Two SR4 billion digital banks licensed in Saudi Arabia

 

Two SR4 billion digital banks licensed in Saudi Arabia

Riyadh city skyline at night. Image Credit: Shutterstock

Dubai: Saudi Arabia’s Cabinet on Tuesday approved licensing two digital banks in the Kingdom, with a capital of SR4 billion, the Saudi Central Bank (SAMA) announced on Wednesday.

Minister of Finance Mohammed Al Jadaan, chairman of the Financial Sector Development Program, and Dr. Fahad Abdullah Al Mubarak, governor of the Saudi Central Bank, expressed gratitude and appreciation to King Salman bin Abdul Aziz and Crown Prince Mohammed bin Salman, for the Cabinet's approval to licence two local digital banks.

First, STC Pay will be converted into a local digital bank, with a capital of SR2.5 billion (STC bank). Second, a number of companies and investors, led by Abdul Rahman Bin Saad Al-Rashed and Sons Company, will establish a local digital bank to conduct banking business in the Kingdom, with a capital of SR1.5 billion (Saudi Digital Bank).

Al Jadaan said that the Cabinet's approval reflects the leadership's keenness to keep pace with the rapid development in the FinTech sector and to empower the Kingdom to be among the largest financial hubs in the world.

He added that the Financial Sector Development Program, one of the Kingdom's Vision 2030 realization programs, seeks to keep pace with global developments in the financial services and FinTech during 2021-2025 to underpin economic diversification.

On his part, the SAMA governor clarified that with the approval of the Council of Ministers, the Saudi Central Bank will recommence its work to finalize technical and operational requirements for the two banks to start their banking activities in the Kingdom.

The governor drew attention to the fact that digital banks are subject to supervision and controls applied currently to commercial banks operating in the Kingdom, with an increased focus on aspects of technology, cyber security, anti-money laundering, tracking terrorist financing as well as operational risks.

Al Mubarak pointed out that digital banks provide services and products exclusively through electronic channels by adopting an innovative and sustainable banking business model to enhance the financial inclusion and keep pace with cutting edge technological developments in the financial sector.

It is worth mentioning that the Saudi Central Bank has been actively engaged in supporting innovation and maintaining confidence in the financial sector by developing the digital economy and enabling FinTech companies to support the growth of the private sector.

In this context, the Central Bank has licensed 16 Saudi FinTech companies in the recent past to provide payment services, consumer micro-finance and digital insurance brokerage.

In addition, there are 32 FinTech companies operating under the Regulatory Sandbox environment, which was designed for testing innovative services and products in the Kingdom.

In an effort to broaden the scope and efficiency of innovative services through the best regulatory standards, the Central Bank has issued last year the "Open Banking Policy," which will allow bank clients to manage their bank accounts and share data securely.

Clients will be given the option to allow third party service providers, including banks and FinTech companies, to access their banking information.

To sum up, the Saudi Central Bank has been working relentlessly for developing and supporting innovation in the banking sector in partnership with FinTech companies to reap the benefits of the technological revolution for the financial sector and the economy at large.

Regulating digital transformation in Saudi Arabia

 

Regulating digital transformation in Saudi Arabia

Like elsewhere around the world, Saudi Arabia is witnessing a digital transformation.

Not very long ago, the digital transformation was limited to the world of business and security. But now we are experiencing a sea change in the way we lead our lives. It would not be wrong to say that now several aspects of our personal lives heavily rely on different apps.

Digital transformation is also a key goal of the Vision 2030 reform plan. Since the announcement of the 2030 road map for the Kingdom, we have witnessed huge changes in the way we used to deal with financial institutions and government entities.

Initially, many of us felt uneasy but now we are becoming used to the ease that comes with this digital transformation, as we no longer have to wait in long queues to get trivial matters sorted out at the bank or a government institution. Most of the services are just a click away or can be done through an app.

Due to the rapidly changing situation, it is necessary to regulate all matters related to digitization and digitalization processes. Therefore, the Kingdom launched the Digital Government Authority (DGA) to serve as an umbrella organization for all digital matters in Saudi Arabia.

In today’s article, we shall highlight the scope and powers of the authority.

First of all, it is important to get acquainted with the definition of digitization, as knowing the basic concepts from the regulator’s point of view will certainly correct our understanding of all relevant terms and determine their actual purpose.

We will start with the most popular term, which is digital transformation. It means transforming and developing business models strategically to become digital models based on data, technology, and communication networks. Hence the role of digital government in supporting administrative, organizational, and operational processes within and between government entities to achieve digital transformation, develop, improve and enable easy and effective access to government information and services.

All of the above is supposed to be carried out in accordance with specific criteria, meaning a set of rules and controls regulating the operations and tasks related to digital governance approved by this newly formed authority.

Another interesting term is the government digital market platform, which means a platform that enables government agencies to purchase and provide services and technical assets — such as software, hardware, communications services, managed services, and cloud services — and the completion of purchases, payments, and receipts through the electronic portal for government competitions and procurement.

Some time ago, a unified national portal was launched, which provides all government digital services from various sectors through a unified portal and application or through a unified service center.

To provide safety of use, we have the new Digital Trust Services, which refers to any electronic service that aims to verify the validity and integrity of electronic transactions and the identity of customers, including digital signatures, digital seals, and time stamps.

The DGA is the competent authority in everything related to digital government.

To ensure the achievement of digital government goals and sustainability of its business, this new authority is responsible for issuing indicators, tools, and reports to measure the performance and capabilities of government agencies in the field of digital governance.