Golden future for fintech revolution
The fusion of finance with cutting-edge technology is a catalyst for change
The digitalization drive in Saudi Arabia continues to accelerate as increasing numbers of companies harness the speed and efficiency of state-of-the-art hardware and software, with this positive trend most evident in the banking and financial services industries. Secure and streamlined frameworks have been designed to match global fintech benchmarks, with the Saudi Arabian Monetary Authority (SAMA) taking the best components of regulations from world-class financial centers including Singapore and London.
Through fully owned subsidiary Saudi Payments, SAMA had a leading role in the creation of a safe, reliable, low-cost and efficient system for financial transactions and card payments made online, through ATMS or in shops and stores. Guided by the Financial Sector Development Program, the company’s work is an important conduit for the Vision 2030 goals of a cashless society and a more transparent monetary environment. Known as mada, the latest innovative generation of electronic payments aims to boost sales growth with unprecedented dimensions of flexibility, speed, security and acceptance, notes SAMA’S Deputy Governor for Development and Technology Ziad Al-yousef, who was previously Saudi Payments’ Managing Director.
“When it comes to benefits for individuals or merchants, digital payments are more secure and convenient, they reach the furthest parts of the kingdom and they reduce the costs of cash on the economy, which include the costs of printing, transportation, and securing and insuring physical cash dispensing operations,” the senior executive explains. “When we started this project three years ago, 18 percent of Saudi payment transactions were digital and the goal is to reach 70 percent by 2030. By the end of 2020, we were tasked with reaching 28 percent—but we had already achieved 36 percent by July 2019.
“SAMA mandated Saudi Payments to provide a world-class infrastructure for fintech. The platform we are managing for this used to be an exclusive service for banks, because they were the only businesses that were licensed to provide payment services. SAMA’S new framework allows for non-banks to
enter this market. These operators are treated in a similar way to banks; they need access to our infrastructure to provide their consumers with services.”
Casting his gaze further into the future, Al-yousef is adamant two of the most important things that must be maintained at Saudi Payments are the management of consumer protection and the understanding that companies are in this market to make money, so the business and regulatory environment needs to remain conducive to that key goal. “Digital payments, technology and developing talent will help steer Saudi Arabia in the right direction in the new world of finance,” he concludes.
This strong technology backbone has helped leading Banque Saudi Fransi (BSF) optimize its considerable financial resources and reinforce its position as a growing provider of commercial banking services to domestic and international customers. “We are investing heavily in technology and digital,” confirms BSF’S Managing Director and CEO Rayan Fayez. “We are also investing in our core banking system and are installing an entirely new one that will be completed in 2022. As a large corporate bank, trade finance is a key component of our business, so it is something that we have invested in over a long period. We have nurtured strong relationships through the years, locally and globally, which has helped us achieve a strong market share in trade finance.”
Fayez, who has stints at investment giants JP Morgan and Goldman Sachs on his impressive resume, was delighted with BSF’S performance at last year’s Saudi Trade Finance Summit, which saw BSF named Best Trade Finance Bank. He is just as pleased with the opportunities for the kingdom to share to a wide audience its many socioeconomic achievements and modernization during the G20. “The various G20 and B20 events—albeit virtual— offer an opportunity for the world to see the quality Saudi Arabia can do in its presidency of the G20. We cannot wait to showcase our transformation thus far. The kingdom has a lot of excellent emerging fintech companies and amazing entrepreneurs in the form of passionate young people with a lot of creative ideas. The talent and the drive in the biggest market in the region are here and ready; all of this is coming together to create a vibrant fintech community.
“The customer experience is of primary importance to us, so that is something that we want to enhance from start to finish, from opening an account online to seamlessly managing and making transactions with that account. As of today, around 60 percent of our new accounts are opened online. People still visit our branches to get a loan perhaps, but the majority of new accounts are now opened online. It is not just the younger demographic that is driving this change, the Saudi Arabian market in general is very comfortable with digital. For example, Apple Pay’s adoption rate was probably higher here than in any other comparable country when it was first released.”
This upbeat view on the huge importance about the ease of access to digital services for the country’s young, ambitious and highly educated population is echoed by Abdulaziz M. Alonaizan, CEO of Bank Albilad, who is keen for his financial institution to tap into this lucrative market. Named Best Digital Bank at the 2019 Global Business Outlook Awards, Bank Albilad has migrated to digital transactions because Saudi Arabia is a young country and his company needs to be up-to-date and responsive to the needs of this generation.
“It was a tremendous help when SAMA introduced its fintech sandbox rules because it gave banks and other financial services providers the impetus to come up with innovative solutions. This led to banks pursuing their own digital solutions or collaborating with fintech companies. In our case, we have seen a 57 percent increase in transactions over our digital channels in 2019 alone. Saudi Arabia is still underbanked and there is no real need for mergers, acquisitions or consolidations, at this time. There are only 11 banks operating in the kingdom and they are all of good standing.”