Fintechs receive Saudi banking licenses for the first time

Last week the Saudi Arabia Monetary Authority (SAMA) issued its first licences to two non-bank financial institutions, granting an electronic wallet company and a payment services firm the right to operate in the Saudi banking market in doing so. The licences were issued following a trial period for both firms.

"This development signals to the financial services community that SAMA is serious about opening up the market to new entrants, challenging the existing status quo, and will ultimately help expand the financial services sector across the country,” said Tom Bicknell of Pinsent Masons, the law firm behind Out-Law.

“We look forward to seeing what other financial institutions will join the Saudi market, especially with open banking policies on the rise in the region,” Bicknell said.

The new licences continue SAMA’s efforts to further its financial sector development programme. That initiative forms part of the Kingdom of Saudi Arabia’s (KSA) 2030 vision to diversify its economy away from oil and gas. The aim is to enable more payment services providers and fintech firms to operate and support the development of the national economy.

The regulations are aimed at putting in place a supervisory and oversight framework that ensures the safety and efficiency of transactions in the payments sector.

The efforts to open up the financial services sector to non-banking institutions follows publication of updated guidelines for the Saudi banking sector last year. The guidelines allow foreign banks to apply to establish branches in the KSA.

Fintech is a major growth area across the Middle East, with regulators in the United Arab Emirates in particular involved in a number of initiatives to open up their markets to a wider range of financial services firms.