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How can Saudi Arabia unleash national success in fintech?


Abdullah Al Othman is the founder and chairman of Geidea, a Saudi Arabia-based fintech specialised in payments. It works with over 150,000 merchants, and provides support to more than 600,000 payment terminals and ATMs networks within the kingdom.

Over the past few years, Saudi Arabia’s fintech sector has gained tremendous momentum, as agile and innovative startups take advantage of increased technology penetration to innovate financial services across the country. Indeed, the number of fintech companies operating in Saudi Arabia has increased by 37 per cent, according to Fintech Saudi. For investors, the opportunities are huge – in 2021 alone, a record level of over SAR 1.3bn ($347 million) in venture capital investment was plowed into Saudi Arabia-based fintechs. 

Savvy investors recognise that fintech solutions are life solutions – they penetrate almost every aspect of life in all communities, accelerating financial inclusion and catalysing the digital economy. With the power of AI, analytics and machine learning, fintechs can assist the individual throughout the life journey – from the teenager’s first bank account to launching a startup, buying that first home and identifying where to invest for later in life. 

This new reality reflects two permanent dynamics: the rapid and permanent adoption of fintech services - and a corresponding explosion of the digital economy. For these two dynamics to flourish in unison, the fintech ecosystem in Saudi Arabia faces very specific challenges.

The regulatory challenge

It is important to understand that the fintech ecosystem comprises multiple players - innovators (fintech startups), technology developers, governments, financial customers and traditional financial institutions. At the heart of the ecosystem are the fintech innovators – and to truly thrive, they need to exist within an enabling regulatory environment. To enable fintech innovation, governments either issue new regulations or relax some laws. This is especially important, as lengthy procedures can reduce time in product development, expansion, and investment plans. 

Despite local regulators stepping up the level of regulations and issuances, it is an area that remains a challenge for KSA, like many countries around the world. Over recent years, the number of approvals for fintech companies to operate in KSA has been relatively low when compared to more developed financial hubs. According to various reports, there were 35 approvals of fintech startups in 2020 – and more recently, 16 companies were approved in the third quarter of 2021. While there are signs of improvement, this is a process that can be made faster when compared to the growing number of fintech startups worldwide – which now amounts to 26,000 as of 2021. Although regulators must conduct due diligence and balance economic security, there must be ways to balance this priority with a process for faster approvals. 

A proposed solution is the introduction of more sandboxes in the country. Currently, there are still numerous fintech applicants that are not invited to test in a sandbox due to several competing applications to test – and once regulations for a sandbox are close to being issued, these applicants are not considered again for a longer period. By launching more sandboxes, greater innovation in fintech can be achieved while providing the ideal testing environment for regulators and entrepreneurs to collaborate and ensure compliance with financial rules, as well as provide greater confidence to the ecosystem. 

The good news is that the kingdom is making progress. The recent shift to instant payments would not have been possible without increasing the accessibility of digital payment channels - something that SAMA, the Central Bank, has spearheaded as a priority in recent years. SAMA recently announced that the number of points of sale (PoS) terminals inside the kingdom exceeded the one million threshold – ensuring that their efforts bore fruit. 

This feat was made possible after extensive collaboration with the financial sector and with fintechs such as Geidea, which has launched over 700,000 terminals and ATM networks around the country. These trends illustrate that regulators have paved the way for fintech actors to come together in an incredibly exciting way by enabling innovation and cross-sector collaboration. 

The war for talent

As with almost every industry, the growth of the fintech sector relies on private-sector innovation, and it is clear that Saudi policymakers wish to enable invention and creativity rather than always ‘own’ it: unleashing the very best of capitalism as opposed to using the levers of big government. It should be no surprise that ‘Fintech Saudi’ was launched by the Saudi Central Bank in partnership with the Capital Market Authority in April 2018 - supporting fintech entrepreneurs at every stage of their development and building the skills and knowledge required to grow the fintech sector.

Yet skills themselves represent a threat to fintech evolution in Saudi Arabia. Recruiting digital talent to design, develop, and enhance digital financial services requires relevant expertise, background, skill and a deep understanding of the customer’s needs. This is a challenge for all fintech providers, particularly for traditional financial institutions like banks, which may not have an internal legacy of fintech innovation or invention. 

For banks, the pressure is on to attract and retain the best fintech innovators in the kingdom – and to do so in the face of competition from fintech startups. The scale of the challenge is reflected in data athered in the 2021 Fintech Saudi annual report, which says that 38-40 per cent of fintechs in Saudi Arabia consider talent and recruitment to be their biggest hurdle, and 88 per cent have named ‘finding the right skillset’ as one of the main challenges to recruiting talent.

Unleashing national success

Part of the solution is for different players from across the ecosystem to come together, collaborate and share skills and expertise. This is why it is so encouraging to see so many traditional financial institutions embrace open banking and open application programming interfaces (APIs) as a route to engendering innovation across the ecosystem. 

This is the very definition of collaboration - multiple companies and financial institutions leveraging data to build more relevant products and services for the financial institution’s customers – in turn leading to increased innovation, competition, and digital adoption. Indeed, important factors such as around 80 per cent smartphone penetration in the country – as well as two-thirds of the population being under 25 are also expected to increase investor appetite for the sector, as the kingdom moves to a more cashless future.

In summary, fintechs are leading much of the innovation in the KSA financial space, but their work must be supported by a proactive (as opposed to a responsive) regulatory approach. Saudi Arabian regulatory bodies have done well to nurture new fintech ideas within the SAMA regulatory sandbox – this is important if startups are to get to market quickly and efficiently. Through this, and through open banking and open APIs, Saudi Arabian fintechs can nurture a future talent pool with cutting-edge skills. 

The economic opportunities that this ecosystem unleashes will only be more exciting as Saudi Arabia’s fintech ecosystem matures, modern technologies continue to converge, and every single citizen becomes more empowered. It is clear to see that through collaboration, invention and regulatory support, Saudi Arabia’s robust fintech landscape is truly unleashing national success for all. 


April 30th 2022, 8:47 am
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