Fintech Sector in Saudi ArabiaFinancial Innovations Unleashed in Saudi Arabia

Saudi Arabia's fintech strategy

Saudi Arabia is pioneering a fintech revolution, embedding it in its financial sector's DNA.

The Kingdom’s Fintech Strategy, approved in May 2022, is a bold step in positioning Riyadh as a global fintech hub, with a focus on innovation, global positioning, and talent development.

This strategy is the fourth pillar of the Financial Sector Development Program, which aligns well with Saudi Vision 2030 to achieve global competitiveness. It encompasses six transformational drivers and eleven initiatives that foster collaboration, enhance infrastructure, and drive investment in the fintech ecosystem.

Saudi Central Bank (SAMA) designed a Regulatory Sandbox that further supports these initiatives by welcoming local as well as international firms looking to test their products on the Saudi market. SAMA’s Sandbox creates new opportunities and lowers the risk for foreign-owned companies looking to set up in Saudi.

Talent in Saudi's Fintech Industry

While talent used to be quoted as one of the challenges with 40% of fintechs in Saudi Arabia considering talent and recruitment to be their biggest challenge, we witness that to be changing thanks to various initiatives. In one of them, The Financial Academy recently partnered with Fintech Saudi and AstroLabs to launch the most comprehensive Fintech bootcamp that trained 30 young professionals and supported them in developing their fintech prototypes.

Fintech Regulations in Saudi Arabia

Saudi Arabia's fintech industry is regulated by two key authorities: the Saudi Central Bank (formerly known as the Saudi Arabian Monetary Authority or SAMA) and the Capital Market Authority (CMA). SAMA oversees various financial services, including banking, finance, insurance, credit bureaus, and payments. It also regulates specific fintech activities such as intelligent cash management and insurance aggregation. Meanwhile, CMA focuses on capital market-related activities, such as dealing, arranging, managing, advising, and custody of securities.

Fintech startups operating in Saudi Arabia need to determine whether their services fall under the purview of CMA or SAMA regulations, and they can access a comprehensive list of regulated activities on the respective regulators' websites. Interestingly, not all fintech companies provide regulated services, and some may not require immediate regulatory approval. Here are eight standalone fintech activities that currently do not need regulatory approval:

• Aggregation of Publicly Available Financial Information
• Business Tools
• Back-office Bank Operations
• Enhancing Bank's Customer Experience
• Personal Management
• Regtech
• Gamification
• Reward-Based Crowdfunding

However, should a fintech company intend to provide regulated activities in addition to the aforementioned services, it will likely need regulatory approval. For those uncertain about their regulatory status, Fintech Saudi has developed a Fintech Regulatory Assessment Tool, which can provide clarity on the regulatory pathways for various fintech activities. If any doubts persist, Fintech Saudi can assist in coordinating with the appropriate regulator on the company's behalf. Depending on their strategic direction, fintech companies operating in areas currently not subject to regulation may have several options, such as offering business tools or enhancing banks' customer experiences. More information can be found in Fintech Access Guide.

Future of Saudi Fintech Startups

The biggest fintech companies shaping the investment landscape from 2021 to 2023 include Lean Technologies, Mod5r, Tamara, EdfaPay, Cashin, Lendo, and more. These companies accumulated a total revenue of over $740 million in 2022. As of December 2022, SAMA licensed and authorized another 89 fintechs in Saudi Arabia.

The Kingdom’s fintech expansion aligns with its strategy to position itself as a regional financial hub by 2030. For instance, one of its aims is to increase the share of non-cash transactions among individuals to 70 percent by 2025. By 2030, the fintech sector targets to have 525 active fintech firms in the Kingdom, contributing directly around 13 billion riyals to the GDP and creating 18,000 direct jobs. These forward-thinking initiatives and comprehensive strategies pave the way for substantial market growth.

Democrance’s Expansion Driving Insurtech Growth in the Gulf

Under the financial sector, Insurtech in Saudi has been at the forefront, driving digital transformation and disrupting conventional methods of transactions.

Democrance, a company that specializes in Insurtech innovation, serves as a prime example for this wave of transformation. Boasting a successful track record in Dubai, and armed with the necessary investment from Wa’ed Ventures to branch out into the Saudi market, the company is poised to benefit from all the possibilities of a successful expansion into the Gulf’s Insurtech landscape.

As the Kingdom moves forward with its Vision 2030 agenda, which focuses heavily on digital innovation, the opportunities within the Insurtech sector are growing by the day. The Central Bank of Saudi Arabia (SAMA) has been instrumental in this development, approving comprehensive Insurtech regulations, setting the stage for regulated activities within the domain. As such, there is no better time than now to break into this lucrative market, where new Insurtech regulations are sure to boost the sector’s growth.

Michele Grosso, CEO and co-founder of Democrance, affirms that AstroLabs’ role in their success has been critical. “I started Democrance in 2015, and that is where I met my 2 co-founders. AstroLabs was really the birthplace of Democrance — we were one of the first startups at AstroLabs. So when we were launching in Saudi Arabia, they were obviously our first choice because, on the one hand, it makes us relive that journey of when we started, and on the other, with you [AstroLabs], it would have been a smooth process, as you have the local know-how and we knew there wouldn’t be any surprises. Also, the sense of community that I still remember from Dubai; we wanted to have the same sense of belonging in Riyadh.”

Democrance’s path to success highlights the importance of disruptive innovation, knowledgeable local guidance, and great timing, in achieving unprecedented milestones in the scope of Insurtech. As the only B2B Insurtech company to have received SAMA approval, Democrance has cemented its status in Saudi Arabia as an accomplished expansion champion.