Saudi Arabia, the Middle East’s next fintech oasis

By the end of 2024, the Kingdom of Saudi Arabia is projected to reach an annual GDP of $1.1 trillion, a 4.4% increase from the previous year. This increase would make it the second-largest economy in the Middle East and North Africa (MENA). Key to its growth has been its strategic shift from oil to non-oil sectors, including sports, technology, tourism and financial services.

This pivot has helped the nation rise rapidly as a digital hub with a quickly advancing digital infrastructure. The country’s broadband connectivity is among the world’s highest, with a 93% digital penetration rate. Its substantial $32.1 billion Information and Communications Technology (ICT) sector demonstrates an intensive investment in digital transformation, evidenced by the addition of 37,000 new telecommunication towers since 2017. Widespread internet access in the Kingdom is set to position Saudi Arabia as a key player in the global digital landscape.

In this article, we’ll examine:

• Overview of Saudi Arabia’s economy
• Saudi Vision 2030
• The push to digitise payments
• Digital wallets in Saudi Arabia
• Remittances and cross-border payments in Saudi Arabia
• Moving to non oil-based sectors

Overview of Saudi Arabia’s economy

Saudi Arabia is one of the leading economies in the Middle East and the largest within the Gulf Cooperation Council (GCC). Home to over 36 million people, the Kingdom’s largest economic sectors include oil and gas, petrochemicals, mining, manufacturing, construction, retail, tourism and financial services. With tax-friendly MNC policies, the Kingdom has successfully positioned itself as an important destination for financial giants like HSBC, JP Morgan Chase, and other global financial institutions, cementing Saudi Arabia’s role as a promising global financial center.

Following a 0.8 per cent contraction in GDP in 2023, Saudi Arabia’s economy is expected to recover with projected 2.5 per cent growth in 2024. This increase will be driven by non-oil activities, which are forecasted to expand by 3.5 per cent in 2024.

Saudi Arabia’s digital economy is rapidly growing, fueled by investments in e-commerce, mobile payments, and fintech. Projections suggest that the digital economy will soar to $87 billion by 2025 and $133 billion by 2030. This rise syncs with Saudi Arabia’s ambition to become one of the world’s leading digital economies and a regional center for technology innovation. At the heart of this mission is the ambitious Saudi Vision 2030, a national program promoting economic diversification and technological progress.

Saudi Vision 2030

Saudi Vision 2030 is a strategic framework designed to reduce the Kingdom’s reliance on oil and diversify its economy. The vision emphasises digital transformation and financial inclusion. It aims to create a vibrant society and thriving economy through:

• Economic diversification and reduction of oil dependency: The Kingdom plans to diversify its revenue sources and reduce its reliance on oil. This involves investing in various sectors, including technology, tourism and entertainment.
• Emphasis on digital transformation and financial inclusion: Vision 2030 focuses on adopting digital technologies to enhance economic growth. The financial sector is a vital area of this transformation, with the goals of promoting digital payments and financial inclusion.

Central to Saudi Vision 2030 is the Kingdom’sdevelopment of digital finance infrastructure rooted in digital payments and e-commerce. E-payments have surged to 70% of all retail transactions in the nation in 2023, a 62% increase over the previous year. Vision 2030 promises sweeping changes not just in the nation’s economic and technological development, but for the entire Middle East.

The push to digitise payments

As part of its Vision 2030 initiative, the Saudi government set an ambitious target of achieving a 70 per cent non-cash transaction rate by 2025. This milestone was reached two years early in 2023, headlining the nation’s rapid progress.

A digitally enabled population, a solid and reliable digital payment infrastructure, and a thriving entrepreneurial fintech ecosystem have spurred Saudi Arabia towards a cashless society. Initiatives like FinTech Saudi, launched in 2018, fostered innovation and contributed significantly to the Kingdom’s digital transformation.

With 97 per cent of the population using smartphones, Saudi Arabia has firmly established itself as a mobile-first society. Nearly, 35% of the population is under the age of 35, reflecting a solid demographic foundation for digital adoption. Additionally, a report by SAMA (the Saudi Arabian Monetary Authority) highlighted that digital payments surpassed cash as early as 2021. 

Digital transformation in Saudi Arabia is being driven by the Kingdom’s fintechs, with the number of fintech companies doubling between 2022 to 2023. Fintechs are thriving in the Kingdom’s innovation-friendly environment, further spurring digital adoption.

Digital wallets in Saudi Arabia

Saudi Arabia’s mobile wallet landscape is diverse, offering options tailored to specific use cases. Mada Pay, the national electronic payment platform, supports contactless payments with Mada-affiliated bank cards, making it widely accepted and user-friendly. STC Pay, launched by telecom giant STC, enables consumers to pay bills, make money transfers and in-app purchases. Apple Pay is popular here as in many other parts of the world, for secure and convenient payments at contactless terminals.

Players like Hala, barq, UrPay, Mobily Pay, and Alinma Pay enable specialised capabilities such as bill payments and in-app purchases. In addition, Tiqmo, licensed by the Saudi Central Bank, offers a wide range of digital wallet services, including its recently issued prepaid card in cooperation with Mastercard.

According to Statista, around 90% of consumers are expected to use emerging payment methods like contactless wallets or money transfer apps in 2024. Increased security and the booming e-commerce market also play significant roles in this transformation. Digital wallets offer financial inclusion, increased convenience, greater transparency and control of money.

Remittances and cross-border payments in Saudi Arabia

Remittances from overseas expatriates in Saudi Arabia rose 14 per cent in April to SR11.35 billion ($3.03 billion). Payments from Saudis, making up 30% of total personal transfers, also saw a steep 30% rise totalling SR4.94 billion according to the Saudi Central Bank (SAMA). This surge has primarily been driven by government initiatives like Vision 2030 and the increasing stability of fintech platforms, leading to higher employment rates, improved economic conditions and greater disposable income for local consumers. A February study by IBS Intelligence highlighted the growing demand for purpose-driven remittances in the Kingdom. These payments are used to fulfil specific needs like paying education fees, medical expenses, food and housing costs, or as gifts.

This market expansion fosters financial inclusion and ensures a stable income stream for both customers and businesses, helping Saudi Arabia transform its remittance market into a robust, inclusive financial ecosystem.

Moving to non oil-based sectors

Saudi Arabia is making significant strides to move its economy beyond oil by investing in non-oil sectors such as tourism, construction, and manufacturing. Recent data shows robust growth in these areas, with non-oil economic activity accounting for 50 per cent of Saudi Arabia’s GDP in 2023, a historic high. This expansion has been fueled by sustained growth in investment, consumption, and exports highlighting the Kingdom’s commitment to economic diversification.

The financial services sector, particularly digital finance, has played a crucial role in Saudi Arabia’s economic transformation. Government initiatives like the establishment of the Saudi Arabian Monetary Authority (SAMA)’s Regulatory Sandbox Framework and the Fintech Saudi programme have modernised the financial landscape and fostered the growth of neobanks and fintech startups. These efforts, encompassing open banking regulations and simpler licensing procedures, have led to an influx of innovative Sharia-compliant financial services, improving financial inclusion within the nation. Undeniably, digital finance is a vital component in Saudi Arabia’s pursuit of economic excellence, deftly integrated with Vision 2030’s goal of economic diversification.

A digital finance oasis in the Middle East

Saudi Arabia’s transformation into a digital finance hub is reshaping the MENA region’s economic landscape. Through Vision 2030, the Kingdom has diversified its economy, reducing its reliance on oil by investing in tourism, sports, and fintech. This strategic shift, supported by advanced digital infrastructure, has positioned Saudi Arabia as a leader in digital innovation.

The rapid adoption of digital payments and mobile wallets underscores the Kingdom’s commitment to fostering a cashless society and enhancing financial inclusion. Initiatives like FinTech Saudi have driven significant economic growth. With its tech-savvy population, high broadband connectivity, and favourable regulatory framework, Saudi Arabia is well-positioned for continued digital finance expansion, paving the way for a sustainable and prosperous future.

Thunes plays a pivotal role in Saudi Arabia’s payments landscape. We’ve partnered with Tiqmo, D360, Barq, Enjaz, and innovative fintechs like Loop to enable cross-border payments to and from Saudi Arabia. We also enable payment acceptance throughout the Kingdom for Visa, and via Paysafe Vouchers for OTC and wallets.

Thunes has an office in Riyadh, and our capabilities continue to expand as leading fintechs, wallets and partners in the Kingdom join our world-leading network. With Thunes’ Pay and Accept solutions, we’re helping banks, PSPs and digital wallets better facilitate cross-border payments and local collection.

Thunes operates across 130+ countries, supporting over 80 currencies and 330 digital wallets worldwide.

Saudi Arabia’s commitment to fostering financial inclusion and innovation has created a favourable environment for businesses and consumers, paving the way for enhanced economic opportunities.

Contact us to learn how you can leverage payments in Saudi Arabia to supercharge your business growth.