RIYADH: Venture capital investment in Saudi fintech companies, especially in the financing sector, surged sixfold in 2023 compared to the previous year, Abdullah Binghannam, deputy of financing and investment at the Capital Market Authority, told Arab News.
“Companies in this sector raised SR2.5 billion ($666.02 million) across 10 funding rounds in 2023. This represents substantial growth in the sector, with the investment amount increasing more than sixfold, and the number of funding rounds more than doubling compared to 2022,” Binghannam said.
Talking to Arab News on the sidelines of the 24 Fintech event, the official said: “The fintech sector in Saudi Arabia saw tremendous growth in 2023, driven by new startups, increased investments, and a rise in innovative business models.”
The Regulatory Sandbox Initiative launched by the Saudi Central Bank, SAMA, in 2018 has been pivotal in driving fintech innovation in the Kingdom.
According to Binghannam, the insights gained from the regulatory sandbox have influenced policies that balance innovation with market stability. “We aim to foster an environment where fintech can continue to drive the Kingdom’s economic diversification goals,” he added.
The CMA official also highlighted the extraordinary growth in the Kingdom’s fintech sector. “By the end of 2023, the number of fintech companies in Saudi Arabia reached 216, surpassing the target of 150 by 144 percent, and direct jobs in the sector exceeded 6,500, more than double our target,” Binghannam noted.
He emphasized the balance the CMA has achieved between promoting innovation and protecting investors. Binghannam explained that all fintech applications undergo rigorous evaluations to assess potential risks and benefits. “The goal of these considerations is not to create a risk-free environment for fintech products, but rather to foster innovation within a controlled environment where the consequences of failure can be contained,” he said.
Collaboration has been crucial to advancing fintech in the Kingdom. “We fully recognize that our mission at the Capital Market Authority requires concerted efforts and collaboration with relevant entities in the Kingdom,” Binghannam commented.
One key example of this collaboration is the Fintech Saudi initiative, launched in 2018 through a joint effort by the CMA and SAMA. The initiative has been instrumental in supporting the fintech sector’s growth and integrating it into the national economy.
Investments from local, regional, and global players have significantly accelerated the growth and innovation within Saudi Arabia’s fintech sector. The Kingdom’s advanced digital infrastructure has also played a critical role in supporting the development and expansion of fintech solutions.
“Most importantly, it is essential for financial services regulators to create a regulatory environment that fosters fintech growth while maintaining security, trust, and compliance,” Binghannam emphasized.
In addition to regulatory oversight, the CMA has focused on incorporating fintech innovations into the traditional financial system. New business models, such as robo-advisory services, social trading, and equity crowdfunding, are becoming increasingly common. Since the CMA launched its fintech lab in 2018, 38 companies have become active in the capital market’s fintech ecosystem, with 14 experimental permits granted in 2023.
Binghannam outlined how the CMA continues to regulate and support the fintech sector’s growth while ensuring adherence to strict regulatory standards. As the fintech landscape evolves, the CMA remains dedicated to enhancing its programs and nurturing an environment where fintech can thrive, aligning with the Kingdom’s economic diversification goals under Vision 2030.