Building the foundation for a strong fintech ecosystem in Saudi Arabia

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With a population of almost 35 million
people
, Saudi Arabia is undergoing a massive economic
development and diversification reform known as Saudi Vision 2030.
Fintech plays a part in diversifying the current offering in the
Kingdom, with oil historically playing a huge part in the economy.

Within Saudi Vision 2030, on April 24, 2017,
the Council of Economic and Development Affairs
(CEDA)
initially launched ten delivery programs to realize
Vision 2030; one of those is the Financial Sector
Development Program (FSDP)
. According to the 2030 website,
“The FSDP’s role is to create a diversified and effective
financial services sector to support the development of the
national economy, diversify its sources of income, and stimulate
savings, finance, and investment. The FSDP will achieve this
ambition by enabling financial institutions to support private
sector growth, ensuring the formation of an advanced capital
market, and promoting and enabling financial planning, without
impeding the strategic objectives intended to maintain the
financial services sector’s
stability
.”

Riyadh – the
capital and largest city of Saudi Arabia GETTY

How is the fintech offering in Saudi Arabia? Well, as in other
parts of the world, the ongoing Co-VID 19 pandemic has resulted in
much of our daily lives to go as digital and contactless as
possible – in effect accelerating digital transformation. Due to
the nature of fintech, the sector has a key role to help business
and this is not only just in Saudi Arabia but across the entire
world.

Prior to Co-VID 19 and its sudden need for global
digitalisation, there was already potential for Saudi Arabia to
have a strong fintech network. It is the largest economy in the
region, where its stock market is worth around $549 billion

USD
, contributing to over half of the region’s total gross
domestic product (GDP) in
2018
, and is a member of the Group of Twenty
(G20)
; this year it is actually Saudi Arabia that holds
the G20 presidency.

Also, Saudi has a very young population, where 70 percent of the
population in 2017 was under 30 years
old
. It is also a very tech savvy nation, where it ranks,
according to a report by EY, as having the third
highest smartphone mobile usage globally and the seventh globally
in terms of household internet
access
. This, coupled with the ongoing economic initiatives and
investments as part of Saudi Vision 2030, has put Saudi’s fintech
prospects and future growth at the forefront.

Jeddah, the second
largest city in Saudi Arabia by population GETTY

The Kingdom started laying the foundation for where fintech
would play a role in a future diversified and innovative economy
under Vision 2030 and the FSDP. First,
Fintech Saudi was launched by the Saudi
Arabian Monetary Authority (SAMA)
in April 2018 under the
FSDP, acting as a catalyst for the development of
the financial service technology / fintech industry.

Key Initiatives that Fintech Saudi have done
include, according to its website:

  • Fintech Tour 19 –  Cluster of events and
    activities hosted by Fintech Saudi’s Partners
    across Saudi Arabia and the Gulf Cooperation Council
    (GCC)
  • Fintech Internship 20 – An opportunity for
    interns to get a taste of working in companies at the cutting edge
    of fintech in KSA, whilst supporting partners with finding future
    talent
  • Fintech Access Guide – Developed by
    Fintech Saudi, SAMA,
    Capital Market Authority (CMA), Saudi
    Arabian General Investment Authority (SAGIA)
    and
    Monshaat – Provide fintech regulation clarity
    for local and international entrepreneurs and a framework to help
    entrepreneurs develop their own fintech ideas

SAMA has also designed a Regulatory Sandbox,
where it is welcoming both local and international firms wishing to
test new digital solutions in a ‘live’ environment. It would
allow those with a view to then deploy them in Saudi Arabia in the
future.

Last month, it was announced that SAMA welcomed
nine more fintech companies to take part in the sandbox, which
included companies such as Manafa Capital,
Funding Souq, Circles,
Nayifat Finance and Sahlah. The
sandbox is home to 30 fintechs, which includes fintech companies
like BayanPay, Skyband and
Lindo Financing. Those 30 companies are focused on
digital payments, financial information aggregation, crowdfunding,
currency exchange, international processing, micro-lending, and
digital savings. So far, over 100 applications have been received
by
SAMA
.

Finally, prior to the coronavirus, there were innovations
already being felt in the fintech scene. For example, Digital
currencies, which could help the world in the cloud of Co-VID 19,
can be of interest.  The central banks of Saudi Arabia and the
United Arab Emirates (UAE) – the ladder being the second largest
economy in the region – already has a pilot programme that was
launched last year where they are developing a shared digital
currency for cross-border bank
transactions
.

Saudi Arabia has an opportunity to further solidify its position
to one day be a leader in fintech. It has already, as part of
Vision 2030, set the foundation to create an environment that not
only is attracting foreign investment but also providing the tools
and guidance to create its own talent and innovation as well. In a
post-Co-VID 19 fintech will play a part in the global economy out
of necessity; Saudi has a chance to provide solutions to those
needs to help the world to operate as safe, normal and digital as
possible.

The post
Building the foundation for a strong fintech ecosystem in Saudi
Arabia
appeared first on The Fintech Times.

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