Among its many efforts to boost industrial action across multiple sectors in the past few years, the Kingdom of Saudi Arabia (KSA) has made great strides to develop fintech into a flourishing national industry.

Diversified financial services have increased fiscal contributions to KSA’s national economy, as it looks to match the robust fintech economies in Western markets. 

However, for Dr. Mohammad Nikkar and Arjun Vir Singh, authors of Arthur D. Little’s latest report, challenges remain for KSA in its attempts to become a leading fintech hub. 

Below, we run through the details of the report, analysing KSA’s fintech journey so far, the current challenges and how they can be overcome. 

KSA: The initial fintech trip

Since the establishment of Fintech Saudi in 2018 by the Saudi Arabian Monetary Authority (SAMA) and the Saudi Capital Markets Authority (CMA), which launched a fintech growth journey, the fintech industry in the Kingdom of Saudi Arabia has flourished.

Nikkar and Singh go on to say that Fintech Saudi constantly works to promote, assist, and represent the fintech sector in the Kingdom of Saudi Arabia through programs like the Summer Sessions, Career Fair, Fintech Tour, and Accelerator program.

The number of fintech companies operating in the country has increased twentyfold since Fintech Saudi launched. Fintech Saudi has arranged training courses, internships, and events for over 100,000 individuals, and over SAR 4bn (~US$1bn) has been invested in fintech startups in KSA.

However, Fintech Saudi was only the beginning. Based on six major elements, KSA identified the next stage of fintech growth in 2022:

1. Establishing KSA as the Middle East's finance center

2. Establishing a regulatory framework that encourages development and innovation

3. Startup financing

4. Training and improving abilities

5. Quickening the infrastructure for support

6. Promoting both domestic and global cooperation

A component of the Kingdom's Vision 2030 plan includes this tactic.

Four major goals of KSA Vision 2030 are as follows:

• Create at least 525 fintech businesses (compared to 200 in 2023)

• Create 18,000 fintech jobs (compared to 5,400 in 2023)

• equate to SAR $13.3 billion in direct GDP (as opposed to around $1 billion in 2023)

• Reach direct venture capital (VC) contributions of SAR $12.2 billion (compared to $1.4 billion in 2023)

KSA: Obstacles to Fintech Plans for 2030

Nikkar and Singh's list of major obstacles must be addressed by KSA in order to achieve these growth objectives.

"KSA's fintech growth is impressive, but it needs to stand out among established global fintech hubs by becoming more visible and unique," they add. This entails elucidating its distinct ecosystem's offerings to international investors and entrepreneurs.

The Arthur D. Little specialists advise that in order to assist Saudi fintechs in their international development efforts, it is just as crucial to cultivate more foreign alliances as it is to strengthen its international standing.

In fact, they recommend that in order to foster a more active investment climate, support for KSA fintechs be strengthened through the creation of new financing channels and the attraction of additional accelerators and incubators.

Fintechs in Saudi Arabia also face cost challenges, especially in the area of infrastructure. We are investigating ways to lower the cost of necessary technical infrastructure. According to Nikkar and Singh, these initiatives seek to strike a compromise between adherence to regional data laws and the need for enhanced application programming interface (API) integration and data accessibility.

Then, there are regulatory difficulties to deal with, just as in many marketplaces. According to the experts, efforts are being made to make the licensing and setup procedures simpler in order to make the regulatory landscape for fintech companies easier to understand. Improvements in this area should continue to encourage both domestic and foreign endeavors.

Taking on major obstacles: Opportunities for a premier finance cluster in KSA

Even though the Kingdom of Saudi Arabia's fintech industry has advanced quickly thus far in terms of digital payments, alternative financing, and financial product aggregation, Nikkar and Singh believe that the industry's long-term viability hinges on its ability to overcome major obstacles.

They assert that "these challenges are not just roadblocks, but also fantastic chances for innovation and development." It is essential to address concerns about global positioning, legal frameworks, markets and finance, hiring people, technological infrastructure, and teamwork.

"The KSA fintech sector has to build on its strengths and keep innovating and adapting.

Fintech in Saudi Arabia is about more than simply financial goods and technology developments. It involves developing an ecosystem that is robust, inclusive, and able to serve the country's larger economic objectives as well as fostering an innovative culture that will enable both new and old companies to prosper.