RIYADH: Saudi Arabia’s fintech sector has become a major player in the country’s financial services landscape, with companies generating over SR3.75 billion ($1 billion) in revenues and reaching millions of customers daily.

“The Saudi fintech sector has made substantial progress over the past five years to the point where it is now firmly established as the leading regional hub for fintech with an increasingly prominent global role,” Khaled Al-Dhaher, vice governor for supervision and technology at the Saudi Central Bank, told Arab News on the sidelines of the 24 Fintech Conference.

He added: “Since 2019, the number of fintech companies operating in Saudi Arabia has grown from 14 to more than 230.”

Saudi fintech firms are not only transforming the financial landscape with innovative solutions but are also prompting traditional financial institutions in the country to rapidly adopt digital services. Many of these institutions are partnering with fintech companies to enhance their offerings and better serve their clients, contributing to a more digitized and innovative financial sector.

“We expect this strong momentum in Saudi fintech to be sustained,” Al-Dhaher said, emphasizing the Kingdom’s ambitious goals, which include increasing the number of active fintech companies to 525 by 2030. This growth is driven by the entry of new and innovative business models into the market, improving the overall sophistication of the financial sector.

Al-Dhaher also sees potential for international fintech companies to deepen their involvement in Saudi Arabia, further boosting the sector’s contribution to employment and gross domestic product.

Drivers of growth

Several factors have fueled the rapid expansion of fintech in Saudi Arabia. Al-Dhaher highlighted the Kingdom’s young, tech-savvy population, which boasts high mobile penetration and a strong preference for digitally delivered services. This demographic advantage has naturally driven the growth of fintech firms in the region.

In addition to these socio-economic factors, government initiatives have played a crucial role in fostering a supportive environment for fintech development. The Financial Sector Development Program under Vision 2030 and the National Fintech Strategy have both provided clear roadmaps for the sector’s growth.

“Over the last several years, SAMA has undertaken a number of proactive steps to support the development of the Saudi fintech ecosystem," Al-Dhaher said.

One such initiative is the regulatory sandbox launched in 2018, which allows emerging fintech companies to test their ideas in a controlled environment. This has attracted substantial interest, with over 500 applications from companies wanting to participate in the sandbox since its inception.

Beyond SAMA’s efforts, other regulatory bodies, including the Capital Market Authority and the Insurance Authority, have established their own fintech incubators. These collaborative efforts have created a dynamic and supportive regulatory environment, spurring growth in areas such as Insurtech, Buy Now Pay Later, and Open Banking.

Another pivotal initiative is Fintech Saudi, which serves as a catalyst for developing the infrastructure and talent needed for fintech companies to scale.

Al-Dhaher highlighted the Makken program, launched by Fintech Saudi with support from SAMA and CMA, as a key enabler of the fintech ecosystem. The program offers essential support in technology, cloud computing, and cybersecurity, ensuring that fintech entrepreneurs have the tools they need to succeed.

Challenges in sustaining growth

While the outlook for Saudi Arabia’s fintech sector is positive, Al-Dhaher acknowledged that challenges remain. One major challenge is ensuring sufficient sector diversification and maintaining fair market competition.

He noted that early fintech companies in the Kingdom primarily focused on payments, which significantly increased the electronic transaction ratio to 70 percent, ahead of the target date. However, as the sector evolves, there is a growing need for diversification into other fintech segments.

Al-Dhaher pointed out that emerging areas like crowdfunding, robo-advisory, BNPL, and Open Banking are gaining traction and will be crucial in meeting evolving customer needs. Regulators like SAMA must ensure that fintech companies represent a broad range of business models catering to diverse consumer demands.

Another significant challenge is ensuring the long-term sustainability of the fintech ecosystem while maintaining financial system stability and consumer protection.

“A main focus of our mandate is to make sure the fintech ecosystem will effectively co-exist with traditional financial institutions and complement each other, without disruption to the broader financial system,” Al-Dhaher said. Balancing these elements will be critical to the sector’s future success.

A collaborative approach

In a dynamic sector like fintech, the regulatory environment must be flexible and responsive to emerging trends.

Al-Dhaher emphasized SAMA’s commitment to evolving its regulations and processes to support sustainable fintech growth while safeguarding the broader financial system.

“We are engaged in an ongoing dialogue with key stakeholders within the sector to ensure we fully understand their needs,” he said, noting that Saudi regulators closely monitor global trends and adapt their frameworks as needed.

The regulatory sandbox remains a vital tool in this process, allowing SAMA to stay updated with the latest fintech developments and adjust regulations accordingly. Other entities, such as the CMA and the Insurance Authority, also play crucial roles in maintaining a regulatory framework conducive to fintech innovation.