The fintech boom in the Kingdom has the potential to put pressure on traditional banks as the new companies appeal to its young, digital savvy population, the KPMG report said, according to Al-Sharq Al-Awsat.
Fintech startups have increased the prevalence of flexible digital transactions, helped ease regulatory barriers, and led to greater cooperation between financial technology companies and traditional financial institutions, KPMG said.
The coronavirus pandemic represents an additional incentive to conclude merger and acquisition deals, especially if doubtful loans continue to grow, according to the consultancy.
Fintech activity in the Kingdom has been ramping up rapidly recently.
Saudi Arabia has 30 fintech companies today under Saudi Central Bank supervision, 10 times more than the original target of three, director general of the Financial Sector Development Program, Faisal Al-Sharif, said earlier this month.
Geidea, the largest fintech in Saudi Arabia by market share, said last week industry heavyweight Nick Ogden had joined its board of directors.
Ogden has founded several major names within the financial services sector, including Europe’s largest global payment processing company Worldpay and ClearBank, the UK’s first clearing bank to launch in more than 250 years.
In June, the Saudi Cabinet gave its nod to the Kingdom’s finance minister to issue licenses for the country’s first digital banks, STC Bank and Saudi Digital Bank.
STC Pay will be converted into a local digital bank, STC Bank, with capital of SR2.5 billion. A second lender, Saudi Digital Bank, will be formed by investors led by Abdul Rahman bin Saad Al-Rashed and Sons Company with capital of SR1.5 billion.
Digital banks licensed in Saudi Arabia will help improve the quality and user experience for customers in the Kingdom, supporting innovation and reducing costs, Yazeed Alsheikh, director for general of banking control at Saudi Central Bank (SAMA), said in June.
This will directly contribute to stimulating competition with local banks and financial technology companies, he said.
Dubai’s Mashreqbank has applied for a banking license in Saudi Arabia, Ahmed Abdelaal, CEO of Mashreqbank, said earlier this month.
The Dubai-based lender no longer sees its main competitors as other bricks-and-mortar lenders and sees the future of retail banking as digital only, he said in an interview. Traditional bank branches will no longer exist “very soon,” Abdelaal said. The Dubai-based lender currently operates just 10 branches in the UAE, having closed 24 in the past two years, he said.