Saudi Arabia

Saudi Fintech Sector Doubles in Size

Saudi Arabia’s fintech sector is growing at a fast pace, doubling in size in the span of just a couple of months. As of the end of 2022, the country was home to 89 fintech companies, a number that soared to over 200 companies by August 2023, Ayman Al-Sayari, governor of the Saudi Central Bank (SAMA), told Arab News last week.

The number surpasses the central bank’s initial expectation of reaching 150 fintech companies operating in the country by the end of 2023, making Saudi Arabia well on track to achieve its goal of hosting 525 fintech companies by 2030.

The statement came on the heels of the release of SAMA’s fintech report, an annual industry report which provides an overview of the current state of the Saudi fintech landscape, and highlights the progress made so far.

The report shows that the Saudi fintech sector has grown tremendously over the past four years. In 2018, only six fintech companies operated in the country.

Companies licensed or authorized by SAMA, Source: Annual Fintech Report 2022, Saudi Central Bank, 2023

The growth of the sector is also evidenced by soaring fintech revenue. In 2022, a total of SAR 2.8 billion (US$746.4 million) was generated by fintech companies in Saudi Arabia, up 40% from 2021’s SAR 2 billion (US$533 million) in 2021. Total assets held by fintech companies also grew to SAR 6.8 billion (US$1.8 billion) in 2022 from SAR 6.5 billion (US$1.7 billion) the year before.

Total revenues and assets by SAMA fintech companies (SAR), Source: Annual Fintech Report 2022, Saudi Central Bank, 2023

Booming fintech adoption

The rise of the Saudi fintech sector comes on the back of booming fintech adoption across all major segments.

In 2022, a total of 13.8 million retail customers registered with Electronic Money Institutions (EMI) digital wallets, among which 8.6 million being active customers (62%). The figure implies an increase of nearly 80% in the number of registered customers between 2021 and 2022.

Merchants are also increasingly adopting digital wallets. At the end of 2022, 176K merchants had registered with EMI digital wallets, up 67.6% from 2021’s 105K merchants.

Total number of retail customers and merchants registered with Electronic Money Institutions (EMI) digital wallets, Source: Annual Fintech Report 2022, Saudi Central Bank, 2023

Buy now, pay later (BNPL) is one sector in particular that’s booming in popularity in Saudi Arabia. In 2022, a total of 10 million customers had registered with a BNPL service, more than tripling the number in 2021 (3 million). SAR 8.7 billion (US$2.3 billion) worth of goods were sold through BNPL arrangements last year, up nearly fivefold from 2021’s SAR 1.8 billion (US$480 million).

Buy now, pay later usage in Saudi Arabia, Source: Annual Fintech Report 2022, Saudi Central Bank, 2023

Digital insurance is another fintech segment that’s seeing rapid customer adoption. Between 2021 and 2022, the total value and number of policies issued through insurance aggregators in Saudi Arabia increased by 40% and 7.5%, respectively, reaching SAR 4.2 billion (US$US$1.1 billion) and 4.3 million policies last year. A total of 7.2 million retail customers had registered with an insurance aggregator in 2022, up 33% from 2021’s 5.5 million.

Usage of insurance aggregation in Saudi Arabia, Source: Annual Fintech Report 2022, Saudi Central Bank, 2023

Saudi Arabia’s National Fintech Strategy

Saudi Arabia has set out ambitious goals for its fintech sector as it aims to reduce the use of cash and increase the share of non-cash transactions amongst individuals to 70% by 2025.

The country wants to raise the volume of venture capital (VC) investments in fintech companies to SAR 12.2 billion (US$3.2 billion) by 2030 from just SAR 232 million (US$61.9 million) in 2021.

Saudi Arabia also aims to raise the contribution of the fintech sector to its gross domestic product (GDP) to reach SAR 13.3 billion (US$3.5 billion), and create more than 18,000 jobs by 2030, ambitions that are in line with the country’s goals of diversifying the economy and empowering its labour force with future-proof skills.

Saudi Arabia’s National Fintech Strategy goals, Source: Annual Fintech Report 2022, Saudi Central Bank, 2023

Pursuing its fintech ambitions, Saudi Arabia introduced a number of regulations this year to further boost the growth of the sector. In July, SAMA approved insurtech rules to regulate the sector, assure client protection, and promote innovation in the insurance sector.

That same month, new regulations on payments and payment services came into effect. The rules are meant to further enhance soundness and efficiency of the payment systems infrastructure in Saudi Arabia, create a more attractive environment for investment, and stimulate innovation and competition.

The central bank is currently working on a banking law aimed at modernizing the country’s financial sector. The legislation will seek to expand the definition of banking business to explicitly cover credit granting, enhance the legal framework for the Deposit Protection Fund, enhance the banking secrecy framework in Saudi Arabia, and establish a legal framework to regulate the use of technology in the banking sector including digital banking, open banking, regtech and big data, among other goals.

Featured image credit: Edited from freepik