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Investments in Saudi’s fintech sector bucked a global and regional downtrend to grow 231% y-o-y in 2023, reaching USD 791 mn, according to KPMG’s Overview of the Fintech Opportunity in Saudi Arabia Report (pdf).
The global picture, by contrast: Global fintech funding dropped 42% y-o-y last year to USD 35 bn, while funding in EMEA declined 62% y-o-y to USD 8 bn, driven by geopolitical uncertainties and rising interest rates.
The breakdown: Series C funding led the Saudi fintech startup scene in 2023 at USD 398 mn, followed by series D rounds at USD 250 mn, and seed funding rounds at USD 61.1 mn. The highest-funded startup was BNPL platform Tamara, securing USD 340 mn, followed by Lendo (USD 328 mn), and Tabby (USD 308 mn). Key investors included Core Vision, Vision Ventures, Sanabil Investments, Shorooq Partners, and Sanabil 500 MENA.
2030 strategy goals: The Kingdom aims to have 525 fintech companies, 18k fintech jobs, SAR 13.3 bn in direct GDP contribution, and SAR 12.2 bn in cumulative venture capital investments by 2030, according to a 2022 cabinet-approved fintech strategy. The number of fintech players in Saudi hit 226 in 1H 2024, compared to 60 back in 2020.
Saudi is moving closer to a cashless society, with noncash transactions rising to 70% in 2023, compared to 62% in 2021, driven by digital wallets like stc pay and a growing e-commerce sector which is forecasted to top USD 13.2 bn by 2025. Alternative financing methods such as peer-to-peer lending, crowdfunding, and BNPL platforms are also on the rise.
Prospects for further fintech growth: Financial product aggregation, particularly in ins., is gaining traction, consolidating various financial services into single platforms. The Kingdom is also investing in emerging technologies, including blockchain, cloud computing, Web3, and spatial computing, cross-border digital currencies, and other digital means that can be integrated with fintechs. Meanwhile, initiatives are also in place to help SMEs secure B2B financing through the fintech sector.
Key growth drivers: The sector’s expansion is fueled by increasing consumer and business adoption, strong investments and investor interest, a boost in the number of fintech startups, and government policies with supportive regulations.
Saudi fintech adoption rates beat global benchmarks: Despite having fewer players, Saudi recorded a high fintech adoption rate in 2021-2022 at 72%, surpassing the UK (71%), Singapore (67%) and the US (46%).
Potential disruptors to the investment landscape with applications for fintech: Nascent technologies such as spatial computing, cross-chain technology and blockchain interoperability, and decentralized identity are beginning to take shape. Trends in hyper-automation through AI, digital twins, advanced blockchain applications, biometric authentication, and Web 3.0 are emerging, while online banking, payment gateways, electronic trading platforms, mobile payments, and cloud computing have already matured.
Future outlook: Saudi’s cybersecurity market, valued at USD 3.7 bn in 2023, is expected to grow annually by 13%, with cybersecurity presenting a key focal point for fintech investors. Worldwide RegTech spending is also set to see increases, along with other fintech-relevant measures such as lending to SMEs, trade financing, and climate financing.
