Fintech in Saudi Arabia—Sequoia Capital India has made its first investment in the Arab Gulf region by investing $33 million in Saudi financial startup Lean Technologies.
It’s no coincidence that Sequoia Capital India’s fund is related to Sequoia Capital in the US, which has invested in Google and Stripe. However, its fund is independent. Other international investors, including New York-based Liberty City Ventures and former General Electric CEO Jeff Immelt, have joined its capital commitment to the Saudi fintech’s Series A round.
2019 saw the debut of Lean Technologies’ platform in Riyadh and London, allowing third-party financial service providers to access their customers’ bank data and immediately start payments. The company’s APIs, or application programming interfaces, allow different systems to communicate with one other. Fintech companies have challenged traditional banks and delivered new services to customers in sectors such as e-commerce, accountancy, and banking, thanks to open banking technology.
Hisham Al-Falih, Lean’s co-founder and CEO, told CNBC’s Dan Murphy that the company sees itself as an enabler, a supporter of the [fintech] ecosystem, and hopefully a bastion of a new wave of fintech innovation that will enable and spur a lot of fascinating changes in the lives of everyday people and businesses.
In light of Saudi Arabia’s decision to establish a legal framework for open banking last year, the $33 million investment represents a new opportunity for Gulf-based fintech startups. More than 55 markets worldwide, including Europe and the United States, have implemented open banking in the previous decade. He claims that the system is “not only for retail accounts but also for small and medium-sized enterprises (SMEs). You can think of it as the plumbing for the financial technology industry. In turn, this will open up a slew of hitherto unimaginable application scenarios.
Al-Falih said this would expedite the development of new enterprises and platforms. There is a range of use cases that were previously either hampered or barred entirely by infrastructure deployment, like Lean. Hopefully, we’ll see these enterprises come to light and reach the market much more quickly due to the advent of this infrastructure.
Growth of Fintech in Saudi Arabia
A new financial and banking structure, on par with those already in place in developed economies, is required, according to Saudi businesses, as the Kingdom undergoes its economic revolution pushed by Saudi Crown Prince Mohammed bin Salman’s Vision 2030. Growth in the sector has been fueled by individuals who want to make it more accessible to everyone.
“Fintech has witnessed astounding growth over the past two years in the MENA Region,” said Rayan Dawud, an investment partner at Outliers Venture Capital, which is an investor in Lean Technologies. A new breed of regional fintechs is fueled by open banking, which lowers transaction costs and provides access to advanced data sets.
The numbers speak for themselves. For the Middle East and North Africa region, “fintech investments have grown from roughly $144 million (which was pretty large) in 2020 to almost $400 million in 2021,” Al-Falih added. A similar trend was seen worldwide, proving that venture capitalists’ confidence and excitement in the fintech business is undeniable.
More than a dozen financial institutions from throughout the region have signed on as customers of Lean Technologies since it was created in September 2019 and debuted its flagship APIs in February 2021.
Shorooq Partners in Abu Dhabi and angel investors like Henrique Dubugras of Brex and Samir Vasavada of AI-powered investment management business Vise are among Lean’s current venture backers in addition to Outliers.
Users will have more options for managing their personal and commercial accounts if the region moves toward an established open banking framework in the area.
Fintech in Saudi Arabia has increased in the last two years, according to Dawud, thanks to authorities’ increasing involvement, investors’ improved stomach for risk, and the growing demand for services from Saudis’ youthful, mobile-native population.
Open banking will be a lucrative market for financial technology providers, startups, and investors alike, as over 70 percent of the Kingdom’s 34 million-strong population is under 30. We are confident that the future will be a great one, Dawud added.
