Saudi Arabia‘s financial sector, once reliant on cash because of underdeveloped digital payment infrastructure and cultural preferences, has undergone a remarkable transformation.
The implementation of the Fintech Strategy, along with recent government and regulatory initiatives and the entry of local and global payment providers, has driven significant progress and innovation. Furthermore, the growth in venture capital (VC) investment has boosted the domestic fintech sector.
A new report by KPMG looks at the rise of the fintech sector in the country, providing an overview of the state of fintech in Saudi Arabia and highlighting emerging trends.
According to the report, the fintech landscape in Saudi Arabia has shifted dramatically over the past couple of years, rising from a mere 60 fintech companies in 2020 to 226 in 2024. By 2030, that number is projected to reach 525.
Fintech funding has also surged, growing from just US$20 million in 2020 to nearly US$800 million in 2023, according to KPMG.
The growth of the sector has been driven by booming adoption of fintech solutions. Non-cash payments grew from 62% in 2021 to 70% in 2023, highlighting the shift toward cashless transactions. Meanwhile, alternative financing models is growing in popularity, with debt crowdfunding, for instance, increasing 2.5 times from SAR 296.5 million (US$79 million) in 2021 to SAR 771 million (US$205.5 million) in 2022.
Drivers of fintech growth in Saudi Arabia
Several factors are driving the growth of fintech in Saudi Arabia. First, government initiatives such as the Fintech Accelerator program by Fintech Saudi and infrastructure projects like the Open Banking Lab and Regulatory Sandbox by the Saudi Central Bank (SAMA) are key enablers of digital transformation in the financial sector.
Regulatory advancements, including the Open Banking Framework, new rules for BNPL services and insurtech regulations are also stimulating activity across digital payments, open banking, alternative finance and insurtech.
Furthermore, Saudi Arabia boast a young, tech-savvy population, with a large proportion under the age of 30, providing a fertile market for digital financial solutions. The country also has a strong technological infrastructure, including advanced broadband networks and cloud computing capabilities, which supports fintech development.
Finally, the Saudi government has prioritized fintech development as a core component of its Vision 2030 strategy. Vision 2030 is a national plan unveiled in 2016 that aims to diversify the country’s economy and promote non-oil sectors including finance and technology. The strategy has set out clear objectives for fintech, including having at least 525 fintech companies operating in Saudi Arabia by 2030, 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.
Blockchain and digital banking as top fintech trends
Looking ahead, KPMG identifies several trends that are expected to shape the fintech sector in Saudi Arabia, including blockchain and digital banking.
Technological innovations driven by projects like Neom are set to spearhead advancements in Web3, the metaverse, digital twins, and augmented reality. Neom is a US$500 billion futuristic city and development project in northwest Saudi Arabia that aims to create a high-tech, sustainable city powered by renewable energy.
Blockchain technology, known for its security, transparency, and efficiency, is set to play a crucial role in realizing Neom’s ambitious objectives, with the government partnering with leading blockchain firm Animoca Brands to accelerate these efforts.
The digital banking sector is also anticipated to expand, driven by increased competition from newly licensed digital banks, which will foster innovation and improve customer experiences. SAMA has so far licensed three digital banks to operate in the country. These digital banks are part of the government’s broader push to enhance its financial sector and are STC Bank, D360 Bank and Saudi Digital Bank.
STC Bank, formerly known as STC Pay and is owned by the Saudi Telecom Company (STC). Initially a payment service provider, it has since been converted into a full-fledged digital bank, offering a range of banking services with a strong focus on digital transactions and remittances.
D360 Bank, which is backed by a consortium of investors led by the Public Investment Fund (PIF), focuses on providing general banking services. The bank emphasizes technology-driven solutions that are convenient and accessible.
Finally, Saudi Digital Bank, often referred to as SNB Digital, is owned by the Saudi National Bank (SNB). SNB was formed following the merger of the National Commercial Bank (NCB) and Samba Financial Group. Saudi Digital Bank aims to expand traditional banking services into the digital realm, leveraging technological advancements to offer seamless financial services.
Featured image credit: edited from freepik
