In the Middle East and North Africa (MENA), the financial technology sector, or fintech, is coming of age with regulators and governments across the region thinking more deeply about the impact that fintech companies will have on the broader economy. In line with Vision 2030’s goal to bolster business and financial services, the Saudi Arabian Monetary Agency (SAMA) launched the Fintech Saudi initiative to uphold the financial technology system and promote the Kingdom to become a financial technology hub.
Through this initiative, SAMA will prop up small and medium enterprises, diversify the local economy and create job opportunities.
Fintech Saudi is an ambitious national initiative that seeks to develop the financial technology sector and promote a culture of innovation in financial services by creating a thriving and responsible system based on local and international stakeholders. It also aims to enable foreign and local investors to invest in companies specialized in this field. This will contribute to job creation and support of financial technology companies.
We spoke to Adrian Quinton, Head of Financial Services at KPMG about the future of FinTech in Saudi Arabia. Read on to find out what he said.
- What do you hope the new Fintech Saudi initiative will achieve?
FinTech continues to be an area of focus for the financial services industry in Saudi Arabia and is well supported by the Saudi Vision 2030 whereby the Government plans to significantly invest in financial technology and innovation to drive economic growth. Whether that would be through increasing e-commerce in the SME market, digitize payments, deploying blockchain to facilitate trade finance or to utilize smartphones to encourage ‘branchless banking’. In a country where 60 percent of the population is under the age of 30 and is very much “tech savvy”, coupled with the fact that the Public Investment Fund (PIF) has and continues to flex its financial muscle to support fintech — Saudi Arabia is ripe to excel in this space.In the immediate future, we believe the following segments, in particular, will observe the most amount of Fintech disruption in Saudi Arabia:· Payments;· Distributed ledger technology underpinned by Blockchain;
· Customer analytics; and
· Robotic process automation (RPAs).
- Saudi Arabia and the rest of the Gulf have lagged behind other markets in terms of fintech developments? Why is that and are you seeing them catching up now?
It is fair to say that progress in Fintech space has been slow in Saudi Arabia but if you look at Globally, whilst more investment and developments have been made in this area, tangible results in terms of revenue growth, cost optimization and customer experience have been fairly limited. Saudi Arabia is in a unique position where it can learn from global successes and achieve tangible results more efficiently and effectively. The Vision 2030 and the economic reforms and the quantum of financial investments that it brings, is providing the impetus that was perhaps not there before in Fintech in Saudi Arabia.Thus, we now believe that Saudi Arabia will likely catch up fast and we are seeing signs of this in particular within the payments segment. For example, the local regulator, SAMA, is now keen to strengthen and modernize the payment mechanism in Saudi Arabia to drive efficiencies, in particular on cross-border transactions. SAMA recently signed an agreement with Ripple to launch a pilot program for deploying digital currency, xCurrent, for local banks to facilitate cross-border payments. This initiative is expected to significantly modernize the payments system and broaden the access network of Saudi Arabian banks to global financial institutions. We are also now seeing new Fintech start-ups, such as PayTabs springing up in the market with the aim to disrupt the payment processing industry. We expect more players, both domestic and international ones, to enter and establish themselves in the market in 2018.
- What are some of the challenges Saudi Arabia faces in building up its Fintech industry?Challenges are aplenty which thus far have resulted in the limited development of Fintech in Saudi Arabia. Banks in Saudi Arabia generally cite regulatory constraints, cost pressures and skills shortage as challenges hindering their innovation drive. Start-ups in the region generally have scale and resourcing issues. These challenges also present opportunities to both banks and non-banking institutions in the form of a natural collaboration. For example, a Bank can engage with a Fintech solution provider to enhance its own delivery of payments and customer analytics. On the contrary, we could perhaps see Fintech start-ups going head to head with banks in providing better customer centric and technology-enabled solutions. This creates an interesting dynamic whereby we will see whether the Banks adopt Fintech or Fintech startups adopt banking in the near future!