Arab News, Sunday, Jan 09, 2022 | Jamada Al-Aakhirah 6, 1443
Saudi fintech investment jumps as regulators set 2021 landscape: Year in Review
Saudi Arabia:
Saudi Arabia saw a significant jump in venture
capital investments in the financial technology sector, hitting 16 deals in the
first eight months of 2021 totaling $157.2 million.
This compares with 2020, when seven venture
capital deals were signed worth $7.8 million as pandemic restrictions curtailed
activity, according to the annual Saudi Fintech annual report.
This year has also seen backing spread across a
range of early-stage projects, with 46 percent at series A and B stages, 38
percent at the seed stage, and 15 percent at pre-seed levels.
Pre-seed funding is the earliest stage of
investment, often from founders, family and close supporters. This is followed
by more formal seed and series stages, where equity in the business is traded.
This spread of investment demonstrates that
backing is available to support fintech companies at key stages of their
development.
There has been an increase in the level of early
seed-stage and pre-seed stage investment, in particular.
So far in 2021, investors have signed deals worth
$12.9 million at seed and pre-seed stage investment, a 108 percent jump from
$6.2 million invested in 2020.
The payments sector remains the most attractive
fintech area in the Kingdom, so far accounting for around 93% of total venture
capital investments this year.
Highlights include series A investments in mobile
payments platform Hala $6.5 million and buy-now-pay-later business Tamara $110
million. While restaurant point-of-sale provider Foodics attracted $20 million
of series B funding.
Despite growing levels of fintech investment in
the Kingdom, the median deal size in Saudi Arabia is $2.7 million compared to a
global median deal size of $7.3 million.
The launch of Open Banking in Saudi Arabia in
2022, which allows firms to share consumer current account data once permission
has been given, is also expected to speed up the pace of fintech development.
Experts expect this move will provide existing
fintech investors with more opportunities, and will attract funds to the sector.
The number of financial technology companies in
Saudi Arabia continues to grow, as the number of companies increased this year
to 82, a 37 percent rise on the previous year.
Commitment to Vision 2030
The move by the Kingdom’s central bank, SAMA, to
Open Banking is set to support the further development of the sector, in line
with Saudi Vision 2030 and the Financial Sector Development Program, launched in
2017.
The plan includes developing the digital economy,
and allowing financial intermediaries to support private sector growth by
opening up the financial services industry to new players. It also encourages
the building of an advanced capital market in the Kingdom.