In H1 2024, fintech funding in Saudi Arabia reached US$62 million, representing a staggering 360% increase compared to the same period last year, a new report by Magnitt and SVC reveals.
The surge places fintech as the second-biggest startup vertical by funding, capturing 15% of total investment in H1 2024 and trailing only behind e-commerce and retail, which secured 52% of the total funding or US$215 million.
The “H1 2024 Saudi Arabia Venture Capital Report”, released in July 2024, provides an overview of the venture capital (VC) landscape in Saudi Arabia, highlighting trends in investor participation, funding distribution, and investment evolution over the past five years.
According to the report, fintech is solidifying its position as a major startup vertical in Saudi Arabia. In H1 2024, the sector secured the second-largest funding amount and led in deal count by capturing 14% of all deals in the country. This reflects strong investor interest in the sector, the report says.
During the period, earlier-stage and smaller funding rounds dominated the landscape. This is evidenced by the largest rounds in fintech being the US$21 million seed round raised by digital payment startup Moyasar in March, and the US$18 million Series A secured by robo-advisory company Abyan Capital in May.
Early-stage deals made up the largest share of startup deals in H1 2024, accounting for 84% of the total 63 deals reported in Saudi Arabia. This trend was consistent across the Middle East and North Africa (MENA) region, where early-stage deals accounted for 86% of overall transactions, including 86% of the deals in the United Arab Emirates (UAE), and 83% of the deals in Egypt.
The rise of fintech
The rise of fintech funding in Saudi Arabia reflects the sector’s growth over recent years. Since 2018, fintech has attracted over SAR 4 billion (US$1 billion) in investments and engaged with over 100,000 people in fintech-related events, trading and internships. The number of fintech companies in the country has increased 20-fold to reach approximately 200 in 2023.
Digital wallet is one vertical that’s witnessed significant growth, fueled by booming usage of cashless payments. In 2021, non-cash payments accounted for 62% of all transactions, up from 18% in 2016, data from SAMA show. Adoption continued to increase in 2023, with non-cash payments reaching a share of 70% last year.
Saudi Arabia has set out ambitious goals for fintech under Vision 2030. These objectives include having at least 525 fintech companies operating in Saudi Arabia, creating 18,000 fintech job opportunities, contributing SAR 13 billion (US$3.5 billion) to GDP, and achieving SAR 12 billion (US$3.2 billion) in direct VC contributions by 2030. Unveiled in 2016, Vision 2030 is a national development plan designed to diversify Saudi Arabia’s economy and promote non-oil sectors including finance and technology.
Saudi Arabia shows resilience
In H1 2024, Saudi Arabia’s tech startups secured a total of US$412 million in VC funding. The sum represents a slight 7% YoY decline and the smallest YoY dip in funding among MENA’s top three geographies.
32% of the amount came from a single transaction: the US$130 million round secured by software-as-a-service (SaaS) provider Salla. The deal was the only mega-round across the Middle East and North Africa (MENA) announced during the period.
Like funding volume, deal flow activity remained relatively flat, with a modest 3% YoY reduction in H1 2024.
In H1 2024, Saudi Arabia remained the second most transacted MENA country, accounting for 30% of total deals, up from 25% in the same period a year earlier. The country also retained the first spot in total capital deployed, contributing to 54% of total funding in MENA in H1 2024, an increase from 38% in H1 2023.
Saudi Arabia is followed by the UAE with US$225 million, Egypt with US$86 million, Morocco with US$17 million and Kuwait with US$14 million.
Featured image credit: edited from freepik