Saudi Arabia leads adoption of AI in financial services: Finastra

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Despite economic constraints, financial institutions in Saudi Arabia and UAE are among the global leaders in investment in artificial intelligence (AI), Banking as a Service (BaaS) and embedded finance.

This is according to Finastra’s annual global survey titled The ‘Financial Services: State of the Nation Survey 2023’, which finds that nearly 9 in 10 (87%) institutions in the UAE and nearly two thirds (64%) in Saudi Arabia say the economic climate has constrained their technology investments.

Compared to the global average of 78%, the UAE has felt the pinch particularly hard, yet sentiment in both countries remains positive. 78% of firms in the UAE and 72% in Saudi Arabia expect investments to return in full before the end of H1 2024, both higher than the global average (69%).

Global leaders

Despite this, the survey reveals that both regions have emerged as global leaders in AI. 55% of respondents in Saudi Arabia, the highest globally, and 45% in the UAE, the second highest, say they have deployed or improved AI in the last 12 months.

The UAE shows a significant uptick in AI adoption from 25% in 2022, and both regions are notably above the global average of 37%. Financial institutions are setting their sights on generative AI (Gen AI) in particular. 88% of decision-makers in Saudi Arabia and 86% in the UAE say they are interested in the technology, with 27% and 34% respectively having already incorporated it in some form, both higher than the global average of 26%.

Respondents have differing views about the priority use cases for GenAI. In the UAE, institutions state automating manual or repetitive tasks, such as document checking or documenting code functionality, as the top benefit (43%), followed by collecting, processing or analysing data for environmental, social and governance (ESG), such as to make investment or lending decisions (40%). The latter is the top benefit for 47% of firms in Saudi Arabia, followed by enhancing IT operations, such as process automation or infrastructure optimisation (36%).

The research, conducted from August to September 2023, canvassed the opinions of 956 professionals at financial institutions across France, Germany, Hong Kong, Singapore, Saudi Arabia, the UAE, UK, US and Vietnam.

Other insights

UAE and Saudi Arabia lead on BaaS adoption: nearly half (49%) of institutions in the UAE, an uptick from 41% in 2022, and 53% in Saudi Arabia have improved or deployed BaaS in the last 12 months, higher than the global average of 48%. The most advanced use case in the UAE is cited as FX as a Service, while embedded lending to SMEs is the most popular in Saudi Arabia.

Open Finance welcomed, but more support needed: 9 in 10 respondents in the UAE believe Open Finance gives consumers access to a greater range of financial services, however, a similar proportion (91%) believe more support from regulators and industry bodies is required to make Open Finance a success. These figures are similar in Saudi Arabia, at 89% and 88% respectively.

Banking is about more than just finance: Nearly 9 in 10 (89%) leaders in the UAE and slightly more (92%) in Saudi Arabia say it is important for financial services to support ESG initiatives and actively seek to improve in this space. The majority also agree that financial literacy and supporting vulnerable audiences should be a key focus (88% and 90% respectively).

Leaders are excited about the speed of change: When asked about whether they are excited about the pace of technological and cultural change in financial services personally, for their financial institution and for the wider industry, both regions scored highly in all areas. In the UAE, these figures are 90%, 88% and 80% respectively, while the same is true for 93%, 90% and 92% for institutions in Saudi.

Key priorities

“Despite the challenging economic climate, it’s clear from our research that investment in AI, BaaS, and embedded finance remain key priorities for financial services organisations over the next 12 months,” said Simon Paris, Chief Executive Officer at Finastra.

“This is particularly prevalent in the UAE and Saudi Arabia where institutions have emerged as some of the global leaders in technological innovation – echoing last year’s findings in the UAE – showing great promise for the future of financial services in these regions. We share the industry’s ongoing commitment to ESG initiatives, collaboration around Open Finance, and excitement in using advanced technologies like AI to help deliver on the opportunities ahead.”