455 firms financed by fintech platforms since 2022: CMA

Yazeed Aldemaigi, Capital Market Authority (CMA) Deputy of Strategy, Research & International Relations

A total of 58 fintech experimental permits have been granted, with the FinTech Lab enabling seven business models to operate within the market, Yazeed Aldemaigi, Deputy of Strategy, Research & International Relations, Capital Market Authority (CMA), told Argaam.

In an interview on the sidelines of the 24 Fintech Conference in Riyadh, Aldemaigi said the number of companies benefiting from traditional financing channels in the market reached 256 since 2022. In contrast, the number of companies financed through fintech platforms reached 455 since 2022, representing a 78% increase in favor of fintech platforms.

He noted that financing activity through fintechs saw significant growth. The value of funds raised in the first half of 2024 increased by 132% year-on-year (YoY) and the number of investment applications through financing platforms exceeded 367,000.

Aldemaigi mentioned that fintech companies contributed to the growth of assets under management to nearly SAR 5 billion, marking a 267% increase since 2022 until the end of the first half of 2024.

Below are the excerpts from the interview

What is your view on the activities of the first edition of 24 Fintech Conference?

The first edition of this conference demonstrates the strength and leadership of the fintech sector in the Kingdom. At CMA, we are always committed to applying best practices in regulating and facilitating the use of fintech. This enabled us to enhance various activities under our supervision, including company listings, investment execution, as well as advisory and investment services.

We have granted 58 permits for fintech experiments in the financial market. Additionally, the Fintech Lab enabled seven business models in the market. Since 2022, the number of companies benefiting from traditional financing channels reached 256, while the number of fintech companies reached 455, representing a 78% increase.

Moreover, financing activity through fintechs saw notable growth, with the value of funds raised in the first half of 2024 increasing by 132% YoY. The number of investment applications through financing platforms has exceeded 367,000.

Fintech platforms also contributed to the growth of assets under management in the financial market to nearly SAR 5 billion, marking a 267% since starting operations in 2022 until the end of the first half of the current year.

Can you tell us about the role of technological innovation in enhancing the efficiency of the Saudi financial market?

We can summarize the impact of technological innovation on enhancing market efficiency through three fundamental pillars: data availability, infrastructure development, and innovative product offerings. These aspects collectively contribute to achieving an effective, advanced, and dynamic financial market, where fintech companies offer competitive products and services across many key areas traditionally served by conventional brokers, including asset management and corporate financing.

At CMA, we recognized early the importance of fintech and took steps to integrate and support it, leveraging its benefits to facilitate investor and company access to the financial market while reducing costs for accessing financing and investment tools.

We strive to attract innovative business models and emerging technologies with the potential to advance the financial services industry to new horizons, facilitate financing, stimulate investment, and enhance economic development. Therefore, the CMA continues to grant authorization to more fintech companies operating in various activities.

Given the widespread use of technology, artificial intelligence (AI), and fintech today, how does the Saudi market benefit from this new revolution?

Fintech and AI play a crucial role in market efficiency by providing modern services and technologies that help financial institutions and fintech startups expand their service offerings, improve their efficiency, and create new financial products that meet the needs of investors in the financial market.

The CMA leveraged fintech to enhance the efficiency, growth, and development of the market. The real beginning was the launch of the FinTech Lab in 2018. This attracted innovative business models to the financial market and plays a pivotal role in boosting the fintech sector in the market.

By the end of 2023, approximately 38 active fintech companies received authorization from the CMA to operate within the FinTech Lab. Additionally, 14 fintech companies received experimental permits (ExPermit) for innovations in areas such as debt issuance and investment, investment fund distribution platforms, real estate investment funds, robo-advisory services, AI-powered advisory services, and social trading.

The authority also facilitated the investment process in debt instruments and made them accessible to various investor segments by allowing authorized fintech companies to experiment with the debt instruments issuance and investment, including the public distribution of these instruments.

The CMA continues to encourage and stimulate innovation in the financial market. In December 2023, the authority granted authorization for the first model providing AI-powered advisory services. This model offers securities advice to platform clients using algorithms, based on data from various sources, including client-specific data obtained with the client’s consent.

Why was the Saudi Fintech Center established by the CMA and the Saudi Central Bank (SAMA)? What is its actual role and how is its role distinct from that of the authority?

The Saudi Fintech Center was established by the CMA and SAMA to serve as a catalyst for developing the fintech industry in Saudi Arabia. The vision of the Saudi Fintech Center is to transform the Kingdom into a hub for fintech innovation and to create a thriving and responsible ecosystem supported by both local and international stakeholders.  

This is achieved through supporting the development of the infrastructure required for the fintech industry, building the skills and knowledge necessary for fintech growth, and supporting entrepreneurs at every stage of their development.

 The center assists fintech companies in various ways, including providing guidance and clarity on developing their fintech businesses, introducing them to potential partners, and aiding in talent recruitment and the promotion of fintech solutions in the Saudi market.

Additionally, the center collaborates with incubators and accelerators to fund and support early-stage startups, providing the necessary support for entrepreneurs. It also offers office spaces and training programs aimed at supporting projects and helping them grow faster, including structured programs that last from three to six months.

Thus, the role of the center is to equip early-stage fintech entrepreneurs and work with partners and stakeholders. The role of the FinTech Lab, on the other hand, comes in the subsequent phase to test technologies that have matured and are ready for authorization and entry into the authority's FinTech Lab.