AI keeps widening in Saudi Financial Market

The entry of artificial intelligence companies into the Saudi financial market is increasing, as the Capital Market Authority approved the Saudi Economic and Development Company for Securities to offer units of the “Sedco Capital Flexible Fund for Saudi Equity Enhanced with Artificial Intelligence” as a public offering. The Authority also granted a permit at the end of 2023 to the Automated Support Company for Financial Technology, as the first company to provide advisory services using artificial intelligence in the Saudi financial market.

The importance of financial technology innovations and their participation in the development of the digital economy is increasing, as we see artificial intelligence creating opportunities for traders and investors in financial markets, as it enables the processing of big data, predicting price movements, reducing risks, in addition to trading and executing deals automatically, and improving investment returns.

The presence of a large amount of data, information and statistics enhances the opportunities for hedging potential risks, financial planning, monitoring financial performance, and forecasting, with the use of big data or “blockchain”.

Regarding the role of technology in financial markets, Mohammed Al-Quwaiz, Chairman of the Capital Market Authority, explained in a previous interview that algorithmic trading constitutes a quarter of the value of trading in the Kingdom, stressing the quality of the sector in terms of financial technology with the need for development, by addressing several challenges such as authenticating the login of more than one party, and the challenge of obtaining the appropriate financial share in the financial sector, noting that the financial markets are the most successful in terms of adopting technology, as technology has been used in legal procedures, and artificial intelligence has been applied to track market movement, indicating that crowdfunding platforms, specifically multi-party ones, are among the most active models. The Financial Sector Development Program launched the executive plan for the financial technology strategy in 2022, which aims to make the Kingdom a global center for financial technology, and is referred to as one of the pillars of the Financial Sector Development Program, which is one of the programs to achieve the Kingdom’s Vision 2030, and its role revolves around developing a diverse and effective financial sector, to support the development of the national economy and diversify sources of income, and stimulate savings, financing and investment, by developing and deepening financial sector institutions, and developing the Saudi financial market, to be an advanced financial market. The number of fintech companies in the Kingdom reached 224 companies by the end of the second quarter of last year, exceeding the program’s target for the same quarter of 168 companies, while the targeted goal is to increase the number to 525 companies by 2030, in addition to increasing the share of non-cash transactions (digital transactions) to 70%, and for the sector’s direct contribution to the GDP to be about 13 billion riyals, in addition to creating 18,000 direct jobs. The strategy also aims to make innovation in financial services based on technology the basis; which enhances the economic empowerment of the individual and society, as it contributes to achieving the goals of the Kingdom’s Vision 2030 by facilitating the practice of business, raising the private sector’s contribution to the economy, attracting foreign direct investment, and developing the digital economy, in addition to enhancing and supporting the culture of innovation and entrepreneurship, increasing the contribution of small and medium-sized companies to the economy, and developing electronic operations. The strategy contributes to enhancing innovation in the financial sector by attracting the most prominent players in the field of fintech. In addition to issuing the Open Banking Framework, which is the most important output of the Open Banking Program and represents a new concept in the financial sector, as it will enable banks and financial technology companies to provide open banking services in the Kingdom to contribute to creating a positive impact in the sector by strengthening the partnership between banks and financial technology companies, improving the sector’s infrastructure, and enabling better use of customers’ financial data. The regulatory framework for crowdfunding was also approved, which aims to support financial technology innovations and keep pace with the accelerating technological revolution in the financial market, as it is the first regulatory framework that enables the transition of the financial technology business model from the experimental environment (financial technology laboratory) to the sustainable environment in the financial market, as this procedure contributes to enabling companies that have obtained a permit to experiment with financial technology to obtain the appropriate license to practice it as a financial market institution, in line with international best practices. One of the most prominent achievements of the strategy is enabling financial technology companies to conduct their business efficiently within a supportive regulatory environment that contributes to supporting the national economy and supporting financial technology innovations in the financial market, including determining the necessary license and regulating the offering of shares by licensed financial market institutions in the context of practicing crowdfunding with securities.

With reference to leading global practices, the innovation provided by the financial technology sector in the Kingdom through technology-based services and solutions will contribute to empowering multiple sectors, including: retail, hospitality, investments, transportation, and healthcare.

It is expected to contribute to the growth of the percentage of assets under management to reach 50% by 2030, with the growing use of technologies such as artificial intelligence in the financial sector, as the Kingdom achieved the 17th rank out of 64 countries in the World Competitiveness Yearbook issued by the World Competitiveness Center affiliated with the International Institute for Management Development for the year 2023, in addition to its classification in third place among the G20 countries in the Global Competitiveness Report for the year 2023.