If you build it, will they come? has been saved
If you build it, will they come?
Building a FinTech ecosystem from scratch in Saudi Arabia
Innovation, entrepreneurship, and the rise of new industries are often portrayed as emerging out of thin air, as if by some secret combination of inspiration and drive. The last decade has seen several international hubs for dynamic and innovative FinTech businesses to grow in places like London, New York, and Tel Aviv. This growth has often been supported by governments who have sought to give their FinTech hubs a boost by creating a more supportive regulatory environment, facilitated networking or other targeted interventions.
Even with such support, building a FinTech ecosystem from scratch with a limited number of FinTechs and without clear paths for regulation and access to talent is a major challenge.
As part of its Vision 2030 initiative, Saudi Arabia have set ambitious goals to tackle such a challenge.
I work in the executive innovation group with a particular focus in FinTech and was in Saudi Arabia for a majority of 2018 helping support the development of FinTech Saudi, putting in place the building blocks for a new FinTech hub in the Middle East. My journey was the primary driver to shaping the thinking on how Saudi Arabia has evolved its FinTech capabilities across the country.
So, what are the first steps they have taken to build a FinTech industry from scratch?
For an industry to thrive, it needs a supportive ecosystem to help it grow. Saudi Arabia looked to establish this by creating a network of government organisations, universities, corporates, banks, venture capitalists and local FinTech companies, all working together to drive innovation, investment and to create a support system. This network is overseen by a new organisation: FinTech Saudi.
London has over 4,000 FinTech start-ups. Saudi Arabia has just 15. Why?
Historically, Saudi Arabia has been challenged by FinTech start-ups relocating operations elsewhere once they need to scale. A key driver of this has been lack of infrastructure and regulation to support them.
Therefore, a huge focus on creating the right environment for the nascent FinTech industry in Saudi Arabia is to not only encourage more start-ups to be created in the first place, but to encourage them to stay.
Establishing a regulatory framework, including two sandboxes with the Saudi Arabian Monetary Authority (SAMA) and the Capital Markets Authority (CMA) – drawing lessons from the UK FCA’s sandbox established in 2016 – has been seen as paramount in creating an environment in which FinTechs could stay, thrive, and scale.
For a FinTech start-up to succeed, a person or group of people need an initial business idea. That idea most often arises from a frustration with a system or product combined with the knowledge and know-how to create a better alternative.
Without a pre-existing FinTech sector to draw upon, Saudi Arabia has lacked insight and knowledge on how to take ideas and turn them into a reality in the region. On top of this, those who have the inspiration and drive to start their own FinTech business have been faced with a lack of technical and commercial talent to drive local business growth.
There has therefore been a big focus on how Saudi Arabia can begin to develop these skills, starting with the education system. Initiatives have initially been centred around creating a FinTech-style curriculum, targeting university career fairs and offering internship opportunities. FinTech clubs and general co-working spaces have also been established, designed to inspire potential entrepreneurs and build a robust talent pool FinTech’s can access.
What does success look like?
Saudi Arabia has high aspirations for what it wants to achieve over the next five years. The strategic vision is categorised into three elements: community, education and Small-Medium Enterprises (SMEs).
The government is integrating the vision firmly in the community, through running a number of events and creating significant new jobs within the sector. Education will be embedded in the plans, with targets to reach thousands of students across the country. For SMEs, there are initiatives underway to grow the number of Saudi Arabian FinTech companies significantly – generating a substantial amount of new funding.
The initial expectation is that the majority of FinTech start-ups that emerge from this programme will focus on the growing domestic market, but in time Saudi Arabia could ultimately be a great point of entry for international FinTechs looking to scale in the country.
By targeted action in education, regulation and building a supportive ecosystem, FinTech Saudi believes it can deliver the necessary knowledge, skills and support for a competitive FinTech sector.
Across the world, we’ve seen a diverse forest of FinTech sectors grow in different shapes and sizes, with occasional nurture and support from governments. In contrast, Saudi Arabia wants to prepare the soil, plant the seed and spur its growth.