to 30, underscored AlUla’s prominent role within the International Tourism Alliance of Silk Road Cities, a network connecting 63 destinations across 28 countries along ancient trade routes.  

The forums were instrumental in expanding Saudi-China cultural partnerships and organizing official visits to AlUla. 

Saudi Arabia’s strategic focus on tourism, centered around AlUla’s rich heritage, has become a cornerstone in deepening cultural and economic ties with China, showcasing the Kingdom’s commitment to leveraging its historical assets to foster international partnerships. 

Discussions at the International Ancient Capitals Forum included high-level meetings with Luoyang officials on tourism, agriculture, conservation, and urban development, exploring new areas of cooperation between the two nations. 

“The Royal Commission for AlUla continues to build on the deep-rooted foundations of cultural partnership that exists between China, the Kingdom, and northwest Arabia,” said an RCU spokesperson in a statement. 

The spokesperson added: “The Silk Road Dialogue and International Ancient Capitals Forum events represented exciting opportunities to develop new avenues of collaboration, with a focus on expanding knowledge exchange and promoting tourism, with diverse initiatives built upon our shared status as ancient destinations and rapidly developing landmarks for human heritage.” 

The forum was launched to foster dialogue and collaboration between cities with a millennia-long history. It also facilitates an agreement signed earlier this year between AlUla and its Chinese partners at the Henan Provincial Administration of Cultural Heritage.  

The partnership seeks to enhance knowledge and shared resources, focusing on archeology, preserving cultural heritage and museums and research collaboration as well as talent development, tourism and other cultural exchanges. 

It also includes establishing a technology-driven archeological laboratory, conducting excavation activities, engaging in research and fostering connections between heritage sites in AlUla and Henan. 

The deal further involved implementing collaborative exchange programs, participating in exhibitions and events, and utilizing museum technologies such as virtual reality and augmented reality. 

Saudi government agencies boost emerging tech adoption by 10% in 2024

Saudi government agencies boost emerging tech adoption by 10% in 2024
Updated 21 July 2024

Saudi government agencies boost emerging tech adoption by 10% in 2024

Saudi government agencies boost emerging tech adoption by 10% in 2024

RIYADH: Saudi Arabia’s government agencies have made significant progress in integrating new technologies, showing a 10 percent improvement from the previous year, according to an official report.

The Emerging Technology Adoption Readiness Index, which measures the progress of government entities in implementing new solutions, increased from 60.35 percent in 2023 to 70.70 percent in 2024. This improvement is accompanied by a rise in participating agencies, which grew from 13 last year to 35 in 2024, the Saudi Press Agency reported.

The annual report published by the Digital Government Authority underscores the Kingdom’s enhanced capacity for adopting emerging technologies. This progress is a key element of Saudi Arabia’s broader transformation strategy, aimed at leveraging advanced systems to improve services for citizens, residents, and visitors.

This increase in the index highlights the Kingdom’s ongoing commitment to modernizing its digital infrastructure and aligns with its Vision 2030 objectives, emphasizing sustainable development and the advancement of its technological future.

Saudi Arabia’s space sector soars with strategic initiatives

Saudi Arabia’s space sector soars with strategic initiatives
Updated 21 July 2024

Saudi Arabia’s space sector soars with strategic initiatives

Saudi Arabia’s space sector soars with strategic initiatives
  • Initiative aims to bolster the nation’s position in global space economy by developing local capabilities

RIYADH: Saudi Arabia’s bid to become a leading player in the global space industry gained momentum with the recent unveiling of Neo Space Group, a strategic initiative to foster private sector growth. 

Backed by the Public Investment Fund, the group will invest in local and international assets, venture capital opportunities, and cutting-edge technologies to advance the sector, aligning with Saudi Vision 2030’s economic diversification goals. 

NSG aims to bolster the nation’s position in the global space economy by developing local capabilities and providing innovative satellite and space solutions. 

The development, spearheaded by the Communications, Space, and Technology Commission and the Saudi Space Agency, has garnered positive reactions from industry leaders and local talent, all of whom see immense potential in the Kingdom’s burgeoning space ambitions. 

In an interview with Arab News, Amar Vora, head of space at Serco Middle East, expressed strong support for the establishment of NSG, calling it a “bold step forward” that will stimulate the growth of the private space sector in Saudi Arabia. 

“The establishment of the NSG is a welcomed move that will champion growth for the private space sector in the Kingdom,” Vora said. “By working with CST and SSA, the establishment of the NSG will help unlock strategic investments and partnerships with the commercial sector that are aligned with national priorities.”

Serco, a global firm headquartered in Dubai with over 40 years of experience in the space industry, is committed to localizing its services in Saudi Arabia. “We are committed to transferring our knowledge and know-how from our international space business into the Kingdom through our training programs,” Vora added. 

“Our role as a service integrator means that we look to collaborate with innovative companies (small to large) to deliver services across the industry,” he also said. 

The emphasis on developing a robust value and supply chain within Saudi Arabia is seen as crucial for accelerating the sector’s sustainability. 

The emphasis on developing a robust value and supply chain within Saudi Arabia is seen as crucial for accelerating the sector’s sustainability. (SPA)

Vora highlighted the importance of investments in localization and startups across key segments of the space sector, which will help build a dynamic local ecosystem. 

“Going forward, building up the value and supply chain in the Kingdom is essential to accelerate the long-term sustainability of the sector,” he said, adding: “Importantly, NSG’s investments into localization and startups across key segments of the space sector will facilitate the growth of the local ecosystem.”   

Investing in national talent is another cornerstone of Saudi Arabia’s strategy to advance its space industry, and Vora stressed the dual benefits of such investments, addressing both immediate industry needs and long-term growth.  

He added: “Investing in national talent benefits both the immediate needs of the growing space industry and its long-term growth, stability, and success.”  

Vora said that enhancing the skill set of future professionals is expected to bolster the economy by creating a proficient workforce for high-tech jobs. The sector’s growth will provide ample opportunities, with local talent preserving intellectual capital within the Kingdom.  

Speaking to Arab News, Sarah Alhabbas, a graduate of Serco’s Space Graduate Program, shared her journey and shed light on the positive impact of investing in local talent. 

“When I heard that hundreds of nationals had applied to Serco’s Space Graduate Program, I was very proud to have been selected,” Alhabbas said.  

She added: “When I joined, I gained some great insights into what the company’s strategy was and how that relates to Saudi Vision 2030, and I was able to learn more about the actions being put into place to live out the company’s purpose of impacting a better future.” 

As a participant in Serco’s Space Graduate Program, Alhabbas undertook an intensive six-month course at Serco’s COP-2 facilities in Darmstadt, Germany, where she enhanced her theoretical knowledge with practical applications and insights from industry experts. 

“I am excited about transferring that knowledge back to my colleagues and partners in Saudi Arabia after I graduate from the program in the summer,” she said. 

Alhabbas underscored the importance of investing in Saudi talent for the long-term sustainability and growth of the space industry. 

“(Investing in local talent) will help unleash the potential and capabilities of Saudi talent, which can also inspire future generations’ interest in the sector,” she said. 

The graduate added that a strong understanding is crucial “to move toward a more knowledge-based economy to attract investment and lead to economic growth.” 

We are committed to transferring our knowledge and know-how from our international space business into the Kingdom through our training programs.

Amar Vora, head of space at Serco Middle East

As a woman in the field of space technology, Alhabbas has encountered and overcome various barriers, particularly in networking. “One barrier that I encountered at the beginning was the networking challenge; at events, females were in the minority.” 

Alhabbas also joined the space training program offered by CST, which has broadened her knowledge and connections within the sector. 

“The sector has been evolving significantly, especially in Saudi, and more women are exploring their interest and getting involved in space, and I hope I can help to inspire,” she said. “The space courses offered by CST are giving me the chance to meet women who are interested in entering this field which is of real benefit.” 

Alhabbas praised the government’s support for women’s education and training in space technology and said: “There is also much government support for this, with policies being implemented and programs to support women’s education and training.” 

Role models like Saudi’s first female astronaut, Rayyanah Barnawi, play a pivotal role in inspiring future generations. Barnawi has “shed light on the possibilities and capabilities of women in the field; she has truly inspired the future generation.” 

Looking to the future, Alhabbas aims to become a STEM (science, technology, engineering, and mathematics) and space ambassador in Saudi Arabia. “There’s a tremendous opportunity that lies ahead, and I’m proud to be part of it,” she said. 

The graduate expressed her ambition to encourage more talent from future generations to consider a role in the space industry, calling on private and public sector entities to work together to showcase the various career paths available. 

With initiatives like the NSG and the commitment of companies like Serco, Saudi Arabia’s space sector is on a trajectory of significant advancements. 

Strategic partnerships, a focus on national talent development, and government support are set to propel the Kingdom into a new era of space exploration and innovation.

Saudi Arabia’s foreign direct investment stock hits $218bn in Q1

Saudi Arabia’s foreign direct investment stock hits $218bn in Q1
Updated 21 July 2024

Saudi Arabia’s foreign direct investment stock hits $218bn in Q1

Saudi Arabia’s foreign direct investment stock hits $218bn in Q1
  • Growth reflects increasing confidence among foreign investors in the Saudi investment ecosystem

RIYADH: Saudi Arabia’s foreign direct investment stock reached SR817.7 billion ($218 billion) in the first quarter of 2024, marking a 6.1 percent rise compared to the same period last year, recent data showed.

A report released by the Ministry of Investment indicated that this growth reflects increasing confidence among foreign investors in the Saudi investment ecosystem.

The FDI stock represents the total accumulated value of FDIs held in the Kingdom. It is a cumulative measure that includes all past and present investments made by foreign entities in businesses, real estate, and other assets within the country.

The ministry had previously reported that inflows in the first quarter amounted to approximately SR17 billion, reflecting a growth of 0.6 percent compared to the SR16.9 billion recorded in the same period of 2023.

Brendan Marais, partner at Kearney Middle East & Africa told Arab News that “one of the key factors that sets Saudi Arabia apart from other emerging markets is its deliberate focus on building FDI-attraction capabilities.”

“This strategic approach has significantly boosted the market’s confidence in the Kingdom’s creditworthiness. The $12 billion raised from the sale of multiple-tenor bonds at the beginning of the year and its rise to the third position in the 2024 Kearney FDI Confidence Index from 2023 are clear indicators of the success of these efforts,” he added.

The Kingdom aims to attract $100 billion in FDI by 2030 as part of its broader economic diversification efforts under Vision 2030. Despite global economic challenges, including geopolitical tensions and high interest rates impacting FDI flows worldwide, Saudi Arabia has seen positive annual growth in investments, positioning itself as an attractive destination for international investors.

The Organization for Economic Co-operation and Development latest data indicated that global FDI continued to decline by 12 percent in 2023 compared to the previous year. In contrast, investments into OECD countries increased by 11 percent during the same period, while those into G20 countries decreased by 34 percent. 

Saudi Arabia has successfully built credibility with the international investment community and is well positioned to achieve its ambitious target of $100 billion of FDI by 2030.

Elvie Lahournere, Principal at Kearney Middle East & Africa

Meanwhile, FDI inflows in Saudi Arabia grew by 12.1 percent annually, reaching SR72 billion in 2023, excluding the Aramco deal.

Saudi Arabia continues to enhance its attractiveness by improving business laws, fostering human capital development, and nurturing a competitive environment for innovation, which are essential in sustaining its FDI growth trajectory.

Kingdom’s approach navigating global challenges

Rudolph Lohmeyer, partner at Kearney Middle East & Africa, said, “For countries, this global instability is spurring efforts to strengthen national resilience and reduce exposure to economic coercion, including by developing national economic capabilities and diversifying global supply networks.”

“FDI is a strategically central means of meeting both of these imperatives and nowhere are we seeing more decisive efforts to enhance FDI attraction than in the GCC,” he added

Lohmeyer told Arab News that as global instability and competition increase, and investors seek safer, geopolitically stable countries, the Kingdom’s priorities will continue to evolve from its strong, long-term foundations.

“Specifically, stabilizing the region geopolitically represents a central imperative. The Kingdom’s balanced geopolitical positioning and bold diplomatic efforts are clearly geared to this end,” he added.

He also noted that deepening its role as a regional and global hub will enhance Saudi Arabia’s attractiveness to investors by expanding its market. Additionally, as technology and AI transform productivity and the global economy, the Kingdom must foster a competitive environment for innovation. 

Houssem Jemili of Bain and Co. mentioned to Arab News in April that Saudi Arabia leads technology spending in the Middle East and North Africa, investing roughly 2.5 times more than other countries in the region, with annual growth in this expenditure.

According to the ministry’s report in May, this was further demonstrated by innovation and entrepreneurship attracting a range of funding partners to Saudi Arabia, leading to the completion of over 53 percent of investment deals in the first quarter of 2024.

Role of human capital in driving FDI

Marco Vasconi, partner at Kearney Middle East & Africa said, “Investment in human capital development is imperative to drive overall investment, including FDI, and economic growth.”

“As such, human capital is one of the key levers inputs into economic activities, especially in knowledge-intensive sectors, which underpins the development and growth of some of the sectors prioritized for Saudi Arabia’s economy,” he added.

Vasconi noted that the Kingdom is concentrating on two key areas for human capital development, enhancing domestic talent and attracting global professionals to Saudi Arabia.

Domestic efforts include overhauling the entire human capital development journey, from early childhood through K-12 to higher education, technical and vocational training, and lifelong learning. 

Stabilizing the region geopolitically represents a central imperative. The Kingdom’s balanced geopolitical positioning and bold diplomatic efforts are clearly geared to this end.

Rudolph Lohmeyer, Partner at Kearney Middle East & Africa

According to the expert, there is a strong emphasis on both basic skills and advanced thinking skills, such as critical and system thinking, as well as future-oriented skills to meet evolving requirements.

The education and training systems are being aligned with labor market needs to enhance employability and address future job demands. Additionally, there is a concerted push to up-skill and reskill the existing workforce to adapt to the changing workplace environment.

Efforts to attract global talent include enhancing Saudi Arabia’s appeal as a place to live and work through improved access to education, healthcare, and vibrant cultural life.

Additionally, the Kingdom is simplifying entry for skilled professionals, entrepreneurs, and investors while offering a robust ecosystem of economic and business opportunities.

FDI target of $100 billion by 2030

Elvie Lahournere, principal at Kearney Middle East & Africa said, “Saudi Arabia has successfully built credibility with the international investment community and is well positioned to achieve its ambitious target of $100 billion of FDI by 2030.”

Lahournere stressed the Kingdom’s geographic advantages, a young and educated population, a large local market, and growing regional integration in helping it achieve its ambitious target.

“In fact, we already see tangible outcomes from investors’ perspective in this year FDI Confidence Index world ranking that positioned Saudi Arabia at the 14th place rising from 24th last year and demonstrating the investor’s appetite for this vibrant emerging market,” she added.

Saudi Arabia has revamped its business laws to attract foreign investment by allowing 100 percent foreign ownership, establishing a dispute settlement regime, enacting a bankruptcy law, implementing digital licensing procedures, and offering fiscal incentives like zero personal income tax and a 20 percent flat corporate levy, the lowest in the G20.

AI startup DXwand to set up local office in Riyadh

AI startup DXwand to set up local office in Riyadh
Updated 21 July 2024

AI startup DXwand to set up local office in Riyadh

AI startup DXwand to set up local office in Riyadh
  • DXwand’s expansion strategy firmly aligned with Kingdom’s Vision 2030

CAIRO: Saudi Arabia’s growing business landscape has encouraged regional and global companies to establish a local presence in the burgeoning market. 

Egypt-born generative artificial intelligence startup DXwand is leaving no stone unturned as it aims to get closer to its clients with an on-ground team. 

In an interview with Arab News, Ahmed Mahmoud, CEO of DXwand, shared the company’s strategic insights into establishing a local office in Riyadh by mid-year. 

“We already started formalities and got the MISA (Saudi Arabia’s Ministry of Investment) license. The exact location is still in discussion, but it shall be in the amazing capital of Saudi, Riyadh,” he said. 

One step closer 

Mahmoud emphasized the importance of delivering value and impact swiftly with quick wins and is also keen to demonstrate the company’s differentiated position in technology and long-term ambitions in partnerships. 

He said: “That objective is planned to be achieved with local partners, in technology and other industries, to ensure our success. We already have several partners in place in Saudi, and our plan is to multiply this number by the end of 2024.” 

DXwand’s expansion strategy is firmly aligned with Saudi Arabia’s Vision 2030, focusing on economic diversification and digital transformation. 

Mahmoud said: “By focusing on delivering impact on Saudi’s focus areas of its 2030 vision, especially in economic diversification, quality of life, environmental sustainability, and culture and entertainment, we have set long-term goals and corresponding initiatives to support and impact these areas.” 

He further explained: “DXwand’s expansion always involves local partners who are industry-focused or technology builders, leading to larger contributions to each country’s economy, delivering faster and deeper impact, and achieving marvelous results with local talent and resources who understand the culture and local pains very well.” 

One of these partners includes Gulf business expansion platform AstroLabs which aims to leverage DXwand’s strong presence in the US, the UAE, and Egypt. 

Mahmoud emphasized the importance of working with official bodies to enhance their sector’s services. 

“Collaboration with the Saudi government is a key cornerstone to deliver our expansion vision, and we are in the process of identifying potential collaboration areas of focus and concerned government entities,” he said.

This collaboration is intended to support DXwand’s alignment with the country’s evolving regulatory environment. 

Our solutions align with the country’s goals to enhance digital infrastructure, improve government services, and foster innovation.

Ahmed Mahmoud, CEO of DXwand

“Regulations for AI is an emerging area not just for Saudi but also worldwide. We believe in early engagement with regulators to benefit both parties in understanding risks and building proactive mitigations. We believe AI companies should be responsible, regardless of regulations, to build safe AI technology and ensure it follows standards of privacy and safety worldwide,” Mahmoud said.

“This shall help us adapt to any regulatory needs in Saudi as we are proactively mitigating risks and ensuring a safe experience for our community,” he added. 

Mahmoud said the company has been growing yearly by a multiple of two since 2020,  and he is looking to maintain this trajectory along with delivering two nationwide impact initiatives per year.

He added that Saudi Arabia would be a major geography for one of these national impact initiatives in 2024. “We believe Saudi has all needed success elements to deliver not just one of our national initiatives, but it could even be the best delivered,” he said. 

Mahmoud also revealed that the company has three new products in the pipeline, leveraging their generative AI technology, although details are still under wraps. 

“With the help of our co-build partners, we have three new products in the pipeline leveraging our same generative AI technology. We can’t at the moment share more details about them while we shall have them announced with relevant partners very soon,” he said.

Expanding to Saudi Arabia is pivotal for DXwand’s strategy due to factors like alignment with Vision 2030, market opportunities, and government support, Mahmoud highlighted. 

He further explained the alignment of DXwand’s AI solutions with Vision 2030’s ambitions for economic diversification and digital transformation.

“Our solutions align with the country’s goals to enhance digital infrastructure, improve government services, and foster innovation,” he said. 

He added that significant investments in sectors such as healthcare, education, financial services, and tourism present lucrative opportunities for DXwand. 

Government support for a knowledge-based economy and technology investment also aligns with his company’s objectives, Mahmoud said. 

Initiatives to attract foreign investments and create a favorable business environment make Saudi Arabia a strategic location that offers access to other Middle Eastern markets, serving as a springboard for regional expansion, Mahmoud explained. 

The tech-savvy Saudi population provides a receptive market for AI-driven solutions. “This demographic is receptive to adopting new technologies, creating a conducive environment for AI solutions,” he said.

Business fundamentals 

Regarding funding, DXwand has raised $6.7 million since its foundation, with the latest $4 million series A round closing in December 2023. This investment will ignite the establishment of DXwand in Saudi Arabia, fostering strategic partnerships with local partners, educational institutes, and strategic clients. 

Mahmoud said: “We plan to use part of the fund to ignite activities of first establishment of DXwand in Saudi and fostering strategic partnerships to build an ecosystem that both delivers DXwand’s ambition of growth while partnering with Saudi to impact and accelerate the execution of its 2030 vision outcomes and land nationwide impact.” 

Addressing industry challenges in Saudi Arabia, Mahmoud discussed the hype surrounding generative AI and DXwand’s  approach to finding niche solutions. 

He noted that DXwand’s platform, DXP, is designed to solve issues such as high large language model costs, lack of managed accuracy measurement, and slow time to market. 

“DXwand’s platform DXP offers over 90 percent cost optimization leveraging low-end LLM offerings, while increasing accuracy by over 30 percent using one tool that enables experiments to measure and RAG (retrieval-augmented generation) to optimize accuracy and costs easily,” Mahmoud said. 

DXwand operates on a subscription-based business model, selling its products with annual or monthly subscriptions relevant to the problem size, represented by conversation volume or user numbers. 

Mahmoud stated that DXwand is a profitable company with a healthy financial model, designed to ensure profitable unit economics. 

The motivation behind founding DXwand stemmed from Mahmoud’s experience at Microsoft, where he saw the potential for AI ventures focused on the region’s cultural and linguistic needs. 

“This potential was not served and it gave me the temptation to take a leap of faith and resign from such a reputable international Silicon Valley giant to start DXwand’s journey,” he stated. 

Key performance indicators for DXwand include LLM cost optimization, accuracy overtime, new sign-ups, new contracts, new partners, and time to market. 

Mahmoud emphasized the importance of managing growth carefully in Saudi Arabia to maintain reputation and customer experience. 

“For Saudi specifically, as we are still newly introduced, I would focus on new partnerships, new client sign-ups, and their experience with costs and accuracy optimization,” he noted. 

Mahmoud assesses the current market landscape in Saudi Arabia for AI and technology as rapidly evolving, with numerous opportunities and challenges. 

He highlighted the Saudi government’s leadership and investments in economic diversification, digital transformation, artificial intelligence, and talent development. 

“With government leadership and investments in economy diversification, digital transformation, artificial intelligence, and talent development, we foresee a great growth opportunity with such an emerging market with a remarkable GDP (gross domestic product) and population,” he stated. 

Regarding industry forecasts, Mahmoud anticipates a downturn in adoption due to economic factors and the costs of operating generative AI, impacting their business cases. However, he sees this as an opportunity. 

“We foresee a downturn in adoption impacted by economic factors and costs of operating generative AI and its reflections on their relative business cases, which is a great opportunity for the upcoming year or two to leverage this challenge if you have a solution that can deliver such technology with cost efficiency and ability to scale fast,” he explained.