FINTECH

ACCESS GUIDE
Version 3.0

What’s New:

An update to the regulatory environment info@FintechSaudi.com

@fintechSaudi
An updated framework for local entrepreneurs
that want to launch a fintech idea fintechsaudi.com
A Letter from Fintech Saudi team

Dear Reader,

Welcome to Fintech Access Guide Version 3.0!

The Fintech Access Guide has been developed by Fintech Saudi to support
fintech entrepreneurs at every stage of their development. Since the launch
of Fintech Saudi, we are pleased to have seen the fintech industry in Saudi
Arabia advance forward. The Fintech Access Guide has been updated to reflect
the development of the fintech industry so that it continues to support fintech
entrepreneurs at every stage of their development.

Fintech Saudi continues to play a role in supporting local and international

fintechs in areas such as navigating the regulations, developing their fintech
solution or entering the Saudi market. Our aim is to support the agenda of
regulators, government’s entities, and entrepreneurs with respect to the
Kingdom’s Vision 2030. We see ourselves as an advocate for fintech companies
to support their agenda with regulators and government entities and we hope
that this is reflected in the Fintech Access Guide.

The Fintech Access Guide includes:

Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

Part 2: Framework for Local Entrepreneurs to Launch a Fintech Idea

Part 3: Options for International Fintechs Interested in Entering the Saudi

Market

In addition to everything from the previous versions of the Fintech Access

Guide, Version 3.0 provides an update to the regulatory environment and an
updated framework for local entrepreneurs that want to launch a fintech idea.

The goal of Fintech Access Guide is to support your enquiries to initiate your
fintech in Saudi. As the market continues to develop, the Fintech Access Guide
will be developed to support the industry. We hope the Fintech Access Guide is
useful and we would love to hear your feedback on how it can be improved.

Sincerely,
The Fintech Saudi Team

2 © 2023 Fintech Saudi - All Rights Reserved

Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

PART 1
Regulation Clarity for Conducting
Fintech Activities in Saudi Arabia

PART 2
Framework for Local Entrepreneurs
to Launch a Fintech Idea

PART 3
Options for International Fintechs Interested
in Entering the Saudi Market

Disclaimer and Final Remarks

3 © 2023 Fintech Saudi - All Rights Reserved

Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

PART 1

Regulation
Clarity for
Conducting
Fintech
Activities in
Saudi Arabia

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Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

Introduction

Fintech Saudi has prepared the Fintech

Access Guide for fintech companies wishing
to enter the Saudi market.
This section provides clarification on
the current status of the regulatory
environment in the Kingdom.

It includes an overview of the existing

regulations and provides guidance on the
current options for fintech companies
wishing to operate in the Kingdom. It
also provides an overview of the relevant
government entities that fintech companies
should be aware of based on publicly
available information.

This guide should not be considered as a

change to the official regulations issued.
In the event of any inconsistency between
this guide and the official regulations, the
official regulations must be considered.

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Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

Who are the Relevant

Financial Regulators?

The financial sector in Saudi Arabia is governed by two regulators, The Saudi
Central Bank (formerly the Saudi Arabian Monetary Authority) and the Capital
Market Authority, each with a set of financial services under their jurisdiction.

Saudi Central Bank (SAMA)

SAMA, the Saudi Central Bank of
the Kingdom of Saudi Arabia, was
SAMA supervises all activities that established in 1372H (1952). change to:
include: It has been entrusted with performing
many functions pursuant to several
• Banking services: includes the laws and regulations. The most
business of receiving money, opening important functions are the following:
current accounts, issuing debts, ·To deal with the banking affairs of the
Government;
foreign exchange transactions, etc. ·Minting and printing the national
• Finance: including real estate finance , currency (the Saudi Riyal),
strengthening the Saudi currency and
microfinancing, financing production stabilizing its external and internal
assets, financing small and medium value, in addition to strengthening the
businesses, finance lease, credit cards currency’s cover;
·Managing the Kingdom’s foreign
finance, and consumer finance
exchange reserves;
• Insurance: including insurance ·Managing the monetary policy for
companies, reinsurance companies, maintaining the stability of prices and
exchange rate;
and insurance services providers ·Promoting the growth of the financial
• Credit Bureaus system and ensuring its soundness;
·Supervising commercial banks and
• Payments: including Payment exchange dealers;
Systems, Payment Service Providers, ·Supervising cooperative insurance
Money Exchange Houses and Cash companies and the self-employment
professions relating to the insurance
Centers activity;
·Supervising finance companies;
·Supervising credit information
companies.

Saudi Central Bank remains the regulator for any activity that falls under its
supervision even if the regulations for the activity have not been issued by
SAMA. Examples of fintech activities that fall under SAMA’s jurisdiction include
the following (non-comprehensive list):
• Intelligent cash management • Debt Based Crowdfunding
• Buy Now Pay Later • Finance support activities
• Insurance aggregation • Digital Consumer Microfinance

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Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

Capital Market
Authority (CMA)
CMA mainly regulates the following capital market
activities (as per Article 2 of CMA’s Securities The current Capital
Business Regulation): Market Law is
promulgated and
• Dealing: a person deals in a security as principal
pursuant to Royal
or as agent, and dealing includes to sell,
Decree No. (M/30)
buy, manage the subscription or underwrite
dated 2/6/1424H,
securities.
which formally
• Arranging: a person introduces parties in
brought the Capital
relation to securities business, advises on
Market Authority
corporate finance business or otherwise acts to
(CMA) into existence.
bring about a deal in a security.
The CMA’s functions
• Managing: a person manages a security are to regulate and
belonging to another person in circumstances develop securities
involving the exercise of discretion. business activities
• Advising: a person advises a person on the by issuing required
merits of that person dealing in a security or rules and regulations
exercising any right to deal conferred by a for implementing
security. the provisions of
• Custody: a person safeguards assets belonging Capital Market Law.
to another person which include a security, The basic objectives
or arranges for another person to do so, are to create an
and custody includes taking the necessary appropriate investment
administrative measures. environment, boost
confidence, reinforce
Even if the entity is not regulated/ licensed by CMA, transparency and
the nature of the financial activities may still be disclosure standards in
regulated by CMA if the activity is related to the all listed companies,
capital market. Examples of fintech activities that and protect the
fall under CMA’s jurisdiction include the following investors and dealers
(non-comprehensive list): from illegal acts in
the market.
• Equity Crowd Funding
• Robo-Advisory
• Offering and Investment in Debt Instruments
• Distributed Ledger Technology (DLT) to Arrange
and Offer of Securities and Custody Services
• Social Trading
• Investment And Real Estate Funds Distribution
Platform

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Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

Who are the Other Regulators

/ Authorities that Fintechs
Should be Aware of?

Ministry of Commerce (MCI) Ministry of Investment of

Saudi Arabia (MISA)
MCI governs the commercial
sector in the Kingdom, by Ministry of Investment of
setting policy, issuing commercial Saudi Arabia (formerly SAGIA)
regulation, supervising the is responsible for providing
market, and issuing licenses. investment licenses to
MCI also regulates e-commerce international investors, and
activities in the Kingdom. has a one-stop shop which
MCI Website supports international investors
in completing required
governmental procedures to
establish a company in KSA.
MISA Website

Ministry of Communications and Small and Medium Enterprises

Information Technology (MCIT) General Authority (Monshaat)
MCIT is responsible for the Monshaat regulates the
communication and information entrepreneurial ecosystem and
technology sector in the supports, develops and caters
Kingdom. Their objective is to for it as per the best practices.
maximize the effectiveness and Monshaat Website
performance of the public and
private sectors by enabling digital
transformation.
MCIT Website

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Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

Communications, Space & Technology National Cybersecurity

Commission (CST) Authority (NCA)
Communications, Space & Technology
The National Cybersecurity
Commission (CST) is the information
Authority is a government entity
and communications technology
in charge of cybersecurity in the
sector (ICT) regulator in KSA. CST
Kingdom. NCA has both regulatory
is responsible for regulating cloud
and operational functions related
computing in the Kingdom.
to cybersecurity.
CST Website
NCA Website

Saudi Data and Artificial Intelligence

Authority (SDAIA)

SDAIA has been mandated to lead

the Kingdom’s data and artificial
intelligence (AI) agenda. SDAIA is
defining the national data and AI
strategy for the Kingdom.
SDAIA Website

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Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

Are you Providing Regulated Services?

Based on the definitions above, the first question a fintech company founder
should ask themselves is whether they are providing any services that may fall
under CMA or SAMA regulation. The full list of regulated activities can be found
on the respective regulators websites:

SAMA Regulation CMA Regulation

Documents: Here Documents: Here

If your business conducts an activity that is mentioned in the regulation

documents above, then your fintech is regulated under the respective regulator.

It is worth mentioning that if you are involved in multiple regulated activities,

your activities may fall under both CMA and SAMA.

Even if the activity is not explicitly mentioned in the regulation, the nature of
the activities could still be regulated as previously mentioned in the section
introducing financial regulators.

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Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

Examples of Fintech Activities

that Can Get to Market Directly
(Activities that do not Need to be Regulated at the moment by SAMA or CMA)

Not all fintech companies provide regulated services. It is therefore

possible that you may NOT need to be regulated at the moment

Whilst many fintechs will be planning to provide services that need to be

regulated, there are also many fintechs that provide services that do not need to
be regulated at the moment by CMA or SAMA and therefore can get to market
directly. Below we have identified 8 fintech activities that as standalone services
do not require regulatory approval at the moment as they do not implicitly or
explicitly involve regulated activities. (This is not a comprehensive list and there
maybe others).

However, if the fintech company is seeking to provide any regulated activities in

addition to the fintech activities identified below, then it is likely that the fintech
company will need to be regulated.

If the fintech company is in doubt as to whether the activities they are looking
to conduct are regulated, they can use the “Fintech Regulatory Assessment
Tool” developed by Fintech Saudi to understand the regulatory pathways for
different fintech activities. This can be accessed by clicking here. If the fintech is
still unsure, they can consult with Fintech Saudi, who will co-ordinate with the
appropriate regulator on their behalf.

The benefits of a fintech considering one of the fintech activities below is that
they can start activities in the market directly without the need to enter a
regulatory testing environment or partner with a regulated entity.

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Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

Depending on their strategy, there are a number of options for fintech

companies that conduct fintech activities that are not regulated at the moment:

1. Aggregation of Publicly Available Financial Information

There is a lot of publicly available financial services information. This could be:
• Market data such as exchange rates, stock prices etc.
• Banks and financial company information such as locations of ATMs, bank
branches, information on different products (mortgage, car financing,
savings, bank account products)
• Insurance information (names of insurance companies, what they insure,
different terms of insurance etc.)

The fintech activity can focus on aggregating or analyzing publically available

information and making it easier for consumers to compare and access. Examples
of fintech solutions that could be developed using publicly available financial
information include:
• An app that helps consumer find the nearest ATM
• Website that compares different bank or insurance products (without
providing any regulated services such as receiving client’s documents
or payments)
• Tool that analyzes stock market information (without providing any advisory
services such as the recommendation of buying and selling shares)

Key Considerations
Analyzing and presenting publically available information is not considered
a regulated activity. However, the information should not be used to mislead
the consumer. Further, providing advice on different regulated products (for
example: stocks, funds and other financial products), allowing consumers to
transact through the application, providing biased information that favors
particular companies or the use of private financial information would be
considered a regulated activity.

2. Business Tools
Businesses particularly startups, freelancers and SMEs can use fintech products to
help manage their businesses better. Fintechs can help businesses with reducing
costs, solving pain points or time spent on admin activities, accounting etc. This
allows the business owners to focus on their business activities.

Examples of fintech business tools include:

• Expense trackers
• Accounting software that automates bookkeeping function
• VAT tax return tool that simplifies VAT filing
• Automated invoice issuance software

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Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

Key Considerations

Business tools would not be considered regulated if they are focused on

providing operational support to management without providing any regulated
or banking services related to financial transactions such as transferring funds,
foreign exchange dealing, making payments etc.

3. Back-office Bank Operations

Banks require fintech solutions to improve their internal processes. Fintechs
could develop non-regulated back-office fintech solutions that help banks
with reducing costs, speeding up operations and providing a better service to
their customers.

Examples of back-office fintech solutions include:

• Internal messaging services
• Tools that automate loan processing applications
• API developments that allow banks to communicate with third
party applications
• Software that structures the sharing of documentation between
different banking teams

Key Considerations
As banks are regulated by SAMA, they will be held accountable for any service
providers that they work with including fintechs. This includes fintechs that are
conducting regulated activities. Further information on how fintechs conducting
regulated activities can partner with banks can be found in Part 1 of the Fintech
Access Guide. Back office bank solutions would not be regulated provided that
they do not carry out regulated activities (such as approve the issuance of loans
or make decisions on the transfer of customer funds). The solutions also would
need to comply with customer data protection. Currently banks are not allowed
to share customer and transactions data with third parties and therefore any
back-office bank solutions should be developed with this in mind. The bank will
also need to ensure that any service is compliant with SAMA regulations and
guidelines for new products and services.1
© 2023 Fintech Saudi - All Rights Reserved

13 1
“SAMA Guideline for New Product and Services” Circular No. 39100000163 date 18/01/1439H
Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

4. Enhancing Bank’s Customer Experience

Banks are keen to enhance their customer’s banking experience, whilst also
increasing revenue and reducing costs. Fintech companies can provide banks
with technical solutions and services that are not currently subject to regulation.
Examples of such solutions include:
• Customer service chatbots
• Vouchers, rewards or geo-location deals for bank’s customers
• Apps to enhance front end user experience
• Virtual reality / augmented reality software

Key Considerations
Fintech solutions that enhance the bank’s customer experience would not
be regulated if they do not undertake regulated activities such as conduct
transactions on behalf of customers. The bank will be accountable for any
such solutions that are implemented and therefore will want to ensure that an
enhanced customer experience does not increase the risk to the customer. The
solutions will also need to comply with customer data protection regulation and
the regulated entities regulations and guidelines for new products and services.2

5. Personal Management
Customers have different financial needs, goals and require different
levels of support at different times in their life. Fintechs could develop
personal management solutions that support customers but do not involve
regulated activities.

Examples of personal management fintech solutions include:

• Budgeting apps to help budget large expenses such as buying
a house or retirement
• Inheritance planning tools
• Personal expenses overview
• Charity donations overview (without banks having to share the customer data
and without the solution making customer transfers)

Key Considerations
Personal Management tools will not need to be regulated as long as they do not
carry out any regulated activities such as transferring funds, making payments or
© 2023 Fintech Saudi - All Rights Reserved

advisory services on financial products (such as recommending buying and selling

of shares or linking with the user's bank accounts)

14
2
“SAMA Guideline for New Product and Services” Circular No. 39100000163 date 18/01/1439H
Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

6. Regtech
Regulation Tech (“Regtech”) involves the use of technology to support financial
organizations to remain compliant with financial services regulations. Fintechs
can develop regtech solutions that do not conduct regulated activities but
support financial organizations to remain compliant.

Examples of regtech solutions include:

• Software that uses external databases to automate the checks required for
KYC / AML activities
• Data analytic tools that are operated by the financial institutions, which
automate the analysis of data to find patterns to detect financial crime / fraud
• Software that automatically updates compliance officers on new regulatory
requirements that need to be met by financial institutions and prepares
compliance officers for upcoming regulation changes
• Tools that can automate the audit of operational data as parts of the internal
audit process

Key Considerations

Regtech solutions are unlikely to be regulated at the moment if they are not
involved in providing regulated activities. However, they would still need to
be compliant with existing regulation such as regulation related to the use
and transfer of financial data. As most companies that are likely to use regtech
solutions will be regulated, the financial company using the solution will be held
accountable and therefore will need to comply with the relevant regulations
related to this area.3

7. Gamification
Gamification is the technique of using elements of games to encourage greater
engagement from users into a particular subject. Gamification can be used
to simulate financial activities to engage or educate individuals. As no actual
financial activities are carried out, gamification would not be considered to
be regulated. Fintechs could develop gamification solutions to help support
greater financial literacy and increase financial inclusion. They can be considered
as standalone services or as an add-on service to increase engagement in a
regulated product provided by a regulated entity.
© 2023 Fintech Saudi - All Rights Reserved

Examples of gamification solutions fintechs could develop include:

• Stock market simulation trading that does not give recommendations
• Apps that encourage customers to save for particular goals (without
transacting on their behalf)
• Virtual reality tools that teach young people about how banking works

3
“SAMA Guideline for New Product and Services” Circular No. 39100000163 date 18/01/1439H and Articles
15 20(e) and 59 of the CMA’s Authorized Person Regulations related to outsourcing and delegation requirements
Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

Key Considerations

Even though gamification is focused on supporting education and awareness,

the solutions must not promote anything that is in contraction to the regulators'
regulation (such as promoting illegal or inaccurate practices).
If a fintech company is not involved in any activities that need to be regulated,
the company is able to apply for a Commercial Registration (CR) with the Ministry
of Commerce and begin operations once a CR is received. Otherwise, if a fintech
company is involved in activities that need to be regulated, the following section
discusses the three options that can be considered.

8. Reward Based Crowdfunding

Reward based crowdfunding platforms enable individuals to donate relatively
small amounts of money to companies or projects in return for non-equity based
rewards (e.g. funding the development of a new toy in exchange for receiving
one of the first toys that are produced). This is often compared to e-commerce as
it can be used by companies to forward sell new to fund the development of the
products.

Key Considerations

Reward based crowdfunding platforms are not regulated by SAMA and CMA,
provided that the platforms are not associated with the exchange of securities
or providing any financial return. However they may need to comply with
regulation from the Ministry of Commerce. They may also need to comply with
regulation from other Ministries. For example reward based crowdfunding
platforms related to donations should comply with regulation from the Ministry
of Human Resources and Social Development.

Please note that such activities require obtaining a collection account from a
bank, which is subject to the regulations of SAMA, in order to comply with
Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT)
regulations.

If the fintech company is in doubt as to whether they are conducting

regulated activities, they should first use the Fintech Regulatory Assessment
Tool and if they are still unsure, they should consult with Fintech Saudi

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Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

What if you are Providing

Regulated Services?

Step 1: Verify if your Fintech is Covered by

an Existing Fintech Activity License?
Below are the current fintech activity regulations / guidelines that have
been released:

Payments
Payment Services Providers
SAMA has released Payment Services Provider Regulations for companies that
are involved payment activities including the execution / acquiring of payment
transactions, issuing payment instruments, issuing e-wallets, money remittance,
withdrawal of cash, payment initiation services and account information services.

There are 4 different licenses that fintech companies can apply for:
• Micro Payment Institution – Enables all payment activities listed in the
regulations other than cross-border remittance and issuing e-wallets (with limits
on transaction values)
• Major Payment Institution – Enables all payment activities listed in the
regulations other than issuing e-wallets (with no limits on transaction values)
• Micro Electronic Money Institution (E-Wallet) – Enables all payment
activities listed in the regulations including issuing e-wallets (with limits on
transaction values)
• Major Electronic Money Institution (E-Wallet) – Enables all payment
activities listed in the regulations including issuing e-wallets (with limits on
some services including international transfers)

The full Payment Services Provider Regulations can be accessed here

Payment Processors
Any fintech solutions that only process payments and do not hold money can apply
to be certified by Saudi Payments without the need to apply for a license under
the Payment Services Provider Regulations. This will allow the solution to process
all mada payments. However if the solution wants to process payments using an
international scheme (such as mastercard or Visa), the fintech will need to contact
the international schemes to receive the relevant approvals and certification.
Fintechs can apply to Saudi Payments through Onboarding@SaudiPayments.com

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Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

Insurance
Insurance Aggregation Activities
SAMA has released rules related to online insurance aggregation activities. The
rules apply to any company seeking to conduct insurance aggregation activities
and the steps for applying for a license to conduct the activities.

The full rules governing insurance aggregation activities can be accessed here

Insurtech Rules
SAMA has released the draft of insurtech rules to receive public opinions and
to strengthen the principle of transparency. The rules aim to enable insurtech
companies to execute their work in accordance with a regulatory framework.

Visit SAMA's website to confirm the issuance of the final version of these rules.

Banking
Digital-Only Banks
SAMA has provided guidance on the licensing criteria for digital-only Banks that
should be considered in addition to meeting the Banking Licensing Guidelines and
Minimum Criteria.

The Additional Licensing Guidelines and Criteria for Digital-Only Banks in Saudi
Arabia can be accessed here

The Banking Licensing Guidelines and Minimum Criteria can be accessed here

Finance
Consumer Microfinancing Companies
SAMA has released rules regulating Consumer Microfinance Companies. The
rules cover companies that want to provide consumer microfinance activity using
financial technology.

The rules governing consumer microfinance companies can be accessed here

Debt-Based Crowdfunding / Crowd lending

SAMA has released rules regulating Debt-Based Crowdfunding / Crowd lending
activities. The rules cover companies that want to develop digital platforms that raise
funds from qualified investors that are lent to companies through the platform.
The updated rules governing Debt-Based Crowdfunding / Crowd lending can be
accessed here

Rules for Finance Support Activities

SAMA has released rules related to companies conducting finance aggregator
activities and finance support activities (e.g. finance brokerage support). The rules
can be accessed here

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Buy Now Pay Later (BNPL)

SAMA has released guidelines for applying for permission to engage in Buy Now
Pay Later (BNPL). The guidelines can be accessed here

Regulatory Framework for Equity Crowdfunding

CMA Board issued its resolution approving the amended Capital Market
Institutions Regulations, the amended Investment Accounts Instructions, the
amended Rules on the Offer of Securities and Continuing Obligations, and
amending the Glossary of Defined Terms Used in The Regulations and Rules of
the Capital Market Authority. For more details click here

Open Banking Lab

SAMA announced the launch of the Open Banking Lab according to the Open
Banking Framework. The lab will provide banks and fintechs with a technical
testing environment to enable them to develop, test, and certify their open
banking services to ensure compatibility with the Open Banking Framework. The
Lab aims to enable innovation and accelerate the development of open banking
services in the Kingdom. The first version of the open banking services focused
on the Account Information Service (AIS), and the second version will focus on
the Payment Initiation Service (PIS).

You can visit the Open Banking Program website here for more information or
contact the program team at ob@sama.gov.sa

Who does this option apply to?

This option is available to fintech companies:
• Whose activities are mentioned in the regulations / guidelines

Step 2: Other Options for Fintech Companies Involved in

Regulated Activities

We highlight below a number of options that fintech companies that are

planning to conduct regulated activities can consider. The options are listed in an
order to help the fintech company get to market directly.

Whilst not all options will be viable for all fintech companies, we hope that this
provides some ideas for fintech companies to consider.

Option 1: Alter business model to conduct only activities which do

not require SAMA/CMA approval at the moment
Some fintech products and services may include activities that are regulated and
other activities that are not currently regulated If possible, the applicant may
consider altering the business model to stop conducting the regulated activities
and launch the company initially with only activities which do not require
regulation at the moment, which will allow the fintech to start operating in the
market (i.e. without the need for SAMA / CMA approval at the moment).

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Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

Subsequently, the applicant may consider expanding the business model to include licensed
activities when they are able to comply with the regulatory requirements for the same
activity.

How to Change the Business Model?

1. Segment your business model into the different activities intended to be
carried out
2. Determine which of the activities carried out need to be regulated
3. For the activities that are regulated, determine whether could they be
outsourced to a regulated entity (see Option 2) or stopped.

Example
A personal finance app provides users the ability to use a gamification
function that encourages savings and investment into their own fund.
1. Segment the business model into different activities
Gamification to encourage saving
Savings into fintech owned investment funds
2. Determine which of the activities need to be regulated
Gamification activities to encourage saving (does not need to be regulated)
Savings into their own investment funds (needs to be regulated)
3. Alter the business model to outsource or stop regulated activities
Stop the savings into own investment funds. Instead, license gamification
activity to banks or investment funds to encourage greater saving or
investment into the third party funds.

This may also be considered as a short-term solution whilst applying for the
relevant regulations for the regulated activities.

This option may not be viable for all fintech companies but could be a useful
approach for fintechs looking for a way to start some operations quickly and
then adapt their model as the regulations change.

Who does this option apply to?

This option is available to fintech companies that:
• Can segment their business model across activities that need to be
regulated and activities that do not need to be regulated and change
their business model to stop or outsource regulated activities

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Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

Option 2: Partner with a Regulated Entity or Outsource

Regulated Activities to a Regulated Entity
If a fintech company wants to conduct regulated activities that are explicitly
mentioned in the existing regulation, they could seek to partner with one
or more regulated entities (the “Partner”), which will conduct the regulated
activities on behalf of the fintech company, taking into account the obligations
and responsibilities contained in the regulatory requirements issued by the
relevant regulators, whilst the fintech company shall provide the activities that
do not need to be regulated.

Regulated entities include:

Regulated by Regulated by
SAMA: Here CMA: Here

It is important to note when partnering with a regulated entity,

the activities conducted should be related to the Partner's specific
license. For example, a remittance fintech would not be able to
partner with a financial leasing company as the financial leasing
company will not be regulated to conduct remittance activities.

It is also likely that the prospective Partner will need to conduct extensive due
diligence before they agree to a partnership as they will be liable for the product
or service conducted.

Once an agreement in principle has been reached by the fintech and the Partner,
the Partner may need to seek non-objection from the relevant regulatory authority
and should contact the regulator to follow any approval process required.

Example
A peer to peer lending fintech that provides loans to SMEs would be
considered a regulated activity. However, if the peer to peer lending
fintech partners with a financial leasing company or a bank (which are both
authorized to conduct lending activities) and the regulated entity carries
out the lending activities whilst the fintech provides support with loan
origination and management, such a partnership would allow the fintech to
operate in Saudi Arabia subject to SAMA's approval on the partnership.

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Partnering with SAMA licensed entities

SAMA has prepared guidelines on activities that can be outsourced by banks
to third party organizations such as fintechs. These guidelines are available by
clicking here

SAMA released outsourcing regulation for insurance and reinsurance companies

and insurace service providers. The regulations can be found by clicking here

SAMA also released rules on outsourcing for finance companies. The rules can be
found by clicking here

If a fintech is providing services that are covered under these guidelines, the
SAMA regulated entities are permitted to outsource these requirements to the
fintech, subject to approval from SAMA’s authorization department. However
as mentioned above, the Partner is likely to conduct extensive due diligence on
the fintech before outsourcing the services, as the Partner will be accountable if
there are any issues which require regulatory review.

Partnering with CMA licensed entities

According to the Article 59 of CMA’s Capital Market Institutions Regulations, a
capital market institution (i.e. Authorized Person) may delegate other functions
to an external party, provided that appropriate safeguards are put in place.
These safeguards can be found by clicking here

It is important to note that if the fintech company intends to

partner with a regulated entity to conduct a regulated activity
but the regulated activity is not explicitly mentioned in the
regulations, the fintech company and the regulated entity would
need to apply to the regulatory testing environment (Option 3).

Fintech Ecosystem Directory

The Fintech Ecosystem Directory includes a number of financial services
organizations that are interested in hearing from fintech companies. You can
access the Fintech Ecosystem Directory for free by clicking here

Who does this option apply to?

This option is available to fintech companies that:
• Can segment their business model across activities that need to be
regulated and activities that do not need to be regulated
• Conduct activities that need to be regulated and are explicitly mentioned
in the existing regulations
• Can partner with a regulated Partner to conduct the regulated activities

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Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

Option 3: Enter a Regulatory Testing Environment

Both SAMA and CMA have developed their own regulatory testing frameworks,
which provide an environment for fintechs to test innovative products.

The regulatory testing environment is designed to support the deployment of

new technology / activities that are not explicitly mentioned in the regulation,
but are of a nature which may be regulated by SAMA or CMA. Examples include
social trading, security tokenization, digital assets etc.

SAMA’s Regulatory Sandbox

The Sandbox can be described as a regulatory process that acts as a ‘safe space’
in which applicants are given conditional consent (no objection) to test new
fintech solutions under a set of conditions and limitations designed to protect
consumers.

SAMA’s Regulatory Sandbox framework can be found here

The Regulatory Sandbox has a structured selection process:

• Applications for the Regulatory Sandbox are open all year round. Applicants
conducting any of the following activities can apply to SAMA's Regulatory
Sandbox:
1. Innovators whose proposed solution involves a digital business model or
concept that is not currently covered whether explicitly or implicitly under
any existing SAMA regulations.
2. Innovators whose proposed solution involves technologies, which are
currently, not covered under existing SAMA regulations.
• Upon completing the application form, SAMA will assess the application form
against the eligibility criteria set and revert back within 60 days.
• If accepted, SAMA will issue a temporary permission and the applicant will
have 120 days to get operationally ready for live testing.
• Once the applicant is operationally ready, it will be able to test its solution
in a live testing environment for upto 12 months during which SAMA will
evaluate the solution and if approved, SAMA will issue new regulations and /
or amend existing regulations.
• Upon meeting the testing objective, the applicant will graduate and exit the
regulatory sandbox and either apply for a full license and / or amend their
existing license or execute the exit plan without pursing a license.

To see the activities currently being tested in the Regulatory Sandbox please
click here

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Applicants for SAMA’s Regulatory Sandbox must meet the following eligibility
criteria:
• Demonstrate the products and services provide genuine innovation for Saudi
Arabia (differs from existing offerings, uses new technology, etc.)
• Ensure the products and services benefit consumers (and also ensure the risks
to consumers have been considered)
• Ensure alignment to Saudi Vision 2030 and the Financial Sector Development
Program
• Ensure the products and services are ready to be tested in the sandbox
• Have an exit plan in place out of the Regulatory Sandbox

In addition to meeting the eligibility criteria, it is important for applicants to

consider:
• If regulations for an activity have been issued, the Sandbox will not accept
any applications related to the activity
• Applicants need to demonstrate clear risk management procedures including
details on their compliance with local cybersecurity regulations, risk
management processes related to data, consumer protection, AML / KYC etc.
• Applications should be focused on a specific activity, develop a well
thoughtout and structured business plan and if invited for an interview, the
applicants should have an organized presentation

The Regulatory Sandbox is open to:

• SAMA licensed entities such as banks, remittance companies, insurance
companies, etc. that want to test an innovation solution that is not explicitly
mentioned in the existing regulation or in an area not covered by their
existing permissions
• Fintech companies based in Saudi Arabia or international fintech companies
with proven technology that can setup a local presence in Saudi Arabia by the
time that they begin testing.

Companies that meet the above criteria can apply to the Regulatory Sandbox by
completing the Regulatory Sandbox Application Form by clicking here

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Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

CMA’s Fintech Lab

The CMA had issued the Financial Technology Experimental Permit Instructions
(‘the Instructions’) on 10/01/2018, which aim to provide a regulatory framework
that is conducive for the innovation of Fintech in the Saudi capital market within
the Kingdom.

Based on the Instructions, CMA will grant a Fintech Lab Permit (‘Fintech
Experimental Permit’) to applicants who pass the criteria and requirements. Once
obtaining a permit, the fintech solution is able to deploy and experiment their
innovative fintech products related to capital market within a 2-year period and
specified parameters. Upon the Expiration of the Fintech Expermit, the applicant
can either
1. Execute the exit strategy
2. Proceed to deploy the Fintech product on a wider scale, if the fintech company
proves its ability to do so and can fully comply with CMA Laws and Regulations
(including any updates made to accommodate the fintech activity)

The requirements for CMA’s Fintech Lab can be found by clicking here

The Fintech Lab receives innovative fintech business models related to securities
activity, for example:
• Robo-Advisory
• Social trading
• Arranging securities using distributed ledger technologies
• Security token-based fintech business models

Generally, the product must meet with the following main eligibility criteria:
• The proposed Fintech product will develop Fintech products or services
involved in security activities (i.e. within the scope of CMA)
• The proposed Fintech product will promote Fintech innovation and promote
significant growth in the capital market
• The proposed Fintech product is at a sufficiently advanced stage of
development to mount a live experiment with real customers during the
Fintech Expermit.

The CMA Fintech Lab receives applicants from inside and outside the Kingdom
to submit applications for obtaining a Fintech Experimental Permit for fintech
products and services related to securities activities.

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Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

Applications for the FinTech Lab are open all year round but evaluation is carried
out on a cohort basis.

Any entity seeking to apply to the CMA’s Fintech Lab can do so by downloading
the application form by clicking here

Once the application form is completed, the applicant can submit the form to the
email: FinTech.ExPermit@cma.org.sa

There maybe certain applicants that have activities which are

applicable to both the SAMA Regulatory Sandbox and the CMA
Fintech Lab. SAMA and CMA work closely together and will be
able to provide guidance on which regulatory testing environment
should be considered by such an applicant.

Who does this option apply to?

This option is available to fintech companies that:
• Are conducting activities that are not explicitly mentioned in the existing
regulation but the nature of the activities means they should still be
regulated
• Meet the criteria set by SAMA’s Regulatory Sandbox or CMA’s Fintech Lab

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Fintech Regulatory Assessment Tool

Fintech Saudi has released a beta version of the Fintech Regulatory Assessment
Tool. The Assessment Tool is designed to provide entrepreneurs with a clearer
understanding about the regulatory pathway for their activities.

The tool will provide a high level indication on:

1. Whether the fintech activity proposed is regulated
2. If it is regulated, who is it regulated by
3. What are the current options available for bringing the activity to market
4. What are the regulations related to different technologies that
maybe employed

The Fintech Regulatory Assessment Tool is free to use and does not require
any personal information to be added. Click here to access the the tool.

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How to Get in Touch

with the Regulators?

SAMA and CMA have specific channels of communication for anyone that want
to check whether their business model needs to be regulated. These are below:

Fintech Saudi
In the first instance, you should contact Fintech
Saudi who will consult on your behalf with the
appropriate regulators.

info@fintechsaudi.com

SAMA
For any queries related to the Regulatory Sandbox, you
can contact SAMA on the following email:

Sandbox@sama.gov.sa

CMA
For any queries related specifically to the Fintech Lab,
you can contact CMA on the following email:

FinTech.ExPermit@cma.org.sa

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Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

Other Regulations that

Fintechs need to consider

Anti-Money Laundering (AML) and

Countering Financing of Terrorism (CFT)

The Kingdom’s Council of Ministers has issued laws related to AML and CFT and
authorized the formation of an Anti-Money Laundering Permanent Committee
to enforce the law. Fintech companies should comply with the issued AML and
CFT laws.

Aligned to the law, both SAMA and CMA have issued rules related to their
particular areas of activities including Know Your Client (KYC) standards.
The current AML and CFT laws together with the rules issued by SAMA and CMA
can be accessed here

Cybersecurity

Fintech companies should consider the cybersecurity principles related to

confidentiality, integrity and availability.

The National Cybersecurity Authority (NCA) is responsible for all matters related
to cybersecurity in Saudi Arabia. NCA has released essential cybersecurity controls
that all private companies providing critical national infrastructure need to
comply with. This includes private companies that are involved in activities that
provide basic services, national security, national defense or areas of critical
importance to the Saudi economy.

Aligned with the NCA guidelines, SAMA and CMA have issued cybersecurity
guidelines for companies that are regulated by SAMA or CMA. CMA
cybersecurity guidelines for Fintech Lab applicants are shared as part of the
Fintech Experimental Permit requirements. To access the Cybersecuirty guidelines
for Capital Market Institutions click here. A link to the SAMA Cyber Security
Framework can be found here.

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Data Storage on Cloud Computing

Communications, Space & Technology Commission (CST) is the Saudi
Communications Authority. They have released the Cloud Computing Regulatory
Framework which applies to any cloud service provided to cloud customers
having a residence or customer address in Saudi Arabia. The Regulatory
Framework categorizes data into four information security categories and
provides guidance as to how each category should be treated. A link to the
Cloud Computing Regulatory Framework can be found here

Aligned with the Cloud Computing Regulatory Framework, SAMA and CMA
have issued guidelines on the use of Cloud Computing. SAMA's guidelines can be
found in the Cyber Security Framework. The framework states that companies
regulated by SAMA should in principle only use cloud services that are located in
Saudi Arabia and when the company wants to use cloud services outside of Saudi
Arabia, they should obtain explicit approval from SAMA. A link to the SAMA
Cyber Security Framework can be found here

CMA's guidelines can be found in the Cybersecuirty guidelines for Capital Market
Institutions. Click here to view it.

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Processing Payments Through mada

mada is the Saudi payment network that connects all ATMs, POS terminals and
e-commerce payment gateways through a central payment switch. The mada
network accounts for the majority of payments in the Kingdom including all debit
card payments. Fintech companies that are seeking to develop a fintech activity
that involves processing payments through the mada network can either apply
to Saudi Payments to be certified to use the mada network or partner with a
payment processor that is certified by Saudi Payments. Fintechs can apply to Saudi
Payments by sending an email to Onboarding@SaudiPayments.com

Fit and Proper Rules

SAMA and CMA both require regulated fintech companies to appoint senior
positions that meet fit and proper rules highlighted by them. For certain senior
positions, SAMA’s written non-objection is required to change individuals
appointed to those positions. A full list of senior positions in payment and
fintech companies that require SAMA’s written approval can be found in
Appendix 6 of the Fit and Proper Rules. For all other positions, the fintech
is expected to have clear standards and procedures in place to ensure the
candidates appointed meet the fit and proper requirements. A link to SAMA’s Fit
and Proper Rules can be found by clicking here. *Please note that SAMA has released
an updated Arabic version of the requirements for appointments to senior positions. Please
check SAMA's website for the updated English version as it hasn't been released at the date of
publication of this guide.

You can also view the requirements for positions of the companies that have
been licensed by the Capital Market Authority in the Capital Market Institutions
Regulations linked here.

As for the requirements for positions of the Fintech ExPermit Companies, it will
be shared by CMA in the additional regulatory requirements after eligibility
verification.

Commercial Registration
To conduct any business, your entity must be issued a commercial register from
Ministry of Commerce (MCI) through the online portal linked here Or the Saudi
Business Center linked here.

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Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

Frequently Asked Questions

1. What is the Minimum Capital Balance Required and How can

it be used?
For fintechs in SAMA’s Regulatory Sandbox and CMA’s FinTech Lab, the minimum
capital balance is determined according to the business model of the fintech
company and will be discussed in the advanced stages of the application.

However, for every activity specific fintech license (e.g. PSP, crowdlending,
insurance aggregation etc.), the fintech applying for the license will be required
to provide a certain percentage of the bank guarantee amount when applying
for a fintech company license (20% of the guarantee value), provided that the
full amount of the bank guarantee is met before the final license. Each activity
has a different minimum capital balance requirement based on the level of risk
related to conducting the activity. Therefore it is important to check the activity
specific fintech regulations to understand what are the minimum capital balance
requirements.
For most activity specific fintech regulations, the minimum capital balance is
made up of paid up capital and retained earnings and in most cases a small
percentage of the minimum capital balance needs to be kept liquid but the
remainder can be used for business purposes. It is important to check the specific
details in the regulations for the fintech activity license to understand what is
required.

2. Who can apply to the Regulatory Sandbox / FinTech Lab?

Both SAMA’s Regulatory Sandbox and CMA’s FinTech Lab are open to fintech
companies that are conducting fintech activities that should be regulated by
SAMA or CMA but the regulations have not yet been released by SAMA or CMA.
Once regulations for a specific fintech activity are released by the regulator, the
activity will no longer be eligible for the regulatory testing environment and
fintech companies conducting the activity will need to apply directly for the
fintech activity license.
3. How can I apply to the Regulatory Sandbox / Fintech lab?
• SAMA's Regulatory Sandbox is open all year round. Upon submitting an
application, SAMA will review the application and revert back within 60 days.
• CMA's FinTech Lab is open all year round for applications. However evaluation
and entry into the FinTech Lab is carried out on a cohort basis.

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Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

4. What positions require Saudi Appointments?

For fintechs that are regulated by SAMA or CMA there is a requirement for
certain positions to have Saudi appointments. The full list of positions that
require Saudi appointments can be found below:
For SAMA Click here *Please note that SAMA has released an updated Arabic version of the
requirements for appointments to senior positions. Please check SAMA's website for the updated
English version as it hasn't been released at the date of publication of this guide.

As for CMA's requirements for certain positions to have Saudi appointments, it

will be shared with the companies during their license application. You can also
view the list of the job roles and functions that should be registered with the
CMA in Article 19 and the performance of the registrable functions in Article 20
of the Capital Market Institutions Regulations here

For fintechs that are in the Fintech Lab / Regulatory Sandbox, or are not
regulated by SAMA or CMA, there are no specific requirements to have Saudi
appointments.

5. How can I know if the activity is Regulated or Not?

• Use the Fintech Regulatory Assessment Tool to search for your activity/
activities to get an indication
• If your activity is not there, you can write to info@fintechsaudi.com to check

6. Can a Non-Saudi Fintech Company Apply to be Licensed?

• Any Non-Saudi fintech company can apply to SAMA's Regulatory Sandbox

or CMA's FinTech Lab without having a local entity in place. However if the
application is successful, the fintech will need to setup a Saudi entity to
operate in the testing environment.
• Fintechs that are applying for an activity specific license from SAMA or an
activity under the Capital Markets Law will need to have a local entity setup
as part of their application process.

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 Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

Summary of Key Resources

Saudi Central Bank (SAMA)

SAMA Regulated Activities Full list of SAMA Regulated Activities Click Here

Details of the Payment Services Providers

Payment Services Providers Click Here
Regulations

Rules Governing Insurance Aggregation

Insurance Aggregation Activities Click Here
Activities

Licensing Guidelines and Criteria for The Additional Licensing Guidelines and
Click Here
Digital-Only Banks Criteria for Digital-Only Banks in Saudi Arabia

The Banking Licensing Guidelines

Click Here
and Minimum Criteria

Microfinancing Activity Rules of Engaging in Microfinance Activity Click Here

Rules Regulating Consumer Microfinance

Consumer Microfinance Companies Click Here
Companies

Debt-Based Crowdfunding / Crowd Updated Rules Regulating Debt-Based

Click Here
Lending Activities Crowdfunding / Crowd Lending Activities

Rules of Licensing Finance Support Rules Related to Companies Conducting

Click Here
Activities Finance Support Activities

Partnering with SAMA Licensed

Click Here
Entities

SAMA’s Regulatory Sandbox Regulatory Sandbox Framework Click Here

Cyber Security Framework for SAMA’s

SAMA Cyber Security Framework Click Here
Companies
Regulatory Sandbox Application
Click Here
Form

Requirements for Appointments to

Click Here
Senior Positions

Buy Now Pay Later (BNPL) Activity Guidelines for Applying for permission to
Click Here
Engage in BNPL
Outsourcing Regulation for Insurance
and Reinsurance Companies and Click Here
Insurance Service Providers
Rules on Outsourcing for Finance
Click Here
Companies

Open Banking Open Banking Framework and Lab Click Here

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 Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

Summary of Key Resources

Capital Market Authority (CMA)

CMA Regulated Activities - Securities Full list of CMA Regulated Activities - Article
Click Here
Business Regulations 2: Securities Activity

CMA’s Fintech Lab Requirements for CMA’s Fintech Lab Click Here

CMA’s Fintech Lab Application Form Click Here

Partnering with CMA Licensed Article 59: Outsourcing

Entities - Capital Market Institutions Click Here
Regulations

Cybersecurity Guidelines for Capital

Click Here
Market Institutions

Regulatory Framework for Equity

Click Here
Crowdfunding

Fintech Saudi

Provides a Clearer Understanding of The

Fintech Regulatory Assessment Tool Click Here
Regulatory Pathway for your Activities

Includes Service Providers That Fintech

Fintech Ecosystem Directory Click Here
Companies Can Work With

Other

CST Cloud Computing Regulatory

Cloud Computing Regulatory Framework Click Here
Framework

AML and CFT laws together with the

Click Here
rules issued by SAMA and CMA

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Part 1: Regulation Clarity for Conducting Fintech Activities in Saudi Arabia

PART 2
Framework
for Local
Entrepreneurs
to Launch a
Fintech Idea

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Part 2: Framework for Local Entrepreneurs to Launch a Fintech Idea

Framework for Local Entrepreneurs

to Launch a Fintech Idea

One of Fintech Saudi’s key objectives is to support fintech entrepreneurship in

the Kingdom. We therefore wanted to offer local entrepreneurs a framework on
how to develop a fintech business. The framework is broken down into 5 steps
and designed to help entrepreneurs to generate a fintech idea, validate and test
the idea, start build a fintech business and then scaling the fintech business.

Whilst the framework may not answer every question that an entrepreneur has,
we hope it provides a good starting point for entrepreneurs to evaluate and
build their fintech business ideas.

1 2
Generate Fintech Idea Evaluate Idea
• Life Experiences • Business Model Canvas
• Idea Factory • Understand Regulation

3
Test Idea
• Mom's Test Model
• Reflect on whether to
continue or try another idea

4
Build Fintech Business
• Setup Company, build team
• Seed Investment (if required)
• Implement regulation options
• Build Prototype

5
Scale Fintech Business
• Remain focused on customers
• Stay Innovative
• Recruit the right talent
• Use Data

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Part 2: Framework for Local Entrepreneurs to Launch a Fintech Idea

1. Generate a Fintech Idea

Many people may already have a fintech idea that they want to evaluate.
However, if you do not have an idea, below are a few things that you could do
to come up with a fintech idea

Some of the Best Ideas Come from Life Experience

Think about financial situations you have come across that could be improved
through technology. This could be related to buying a house, shopping,
budgeting, investing, getting a business loan etc.

Think about the pain points of the process and how technology could be used
to improve that process.

Still Struggling to Come Up with an Idea? Try These Resources:

Idea Factory
The Idea Factory is a great resource for coming up with multiple ideas not just
related to fintech. The exercise will take about 20 minutes and looks at your
interests, experience and network to come up with new ideas to validate. A link to
get the Idea Factory tool for free can be found here

IDEO Method Cards

IDEO have developed 51 design thinking methods to help inspire creativity and
collaboration between a team. Each card describes one method and includes
a brief story about how and when to use it. The cards are divided into four
categories: Learn, Look, Ask, and Try, making it easy to reference, browse, sort,
and share the cards. A link to purchase the IDEO Method Cards can be found here

What are you Passionate About?

If you proceed with an idea, you will be dedicating the majority of your time to
developing the idea. It is therefore important to focus on something that you
are passionate about and believe in. The life of an entrepreneur is not always
easy. Your passion will therefore keep you motivated during times when things
are difficult.

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2. Validate Your Fintech Idea

Once you have an idea to work on, the first step is to validate the idea and come
up with a viable business model.

Research the Fintech Area

The first stage of validating a fintech idea is to carry out research in the area that
you would like to focus on. An entrepreneur will spend time learning about the
fintech trends, analyzing competitors’ business models and the key drivers that
may need to be considered such as regulation, technology and customer / partner
readiness. Developing a good understanding of the fintech area is important to
be able to effectively validate the fintech idea.
Fintech Saudi has developed the Fintech Cheat Sheets which provide an overview
of the fintech trends in 9 key areas of financial services. This is a good place to
start in understanding the fintech area. The Fintech Cheat Sheets can be accessed
through here
Fintech Saudi has also conducted a number of webinars on different areas of
fintech. They can be accessed here
Once you have carried out some research, the next stage is to come up with a
business model that is right for you. There are a number of techniques that can
be used. We would suggest using the Business Model Canvas.

Business Model Canvas

The Business Model Canvas allows you to look at all aspects of your business
including customers, suppliers, revenue streams, costs, marketing etc. and to play
around with each part until you come up with a business model that works for
you. More information on the Business Model Canvas can be found here.
The Business Model Canvas is a good way for sensor checking your fintech idea
and ensuring all parts of the business have been thought through.
It is important to remember that this is only the start of developing your business
model. As you go through the following steps and beyond, the business model is
likely to change as you position your business to take advantage of opportunities
that you see.

Regulation Check Point

For fintech, it is also important to consider the regulations. You should check
whether your idea involves regulated activities and if so, the options that
are available. Part 1 of this guide provides clarity on the current regulations
for fintech businesses. The different options available should be considered
when validating your business fintech idea.

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Part 2: Framework for Local Entrepreneurs to Launch a Fintech Idea

3. How to Test your Fintech Idea

So far we have come up with an idea, validated it and created a viable

business model. Now it is time to test the fintech idea with potential
customers. You should try to approach customers from the customer segments
identified when validating your fintech idea. Try to use your network
to get in touch with potential customers. If your customer segments are
organizations such as banks, you can use the Fintech Saudi directory by
clicking here to access the right people in the organizations.

Mom’s Test
Once you have managed to get hold of potential customers, it is important
to structure the discussion with the customer to ensure that you get most
information out of it. One well proven method is the “Mom Test” developed
by Rob Fitzpatrick. The Mom Test is based on the idea that when you tell your
mom (or any other friends or family) your idea, they are likely to always say it
is a great idea because they do not want to hurt your feelings.

Therefore the Mom’s Test is based on not telling the potential customer
about your idea but instead asking them pointed questions about their
activities related to the fintech idea that you have come up with to determine
whether the idea actually meets a need or pain point that they have. It is
also important to understand how big the need or pain point is and whether
someone would be willing to pay to solve the need / pain point.

By asking about their activities related to the fintech idea, it may also trigger
other things that you have not thought about or allow you to think about
how to improve your fintech idea.

Rob Fitzpatrick – The Mom Test Website

Regulation Check Point

Even if the fintech idea involves regulated activities, it is still possible to speak
to the customer base to test the level of interest in the fintech idea and check
whether there is interest (as long as you do not conduct the regulated activities).
The information collected from potential customers will be useful should you
choose to proceed with the regulated activities and need to find a regulated
partner or prepare an application for the Regulatory Testing Environment.

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Part 2: Framework for Local Entrepreneurs to Launch a Fintech Idea

Once you have validated and tested your fintech idea it is important to reflect
on your results. Reflecting will allow you to stop, take a breather and decide on
what is the best way to proceed. You may conclude that the fintech idea does
not work and you need to go back to generating a new idea. This is still a great
outcome as you can use what you have learnt to validate your next fintech idea
and you would have managed to reach this conclusion without having made a
large investment. Many entrepreneurs go through tens if not hundreds of ideas
before they decide on the one that they want to move forward with.

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Part 2: Framework for Local Entrepreneurs to Launch a Fintech Idea

4. Start Building your Fintech Business

After you have successfully completed all the steps above and if you are happy to
proceed, it is time to start building your fintech idea. Each startup story is unique
and will depend on your own circumstances. However, below are some of the
milestones to consider. They can be completed simultaneously or in any order.
However throughout the process it is important to stay focused on your fintech
product.

Putting a Team Together

It is important to have co-founders that can have the right skills required to
develop the business and are fully committed. Entrepreneurs can develop
fintech ideas on their own but research has shown startups with more than
one co-founder are more successful. It can take time to find the right partners
but here are a few tips to consider:
1. Try using your existing network – you may have already met the right partner
and have them in your network
2. Find partners that fill the gaps in your skill set – Understand your core skills
and what skills the fintech idea require and then try to find partners that can
fill the skill gaps. For example if you are a strategic thinker from a finance
background and the idea has a heavy tech part, it is worth bringing on a
technical partner
3. Find partners in the community – By attending fintech events, you can
network with others in the community that have an interest in fintech and
may find a partner that shares your passion for your fintech idea. Register for
the Fintech Saudi newsletter through our website to keep up to date on all
our fintech events.

Setting up a Company
Fairly early in the process it will be important to set up a company for the
fintech business. This will include applying for a commercial registration related
to the activities you are involved in. If you are conducting a regulated activity,
this will need to be done before applying to the regulatory authority. Please
refer to Ministry of Commerce website to understand how to apply for a
commercial registration.

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The New Companies Law

The New Companies Law was approved by the Council of Ministers. It aims to
address all challenges facing the business sector. The new Companies law will
regulate all provisions related to companies, whether commercial, non-profit or
professional.

It enables the following types of company formation in Saudi Arabia:

• Joint Liability Company
• Limited Partnership Company
• Joint Stock Company
• Simple Joint Stock Company
• Limited Liability Company

Click here to view more details. (Arabic)

As you go through the process of setting up a company you may also need to
look at a lot of different things such as finding an accountant, looking for a
space to work from, developing a website etc. It is important to choose service
providers that are cost effective and have experience working with startups.

When looking for an office, co-working spaces are a good starting point as
you are able to pay per desk used with limited lock in periods. This therefore
provides you with the flexibility to increase the number of desks you rent as
your team grows.

Building a Prototype
A Prototype is a sample of the look and feel of the solution that you would
like to develop. Depending on the type of prototype, it may have some
very basic functionality (such as clickable buttons) but it is not usually a fully
working model.
Prototyping is a key part of the design process as it helps you map out the
solution and the user experience. It is also a low cost way of getting feedback
from friends and family on the design of your solution. We would recommend
using a wireframes software to develop your prototype. There are a number
of free options available online to start prototyping.

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Part 2: Framework for Local Entrepreneurs to Launch a Fintech Idea

Developing a Pitch Document

A pitch document is a focused way of communicating your fintech business
model effectively and efficiently. This can be used when speaking to prospective
customers, potential investors or to new recruits. Pitch documents can vary but
they tend to have some basic underlying themes:
1. Start with the need – start with explaining the need / pain point that you are
trying to solve and if possible communicate the size of the need
2. Introduce the solution – how does your fintech solution solve the need
identified? Your answer should be concise and easy to understand.
3. What is different / unique about your solution when compared to
other solutions?
4. What are your milestones? This could include key fundraises, any key
customers, programs you have been a part of etc.
5. Information on the team and their prior experience
6. You can also include the prototype you have developed as part of a pitch
document / presentation to provide additional insight to your audience
7. If you are using the pitch document to raise investment, you may also want
to include some financial information such as how much investment you are
looking to raise and what the funds will be used for

Seed Investment
At this stage if you do not have the capital to fund the development of the
Minimum Viable Product (MVP), you may need to raise some seed investment.
The investment is considered high risk as the business has not yet been proven.
However there are a few different sources of funding that entrepreneurs may
look to use:
• Family and Friends or investors in your network
• Angel Investors – These are high net worth individuals that support early
stage / startup ideas. They may also offer mentorship to the startup
• Crowdfunding – Crowdfunding is a method used to raise investment from a
large number of people. Crowdfunding platforms can help with aggregating
and structuring the investment
• Grants / Government Funding – There are a number of different grants
/ sources of government funding available. Monshaat has a number of
dedicated programs for funding SME's and Startups. Please visit Monshaat
website for more information on the following programs:
• Indirect lending
• Grants and CSR

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• Government Venture Capital - Saudi Venture Capital is established as

a Government VC as part of the Private Sector Stimulus Office (PSS), to
stimulate venture investments in funds along with angel investors and
institutional investors. Click here to find out more
• Social Lending – The Social Development Bank is focused on providing social
loans including loans for startups. Click here to find out more
• Competitions – There are a number of startup competitions that are run by
different organizations. These programs encourage startups to apply with the
winners receiving funding

Whichever method you choose, following the steps above will demonstrate
to investors that your idea has been thoroughly researched and tested, which
therefore de-risks their investment.

Incubators / Accelerators
You may want to consider joining an incubator or accelerator program.
Incubators and accelerators specialize in providing funding to early stage
businesses. However they also provide mentorship, office space, structured
training etc. to help the business grow faster.
Incubators tend to help startups over a longer period. Accelerators are structured
3 – 6 month programs that help startups to accelerate their business.
A list of incubators can be found here

Building a Minimum Viable Product (MVP)

What you build as your Minimum Viable Product (MVP) will depend on your idea.
However, we would recommend starting small, focused and remaining flexible.
If you are able to, we would suggest considering the Lean Startup methodology.
This is a philosophy developed by Eric Reis who argued that in order to build
a great company, one must research from customers, build a minimum viable
product, test with the customers and iterate quickly to reduce waste and develop
a better product market fit. For example, if you are looking to develop an app,
it does not need to be the best app in the world. Start with a minimal viable
product, enough to add value to customers, get it out to customers, listen to
feedback and then re-iterate the app to make it better.

Through this process you will be able to adapt / modify the product quickly
and once you have developed a product that is well received by customers and
continues to gain traction, the business will be ready to scale!

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Identifying Early Adopters

Even if your solution is applicable to a lot of different customer segments in
the market, it is important to start with identifying one customer segment that
could be your early adopters. Early adopters help with testing your product
and providing you with feedback in order to help you develop an even better
solution.

The customer segment should be as specific as possible as this will help you to
market to them effectively. For example if you core customers are students,
consider who you are likely to be. If your early adopters are likely to be final year
medical students, it is much easier developing a targeted marketing campaign to
final year medical students than a campaign for all students.

Regulation Check Point

It is important to read Part 1 of this Guide to determine whether your fintech
business involves regulated activities and if so, what your options are. If you
are seeking to partner with a regulated entity or enter a regulatory testing
environment, this is the stage when you should contact potential partners or
make an application to the Regulatory Sandbox / Fintech Lab

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Part 2: Framework for Local Entrepreneurs to Launch a Fintech Idea

5. Scaling Your Fintech Business

If you have reached this far, congratulations! 90% of startups do not make it to
this stage. You have a fintech business that has some traction with customers
and now it is time to scale. Different businesses can scale in different ways
depending on their product – market fit. For some scaling may mean targeting
a wider customer base or moving into a new geographic area. Whichever
approach you take, we have highlighted below some key considerations that
you should consider as you scale.

Set a Clear Vision of What You Want to Achieve

Scaling can take you in different directions. It is important to set a clear vision
of where you want to go and set smart targets that you want to achieve.
Discuss the vision with your co-founders to ensure that you are aligned and
the vision should be communicated internally throughout the company and
externally to key stakeholders.

Identify the Right Advisors / Mentors

The right advisors and mentors can make a huge difference to your fintech
business. They can give your business credibility, keep you focused on your
goals and make the right introductions to help you to grow your business.
Identify individuals that can enrich your business and have experience that can
help you to grow.

Some advisors may provide you with guidance without requiring any financial
incentives. Others may want a more formal structure in which they receive
some of the upside from your success. This could either be the ability to invest
in the business or receive a small equity share (such as 0.5% - 1%) as a fee for
being an advisor. Where there is a more formal arrangement, it is important to
have the right governance structure in place.

Remain Focused on Your Customers

Your customers have got you this far and your success whilst scaling will be
dependent on staying focused on them. Scaling will mean looking at new
customer communities. It is important to understand their specific needs and
adapt the solution / key messages to meet their needs. It is also important to
remain connected with your early adopters that will continue to provide you
with valuable input to keep improving your solution.

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Continue to Stay Innovative

As you grow, one of the key challenges you will face is to remain as agile and
innovative as when you were a start-up. Continue to keep challenging the
status quo and keep challenging the team to improve your fintech solution.
Your internal culture should continue to encourage new innovation and new
ideas. Not all innovation will be successful, which is fine. It is more important
to keep learning and keep the momentum moving forward.

Recruit the Right Talent

Another major challenge you will face will be to recruit and retain the right
talent. Your talent strategy should consider what skills you need now and what
skills you will require in the future. Keep re-assessing the gaps in your business
to determine the right people to recruit.

Growth fintech companies also need to get the right balance between giving
team members the autonomy to support the company to scale quickly and
maintaining internal communications to ensure team members are embedded
into the culture of the company and buy into the vision set.

Find the right team players, nurture them and empower them to scale your
fintech business.

Fintech Saudi has a career portal that you can use to list employment
opportunities for free. These will be shared with the community to assist you in
recruiting the right talent. Click here to post a job on the portal.

Use Data
The use of data is at the heart of every successful fintech business. Data driven
businesses use data to ensure they are making the best possible decisions
whether this is related to operational efficiency, identifying new customer
markets or determining the best way to reach customers. Making the full
use of data requires both the systems to capture data effectively and data
analytic tools and talent to be able to analyse the data in order to inform
decision making.

Collecting and using data whilst scaling will be fundamental to

determining your success.

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Growth Investment
To scale, fintech companies often raise growth investment. This investment is
usually at Series A or above and will be used predominately to help execute the
growth strategy developed. Such funding usually comes with high expectations.
Fintechs raising growth investment should be clear with investors on what the
funds will be used for and how they will meet the targets expected. Growth
investment is typically provided by venture capital partners.

Fintech Ecosystem Directory

Fintech Saudi has launched a Fintech Ecosystem Directory which includes
financial services organizations, investors and other service providers that
fintech companies can work with. Click Here access the Fintech Ecosystem
Directory

49 © 2023 Fintech Saudi - All Rights Reserved

Part 3: Options for International Fintechs Interested in Entering the Saudi Market

PART 3
Options for
International
Fintechs
Interested in
Entering the
Saudi Market

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Part 3: Options for International Fintechs Interested in Entering the Saudi Market

Why Saudi Arabia?

The Financial Sector Development Program was launched as part of Saudi Arabia's
Vision 2030, in order to enable financial institutions to support the growth of the
private sector, develop an advanced capital market and to boost and enable financial
planning. FSDP aims to support the development of Saudi Arabia's economy,
diversify its sources of income, and stimulate savings, finances and investments
The Financial Sector Development Program launched the Fintech Strategy
Implementation Plan, aimed to situate the Kingdom among the leading countries in
the field of Fintech, with Riyadh becoming a global FinTech hub. The strategy also
aims at enhancing the economic empowerment for individuals and communities.
The strategy will contribute to realizing the strategic objectives of Saudi Vision 2030
through: enhancing ease of doing business, increasing private sector's contribution
to economy, attracting foreign direct investment, developing the digital economy,
nurturing and supporting innovation & entrepreneurship culture, increasing SME
contribution to the economy, and developing the e-government, in addition to
realizing the 22 indirect objectives. Key reasons to invest in Saudi Arabia's fintech
sector include:

Leading Regulation reform to promote Young, tech savvy and

financial sector ease of doing business skilled workforce

Improving New market with room for Strategic location linking

quality of life growth and limited competition three different continents

100% foreign ownership Existence of Fintech Saudi, to Government initiatives

with no minimum capital provide support and guidance such as the Financial Sector
required in certain sectors in the fintech sector Development Program to
support the fintech industry

For detailed information on Saudi Arabia’s foreign investment reform efforts,

support systems and success stories, please refer to Invest Saudi website.

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Part 3: Options for International Fintechs Interested in Entering the Saudi Market

Overview of Four Scenarios

Four different ways to enter the Saudi market have been identified.

Scenario 1 Scenario 2
Establish a subsidiary of an Start a new fintech
existing fintech company company through MISA's
Company A (you) has been entrepreneurship license
operational in a foreign country Entrepreneur A (you) has either been
(other than KSA) for at least one operational in a foreign country (other
year and would like to establish a than KSA) for less than one year OR
subsidiary in KSA. This subsidiary would like to create a completely new,
would carry the same name and independent company in KSA to offer
branding as the mother company fintech products/services. The new
and would offer its products/services company would have a new name and
in the KSA market with established branding, and would not be associated
offices and a team, as if it were a with any other company internationally.
branch of the mother company. The company would be a standalone
entity operating in KSA and would offer
its products/services in the KSA market
with established offices and a team.

Scenario 3 Scenario 4
Licensing technology to a Appoint a sales agent
KSA-based startup International Company A (you) is not
International Company A (you) is interested in entering the KSA market
not interested in entering the KSA with full -fledged operations. Rather,
market with full-fledged operations. Company A would like to introduce its
Rather, Company A has a technology products/services into the KSA market
and is willing to license use rights without establishing offices and a team
to a startup based in KSA (Company locally. In this case, Company A would sign
B). It is likely that Company B would a distribution agreement with Company B
be looking for such an arrangement (KSA-based company), who would act as
in cases where it lacks the required a sales agent for Company A’s products/
technology expertise to develop a services, and would be responsible for
technology in-house. Company A marketing and selling the products/
would provide Company B with the services. No dedicated offices will be
technology (white label), without a established in KSA. Company B would
product or service, and Company B be responsible for obtaining all required
would then build a product or service licenses and registrations.
using the licensed technology.

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Part 3: Options for International Fintechs Interested in Entering the Saudi Market

scenario 1
Establishing a Subsidiary of
an Existing Fintech Company

Overview
This option is for operational international fintech companies looking to establish, grow and
scale a fully operational subsidiary in KSA. Depending on whether you are offering activities
which SAMA/CMA regulate, and whether you will be partnering with an already regulated
entity, there are three options available under this scenario:
1. Alter your business model to conduct only activities which
do not require SAMA/CMA regulation
2. Partner with a regulated entity
3. Enter testing environment through Sandbox/Fintech Lab

Who does it apply to?

• Companies that are already operational and have at least 1 year of financials.
• Companies looking to operate a full subsidiary in KSA, without the need for
an agent or partner.

What is the process?

The process will differ based on whether you are offering activities which SAMA/CMA
regulate, and whether you will be partnering with an already regulated entity or seeking
regulation yourself. The main requirements are:
1. Obtaining a MISA license
2. Getting a commercial registration
3. Obtaining a testing permit from SAMA, CMA, or both, if needed.
You also need to set up a bank account, register with the municipality,
social insurance, and Zakat, Tax and Customs Authority.

Benefits
• No local partner is required (100% foreign ownership is permitted)
• No minimum investment is required across all business structures
• Your subsidiary will have complete brand presence in KSA
• SMEs that have been operational for 3 years or less are eligible for reimbursement of
visa fees paid for bringing employees from abroad

Key Considerations
• Will need to submit 1 year of financials and a copy of your commercial registration,
attested by the Saudi embassy in your home country
• Will require a MISA license and KSA commercial registration, and depending on the
activity, may require a testing license from SAMA, CMA or both
• Residency visa is required for all foreign staff based in KSA
• Physical offices in KSA are required

For more information on establishing a subsidiary in Saudi Arabia, please refer to the MISA
Services Manual that can be accessed here

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Part 3: Options for International Fintechs Interested in Entering the Saudi Market

scenario 2
Starting a New Fintech Company
(Entrepreneur License)

Overview
This is a license launched by MISA to support international entrepreneurs looking to establish a
new fintech company in KSA (with no history or existing offices). Depending on whether you are
offering activities which SAMA/CMA regulate, and whether you will be partnering with an already
regulated entity, there are 3 options:
1. Alter your business model to conduct only activities which do not require SAMA/CMA regulation
2. Partner with a regulated entity
3. Enter testing environment through Sandbox/Fintech Lab

Who does it apply to?

• International entrepreneurs looking to establish a new fintech company in KSA with no previous
history or existing offices.
• International entrepreneurs backed by a local Saudi university or approved incubator.
• The program applies only to international entrepreneurs and foreign KSA residents (excluding
Saudi nationals).

What is the process?

The process will differ based on whether you are offering activities which SAMA/CMA regulate,
and whether you will be partnering with an already regulated entity or seeking regulation yourself.
The main requirements are:
1. Obtaining backing from an incubator/university and an entrepreneurship license from MISA
2. Getting a commercial registration
3. Obtaining a testing permit from SAMA, CMA, or both, if needed.
You also need to set up a bank account, register with the municipality, social
insurance, and Zakat, Tax and Customs Authority.

Benefits
• No local partner required (100% foreign ownership)
• No minimum investment is required across all business structures
• No prior financial history is required
• MISA services fees are waived for the first five years of operation
• Startup companies and SMEs that have been operational for 3 years or less are eligible for
reimbursement of visa fees paid for bringing employees from abroad

Key Considerations
• An endorsement letter from a KSA university or approved business incubator/co-working space
is required (focus areas differ and endorsements will be determined on a case by case basis)
• This option will still require a license from MISA, a KSA commercial registration and depending
on the activity, may require a testing license from SAMA, CMA or both
• A physical office must be established in KSA
• Services fees will be applicable beginning the 6th year of operation

For more information on the MISA Entrepreneur License

please refer to the MISA Services Manual that can be accessed here

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Part 3: Options for International Fintechs Interested in Entering the Saudi Market

scenario 3
Licensing Technology
to a KSA-Based Startup

Overview
Licensing proprietary technology to a startup in KSA is a suitable option for
international fintech companies that aren’t focused on establishing a branch in
the Kingdom. This operation will license only the technology and the licensee will
be responsible for building, marketing and selling a product using the technology.
This arrangement will not require the international party to be licensed; a
contract with a local company which has the required permits will suffice.

Who does it apply to?

Companies that aren’t looking to establish a branch in the Kingdom but would
like to license technology to a startup in KSA.

What is the process?

The process of licensing a technology to a licensed entity in KSA will be
considered a standard business decision through an unregulated contract.
Depending on the use of the technology, the licensee may be required to obtain
approvals from SAMA, CMA or both.

Benefits
• Avoid time and cost required to establish a branch in KSA
• Avoid burden of obtaining special approvals for the technology (local licensee
will be responsible for this)
• Avoid time and cost required to access and recruit local staff

Key Considerations
• Will require sourcing a local partner interested in a licensing agreement
• You will have minimal oversight as to how your technology is being used
• The technology may be licensed as a white label technology
• Profit taking will be dictated by the licensing agreement
• A valid commercial registration for the local company is required
• This option may still require a the local company to obtain a permit or license
from SAMA, CMA or both depending on the activity

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Part 3: Options for International Fintechs Interested in Entering the Saudi Market

scenario 4
Appointing a Sales Agent to
Sell a Product or Service

Overview
Appointing a sales agent to sell a fintech product or service is another suitable option for
international fintech companies that are not focused on establishing a branch in the Kingdom.
International companies do not require a license to operate under this arrangement; a
distribution agreement with a local sales representative will suffice (provided the local company
complies with all rules and regulations).

Who does it apply to?

Companies that aren’t looking to establish a branch or license technology in the Kingdom but
will appoint a sales agent to sell a finished product or service directly to a customer in KSA.

What is the process?

The process of partnering with a local sales agent will be considered a standard business decision.
If a partnership with a local sales agent is formed, the sales agent will be responsible for
obtaining any approvals required from SAMA / CMA.
If the international fintech company seeks to establish their own sales office, the scenario of
establishing a subsidiary should be considered.

Benefits
• Avoid time and cost required to establish a branch in KSA
• Avoid burden of obtaining special approvals for the technology (sales agent will be
responsible for this)
• Avoid time and cost required to access and recruit talent
• Brand presence in KSA

Key Considerations
• This option will require sourcing a local sales agent with a strong understanding of
the fintech product or service to then market the offering in a compelling manner to
interested companies
• Profit taking will be limited by the stipulations in the sales agreement
• A valid commercial registration for the local company is required
• This option may still require a the local company to obtain a permit or
license from SAMA, CMA or both depending on the activity

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 Disclaimer
and Final
Remarks

57 © 2023 Fintech Saudi - All Rights Reserved

Disclaimer and Final Remarks

This guide was prepared by the Fintech Saudi team to provide the community
with clarity on the existing options available to local and international fintech
companies. Whilst we have consulted with representatives from various
regulators and government entities, the Fintech Access Guide was not written by
the regulators or government entities and should not be considered as a change
from the official regulations issued by any of the mentioned entities. If there is a
discrepancy between the Guide and the official regulation, the official regulation
will always prevail.

Fintech Saudi is a community centric initiative, and we appreciate feedback in

all forms. If there is inaccurate information, outdated facts, unclear process, or
broken links throughout this guide, or if you have a suggestion to be make it
better, kindly reach out to us through info@fintechsaudi.com with an email kindly
titled “Fintech Access Guide Feedback”.

For additional information or if you have any

questions, please do not hesitate to contact
us at info@fintechsaudi.com

About Fintech Saudi

Fintech Saudi is an initiative launched by the Saudi Central
Bank (SAMA) in partnership with the Capital Market
Authority (CMA) under the Financial Sector Development
Program to support the development of the Fintech Industry
in Saudi Arabia. Fintech Saudi’s ambition is to transform
Saudi Arabia into an innovative fintech hub with a thriving
and responsible fintech ecosystem.

We seek to achieve this by supporting the development of

the infrastructure required for the growth of the fintech
industry, building capabilities and talent required by fintech
companies and supporting fintech entrepreneurs at every
stage of their development.

58 © 2023 Fintech Saudi - All Rights Reserved