By Majed Al Rasheed*

Saudi Arabia, under its Vision 2030 and Financial Sector Development Program (FSDP) — with the FinTech strategy approved in May 2022 as its fourth pillar, aims to become a cashless society with a target of 70% by 2030. It also aims to make the Kingdom a global FinTech hub that attracts entrepreneurs from around the world as well as within the country.

FinTech Saudi was established in 2018 as an ecosystem builder and catalyst under the supervision of the country's financial regulators, SAMA (Saudi Arabian Monetary Authority) and CMA (Capital Market Authority), to lay the foundation and further accelerate the sector's success journey. This initiative has led to an increase in the number of FinTech startups to 207 in 2023, up from only 10 in 2018—an increase of 20.7 times in five years.

With the collaboration of government ministries and agencies such as the Ministry of Finance, Ministry of Communication, Ministry of Investment, SAMA, CMA, and the General Authority for Small and Medium Enterprises (Monsha'at), many initiatives have been possible to support the FinTech sector and help Saudi FinTech succeed in its mission. Examples include the FinTech Hub by Monsha'at, which connects FinTech startups with service providers, and a new program called Makken by FinTech Saudi, supported by the Saudi Central Bank and the Capital Market Authority. The program aims to empower entrepreneurs and startups in the FinTech industry by providing subsidized support for technology, cloud, and cybersecurity. Another initiative by FinTech Saudi is the FinTech Accelerator, which helps startups speed up the development of their services in a dedicated three-month program.

Another government initiative is the National Technology Development Program (NTDP) which states in its vision that it will facilitate Saudi Arabia’s transformation into a leading global technology hub by 2030. It has launched 14 initiatives, starting from MVPLAP, which gives grants to startups to develop their Minimum Viable Product (MVP), to a relocation initiative that helps international startups relocate to Saudi Arabia with many grants entailed to the initiative.

The surge in investment within Saudi Arabia's FinTech sector is a clear indicator of its growing potential and the confidence investors have in its growth trajectory. In 2023, the sector witnessed a remarkable increase in funding, with the total deal value reaching $791 million, marking a significant increase of approximately 231% from $239 million in 2022. This significant uptick in investment is not just a testament to the sector's attractiveness but also to the strategic importance placed on FinTech by the Saudi government and private investors alike.

The establishment of the Saudi Venture Company (SVC) by Monsha’at is a pivotal move toward bridging the funding gap for SMEs and startups. SVC's mandate extends beyond mere financial injections; it aims to foster a sustainable ecosystem where venture capital funds and angel investors are encouraged to co-invest in promising FinTech ventures. The launch of SVC's $80 million VC FinTech fund, in collaboration with the Capital Market Authority and the FSDP, earmarks dedicated capital for Saudi-based FinTech startups, ensuring they have the necessary financial backing to innovate and scale.

This investment momentum is further bolstered by various government initiatives aimed at attracting foreign venture capital and facilitating the growth of domestic funds. These efforts include regulatory reforms to ease investment processes, tax incentives for investors, and programs designed to match investments with startups, amplifying the sector's appeal to a global audience of investors and entrepreneurs.

The FinTech ecosystem in Saudi Arabia is uniquely positioned to address and solve a myriad of local financial challenges, leveraging technology to bridge gaps in the traditional financial landscape. Startups in the Kingdom are innovatively tackling issues such as the SME funding gap, financial literacy, and financial inclusion, showcasing the sector's critical role in the broader economic framework.

SME Funding Gap: FinTech startups are pioneering crowdfunding platforms and alternative lending solutions to provide SMEs with much-needed access to capital. These platforms not only democratize access to funding but also offer investors new avenues for deploying their capital, thereby stimulating economic growth and entrepreneurial activity.

Financial Literacy: With a significant portion of the population lacking basic financial knowledge, FinTech applications focused on savings, budgeting, and personal finance management (PFM) are gaining traction. These apps use engaging user interfaces and personalized financial education content to improve financial literacy rates, empowering individuals to make informed financial decisions.

Financial Inclusion: Perhaps one of the most impactful areas of FinTech innovation in Saudi Arabia is in enhancing financial inclusion. By developing localized products tailored to the needs of the underbanked retail investors, FinTech startups are opening up new possibilities for financial participation. From digital banking solutions that offer user-friendly interfaces and simplified account management to investment platforms that provide access to the capital markets with minimal entry barriers, these innovations are crucial to integrating a larger segment of the population into the financial ecosystem.

The rapid growth and flourishing of the FinTech sector in Saudi Arabia is a testament to the country's committed efforts toward embracing digital transformation and innovation as part of its Vision 2030 objectives. The government's proactive approach in providing robust support through regulatory frameworks, financial incentives, and strategic programs has significantly contributed to creating a fertile ground for FinTech startups. This ecosystem not only aids in solving local financial challenges but also positions Saudi Arabia as a competitive player on the international FinTech stage.

As the Kingdom continues to advance its digital infrastructure and regulatory environment, the potential for further innovation and growth within the FinTech sector is immense. With ongoing investments and support, Saudi Arabia is well on its way to achieving its ambition of becoming a leading global FinTech hub, ultimately contributing to the nation's economic diversification and digital economy goals. The success story of FinTech in Saudi Arabia serves as an inspiring model for other nations looking to foster their own FinTech ecosystems, highlighting the pivotal role of government support, investment, and innovation in driving the sector's growth.

*Al Rasheed is a FinTech Consultant at FinArabia, and Banking Innovation Advisor at SAB bank’.