Fintech on Fire:
Saudi Arabia embraces the trend
The MENA region is still in its infancy when it comes to fintech. Estimates of current fintech market value and projections vary wildly depending on which research reports you read, but we can be certain of two things: fintech is experiencing explosive growth and there is huge upside potential for fintech in MENA.
One of the reasons for this is that collaboration with fintech is a deliberate strategic decision for governments and traditional financial institutions in markets across the region. While remaining prudent and exercising strict oversight, regulators are working proactively alongside others in the financial services industry to enable fintech participation.
Among regional markets, Saudi Arabia was singled out in a 2021 report by The Fintech Times as one of the key emerging fintech hubs alongside Bahrain and Turkey.
These markets are closing the gap fast on the leading fintech centres, using a scoring methodology that took into consideration various factors including overall economic development, development of a digital ecosystem, the market for start-ups, ease of doing business, levels of entrepreneurship and existence of a regulatory sandbox to support fintech innovation. The Fintech Times is confident that more fintech unicorns will emerge, following the announcement in 2020 that STCPay had become the Kingdom’s first such success story, reportedly reaching a $1.3 billion valuation.
KPMG calculated that the number of fintechs in Saudi Arabia increased from only 10 in 2018 to 60 in 2020, a CAGR of 147%. By the end of 2021, there were 82 fintechs. These companies cover a number of industry verticals, including payments and currency exchange insurance, lending and capital markets. These entrepreneurial start-ups are steadily becoming operational and starting to attract funding. In its Saudi Economy 2021 Retrospective, Arab News reported that 16 investment deals were closed in the first eight months of 2021, totalling $157.2 million. Payments start-ups have been most successful in securing investment, including mobile payments, POS services and Buy Now Pay Later.
In January 2022, Rabet became the first company to secure SAMA permission for its Open Banking solution.
With new companies admitted to the sandbox twice a year, there is ongoing activity to expand the range of services available to Saudi consumers and businesses through fintech initiatives, and to ensure the Kingdom realizes all the potential benefits of its digital financial services ecosystem. At eMcREY, we support the fintech community to build mutually beneficial relationships with existing banks, shortening development times and increasing speed to market while promoting innovation at the forefront of regional financial services.