Any move by banks toward entering the FinTech space in KSA is considered positive, though each bank has its own strategy.
This article focuses solely on banks' direct investments in FinTech startups, excluding any FinTech venture-building activities.
It aims to shed light on the significant impact these investments have on the industry, solidifying FinTech's position and contributing to the sector's growth in alignment with the Financial Sector Development Program (FSDP).
The FSDP's mandate is to establish 525 FinTech startups by 2030 as part of the FinTech strategy, the fourth pillar of the FSDP. These investments are not only helping to achieve this goal but are also fostering financial inclusion, improving financial literacy, and creating more jobs in this rapidly evolving industry.
Recently, there were two notable announcements of banks investing in FinTech startups in the Robo Advisory and Personal Financial Management (PFM) sectors.
The first is Al Rajhi Bank's investment in Drahim, acquiring a 65% stake in the startup. The second is SNB Bank's investment in Malaa Technologies in an undisclosed Series A round. SNB also participated in Tamara's Series C funding round last year, a later-stage investment in a leading BNPL provider in the country, further demonstrating the bank's belief in the FinTech sector's potential.
Moreover, a few months ago, two banks announced the launch of venture funds dedicated to investing in FinTech. Riyad Bank established the 1975 Ventures Fund to drive innovation and transformative growth in Saudi Arabia's FinTech sector. Similarly, Alawwal Bank has also set up a fund to support the evolving FinTech industry.
Notably, ANB invested in Cashee through its ANB Seed Fund to bring child-specific products and financial education using the Cashee mobile app.
This initiative not only supports financial literacy among the youth but also empowers an underserved segment of the population.
Bank Al Jazira made two investments in FinTech: one in the equity round of YAP, the digital bank from the UAE, in 2022, and another in Open Banking provider Tarabut's Series A funding. Additionally, Alistithmar Bank invested in Merit Loyalty during its Pre-Series A round.
In the past, Riyad Bank made a significant early investment in Beehive in 2019, marking the beginning of banks' interest in FinTech startups in KSA and the GCC.
There are also indirect investments by banks through VC-managed funds, such as Al Inma Bank, which invested in the Sukna Fund managed by Sukna Ventures through its FinTech arm.
To sum up, while every bank will have a different strategy for entering the FinTech sector—whether through acquisitions or venture building—the crucial takeaway is that banks' direct investments in FinTech startups will have a major positive impact on the sector's growth and development.
By investing in startups, banks can access cutting-edge technologies and innovative business models that they might not have developed internally.
This not only allows them to stay competitive in an increasingly digital landscape but also helps diversify their portfolios and reduce risk.
Moreover, these investments play a vital role in advancing financial inclusion by providing access to financial services for underserved segments of the population, and by promoting financial literacy, they help build a more financially empowered society.
