BrazilSaudi Arabia’s financial technology market continues its growth path
Saudi Arabia’s financial technology (fintech) market continues to grow strongly, with the number of fintechs increasing, investments into the scene at a record level, and innovation and diversification on the up. That is according to a study by KPMG.
The findings from KPMG’s market analysis is good news for the Kingdom’s policy makers, which have embarked on the bold mission to turn Saudi Arabia into a leading global financial hub. The report confirms that Saudi Arabia has in recent years made leaps in developing its fintech landscape, driven by the Financial Sector Development Plan (FSDP) and the FinTech Strategy Implementation Plan.
Among the measures tracked by KPMG, the researchers found that the number of fintech companies has risen from 89 in 2021 to over 220 today. Investment into the sector have meanwhile surged: Between September 2020 and December 2023, Saudi fintech’s attracted more than $1.14 billion, with $791 million invested in 2023 alone – a 231% increase from the prior year.
From a services perspective, fintechs have been found to drive efficiency across the financial services landscape, improve customer offerings and experiences, bolster regulatory compliance, drive innovation, and boost inclusivity within the financial ecosystem.
The report places focus on the important role that regulatory bodies like the Saudi Central Bank (SAMA) and the Capital Markets Authority (CMA) have played, thanks to a forward-thinking and supportive framework, initiatives such as regulatory sandboxes, initiatives such as the FinTech Accelerator and the FinTech Tour and the facilitation of open dialogue with fintechs and other industry players.
“Saudi Arabia has built a conducive ecosystem for fintechs to flourish,” said Ovais Shahab, Head of Financial Services at KPMG in Saudi Arabia. “Strong regulator-backed enablers, access to capital, and collaboration among banks, coupled with favorable demographics, make it a space to watch.”
Payments make up the largest segment within the fintech landscape, driven by the transition towards a cashless society, with non-cash payments surpassing 70% in 2023. Robust payment infrastructure like Mada and Sadad have proven to be pivotal.
“The growth in digital payments marks the beginning of a financial transformation that will reshape the Kingdom’s economy,” said Antony Ruddenklau, Global Head of Fintech at KPMG.
Innovation and diversification
The focus of the sector has however widened beyond payments and point of sales systems, said KPMG, now also including areas such as cybersecurity and data protection, regulatory technology (regtech), SME lending, trade finance, open banking, capital markets and savings, investments and digital banking.
Alternative financing options like buy now pay later (BNPL) and crowdfunding are also gaining traction, with BNPL customer numbers continuing to increase, from just 76,000 in 2020 to 10 million in 2022 and onwards. Similarly, debt crowdfunding is witnessing more than 2.5x year-on-year growth, highlighting the segment’s potential.
This diversification has opened up avenues for more funding to find its way into the sector, said Shahab. “High-growth sectors like digital payments, alternative financing, open banking, and SME financing offer attractive returns.”
The outlook
Looking ahead, KPMG’s authors contest that the key goals the nation has set for the fintech sector – 525 fintech companies and an industry headcount of 18,000 – are achievable.
“Saudi Arabia is on the cusp of a transformative era in its financial sector, driven by innovation, strategic partnerships, and visionary government initiatives. As the Kingdom progresses with its ambitious FSDP goals and continues to embrace cutting-edge technologies, it is well positioned to become a global fintech hub and set a benchmark for financial sector innovation,” said Shahab.
“Despite the positive outlook, Saudi Arabia faces challenges that must be addressed,” said Ruddenklau. “Further enhancing regulatory frameworks will be crucial to keep pace with rapid technological changes and aligning with international standards. Strengthening collaboration with central banks, regulators, government agencies, and the private sector will bring valuable external perspectives and best practices.”
“Continued investment in foundational infrastructure and promoting financial literacy and inclusion are essential for supporting innovation and balancing supply and demand.”
