RIYADH: The rise of financial technology companies in Saudi Arabia will stimulate merger and acquisition activity in the coming years, according to global management consultancy KPMG.
The fintech boom in the Kingdom has the potential to put pressure on traditional banks as the new companies appeal to its young, digital savvy population, the KPMG report said, according to Al-Sharq Al-Awsat.
Fintech startups have increased the prevalence of flexible digital transactions, helped ease regulatory barriers, and led to greater cooperation between financial technology companies and traditional financial institutions, KPMG said.
Bank M&A will also be spurred by factors including the increasing scope of rescue and restructuring deals, private equity interests and the booming of the bad loans market, it said.
The coronavirus pandemic represents an additional incentive to conclude merger and acquisition deals, especially if doubtful loans continue to grow, according to the consultancy.
Fintech activity in the Kingdom has been ramping up rapidly recently.
Saudi Arabia has 30 fintech companies today under Saudi Central Bank supervision, 10 times more than the original target of three, director general of the Financial Sector Development Program, Faisal Al-Sharif, said earlier this month.
Geidea, the largest fintech in Saudi Arabia by market share, said last week industry heavyweight Nick Ogden had joined its board of directors.
Ogden has founded several major names within the financial services sector, including Europe’s largest global payment processing company Worldpay and ClearBank, the UK’s first clearing bank to launch in more than 250 years.
In June, the Saudi Cabinet gave its nod to the Kingdom’s finance minister to issue licenses for the country’s first digital banks, STC Bank and Saudi Digital Bank.
STC Pay will be converted into a local digital bank, STC Bank, with capital of SR2.5 billion.
A second lender, Saudi Digital Bank, will be formed by investors led by Abdul Rahman bin Saad Al-Rashed and Sons Company with capital of SR1.5 billion.
Digital banks licensed in Saudi Arabia will help improve the quality and user experience for customers in the Kingdom, supporting innovation and reducing costs, Yazeed Alsheikh, director for general of banking control at Saudi Central Bank (SAMA), said in June.