By Ali Bailoun, Visa Regional General Manager for Saudi Arabia, Bahrain and Oman

The GCC has seen rapid growth in its digital economy, spurred by a combination of government initiatives, regulatory support and growing adoption of digital payments.

Fintech is also driving this transformation with innovative technologies that extend the benefits of digital commerce to consumers and businesses. Through fintech, more consumers can enjoy seamless and personalized financial experiences, businesses access a wider range of financial services, and the economy benefits from greater financial inclusion and innovation.

Governments have been in the driving seat of this transformation. The Central Bank of Saudi Arabia (SAMA), the Central Bank of Bahrain and the Central Bank of Oman, for example, offer enabling and well-regulated environments for fintechs through sandboxes, fintech hubs and more.

In 2021, SAMA introduced guidelines for licensing digital-only banks, which have helped create a vibrant digital banking scene in Saudi Arabia. These include STC Pay, recently transformed into STC Bank, a fully digital bank; urpay digital wallet, launched by Al Rajhi Bank subsidiary Neoleap; D360, serving disadvantaged segments such as young people, SMEs and B2B; Meem and Vision Bank, which offer banking services for consumers and businesses; and many others.

SAMA also published detailed Buy Now, Pay Later (BNPL) guidelines in December 2023, setting out licensing requirements, minimum capital thresholds and consumer protection measures. Open Banking is being rapidly adopted across the region, with Bahrain first introducing a regulatory framework, followed by Saudi Arabia last year, and the UAE expected to reveal its own Open Banking rules soon.

The growing demand for alternative financial solutions, combined with an increasingly favorable regulatory environment, is fueling financing and fundraising opportunities for fintech companies. As a result of such efforts, Saudi Arabia, the United Arab Emirates and Bahrain have emerged as regional, if not global, fintech hubs. In fact, in 2023, the UAE claimed 54 deals and investments worth $1.3 billion, while Saudi Arabia raised nearly $1 billion from local and global investors. The GCC region has seen companies such as Tabby, Tamara and Andalusia Labs reach unicorn status.

Emerging technologies such as artificial intelligence and blockchain, part of the Web3 revolution, represent an opportunity: AI alone, for example, has the potential to deliver up to $150 billion in real-world value in the GCC.

Saudi Arabia and the United Arab Emirates are at the forefront of use cases for these technologies in gaming, transportation, payments and more. The Saudi government in 2019 established the Saudi Data and Artificial Intelligence Authority (SDAIA) to serve as a national body overseeing research, innovation and operations in the field of data and artificial intelligence. Between the AI ​​hardware and its integration into the education system, Saudi Arabia has also committed over $100 billion to ensure the Kingdom stays ahead of the AI ​​wave.

However, fintechs continue to face challenges that have the potential to undermine their growth and limit the value they are able to bring to individuals and economies. Our recent research in the GCC has identified emerging trends that the broader ecosystem needs to address to maximize the potential that fintechs have to offer consumers, businesses and the wider economy.

A significant obstacle is the global competition for tech talent. High demand for skilled professionals, combined with the relatively high cost of living, makes talent acquisition expensive, potentially hindering the growth of fintechs. In Saudi Arabia, as part of Vision 2030, the government is investing heavily in training in digital and technology skills to increase the local talent pool.

Access to underlying payment systems, previously exclusive to banks and exchange firms, is another trend shaping the fintech landscape. This access opens up multiple revenue streams for fintechs, including fees, free float, foreign exchange and data. As a result, payments have become a major area of ​​focus for many fintechs, with large digital wallets emerging from telcos. The market sees diversified offerings – from BNPL solutions, to personal finance and virtual assets – which have ushered in an era of financial innovation.

The cross-border nature of many fintech deals also presents unique challenges. With business interests often spanning multiple MENA geographies, fintechs must navigate a complex web of country-specific licensing and regulations – an opportunity for the region’s regulatory players to engage with ecosystem stakeholders.

Finally, there is a growing trend of fintechs seeking industry players for more mentorship, infrastructure support and investment. This highlights the importance of the private sector contributing more to government efforts to foster a supportive ecosystem for fintechs to thrive. Visa, for example, has supported local fintechs with several programs, the latest of which is the 2024 Saudi Arabia, Bahrain and Oman edition of the Visa Everywhere Initiative (VEI), so that fintech startups can showcase their solutions on a global stage for the possibility of securing funding to help them with development and operational costs.

Fintechs have the potential to deliver even broader social benefits to the markets in which they operate, particularly when it comes to providing financial services to those who have traditionally been disadvantaged and helping businesses in their digital transformation. This is why it is so important to support fintechs on their growth journey. We have a promising future ahead of everyone, everywhere, but we will only be able to achieve it through close collaboration and cooperation.

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