Saudi Arabia

Global Financial Regulations 2022

Financial regulations in Kingdom of Saudi Arabia

The ambitious and wealthy Kingdom of Saudi Arabia, home to the largest economy in the Arab world, is poised to become a regional fintech hotspot as it emerges from the COVID-19 pandemic.

Country Overview

The ambitious and wealthy Kingdom of Saudi Arabia, home to the largest economy in the Arab world, is poised to become a regional fintech hotspot as it emerges from the COVID-19 pandemic. Although the health crisis and a decline in oil prices drove a 4.1% shrinkage in the Saudi economy in 2020,1 GDP is forecasted to expand by 2.4% in 2021.2 The Kingdom has enforced strict vaccination rules amidst the rise of the Delta variant,3 and the economy is expected to return to pre-pandemic levels by mid-2022.4 As the Gulf state recovers, regulators are keen to continue efforts to diversify the economy, digitalize the financial sector5 and become a global leader in the development of innovative technologies. 

Vision 2030, a national strategy launched by Crown Prince Mohammad bin Salman in 2016, aims to reduce Saudi dependence on oil and foster a modern, vibrant economy. Accelerated digitalization—spurred on by the pandemic—will be instrumental in achieving its fintech-heavy goals and helping the Kingdom to compete with innovation powerhouses like the United Arab Emirates. In 2020, digital payments soared by 75%6 and e-commerce rose by 74% between March and April.7 The fintech sector is raking in venture capital investments, and even big tech has flocked to the Kingdom, with Google set to open a cloud region there.8 Sophisticated 5G technology,9 strong cybersecurity and a friendly regulatory environment10 have especially made the Kingdom an attractive choice for fintech startups. The Global Cybersecurity Index 2020, developed by the United Nations’ International Telecommunication Union, ranks Saudi Arabia #2 in the world. 

This year, Saudi Arabia’s digital agenda focuses on cybersecurity, open banking, data protection, instant payments, a digital identity project, the digitalization of government services and the development of innovative technologies like big data and artificial intelligence. In 2020, the central bank spearheaded numerous blockchain-based experiments, including a cross-border digital currency pilot with the United Arab Emirates. The National Information Center (NIC), part of the Saudi Ministry of Interior, is planning to institute iris recognition for the identification of travelers at all air, land and sea borders.11 As the Kingdom increasingly pursues sustainability and other green initiatives, it will have even more impetus to develop and implement groundbreaking technologies.12 Alongside this rapid digitalization, however, regulators must look towards adopting data protection and privacy standards, as the Kingdom does not have a national data protection framework.

Financial Regulatory Authorities

The Saudi Central Bank (SAMA) is the Central Bank of the Kingdom of Saudi Arabia. 

The Capital Market Authority (CMA) is Saudi Arabia’s financial regulatory authority governing capital markets in the country. 

Other Regulatory Authorities

The Communications and Information Technology Commission (CITC) is Saudi Arabia’s communications authority, and seeks to ensure competitiveness and fairness in the market.

The Saudi Data and Artificial Intelligence Authority (SDAIA) sets the national data and artificial intelligence agenda.

Policy, Laws and Regulations

Digital Government Framework, 01 August 2021

The board of directors of the Digital Government Authority (DGA) announced the body’s first draft regulatory framework for a digital government. The DGA was established 11 March 2021 to lead the digitalization of government services, a key goal of Vision 2030. The framework hinges on eight principles, including “Digital by Design” and “Mobile First,” alongside a five-pronged e-government policy. As part of the “Whole of Government as Platforms Policy,” the DGA seeks to support government agencies in digitalization efforts through resources, data and tools. In a move to promote citizen participation in the implementation of the framework per the “Beneficiary-Centric Policy,” the DGA will continuously issue surveys and public consultations.13 The draft regulatory framework was open for comments until 14 August 2021. 

 

Cybersecurity Regulatory Framework, 29 May 2021

The Communications and Information Technology Commission (CITC) announced the launch of a cybersecurity regulatory framework for service providers in communications, information technology and postal services. The framework includes cybersecurity requirements and controls, as well as a risk management methodology. 

 

The Kingdom has been aggressive in strengthening cybersecurity and digital literacy. In August 2021, the Saudi Federation for Cyber Security, Programming and Drones (SAFCSP) announced a USD $1.2 billion spate of initiatives to bolster the digital skills of 100,000 young Saudis by 2030.14 The Global Cybersecurity Index 2020 noted that Saudi Arabia, ranked #1 in the region and #2 in the world, is strong in its legal, organizational and cooperative measures, alongside capacity development. Between January and March 2021, over 7 million cyberattacks were deterred in Saudi Arabia.15

 

Saudi Payments Adopts Instant Payments, 21 April 2021

Saudi Payments, a major payment system established by the central bank, announced the introduction of its instant payments system “sarie.” Sarie allows customers to make real-time transactions of up to SAR 20,000 (approximately USD $5,333) and quick transfer services of up to SAR 2,500 (approximately USD $666) through the use of a mobile number, email address or IBAN number.16 The system, launched in collaboration with IBM and Mastercard, will be key in achieving Vision 2030’s goal of 70% cashless transactions by 2030. 

 

Digital Identity Project, 24 March 2021

The Ministry of Interior, in partnership with the Saudi Data and Artificial Intelligence Authority (SDAIA), introduced a national digital identity on the Tawakkalna application. The app, launched in May 2020 as part of efforts to combat the COVID-19 pandemic, now provides a national digital identity for Saudi citizens, as well as a resident identity for non-citizens in the Kingdom. The digital identity can be utilized to access certain government services,17 which aligns with Vision 2030’s aim of digitalizing government and creating a seamless experience for users.

 

Open Banking Policy, January 2021

The central bank issued its brief Open Banking Policy, which aims to promote competition, innovation, financial inclusion and efficiency in the banking system. The central bank is currently assessing the potential impacts of open banking, and how best to adopt it in the Kingdom. The launch of open banking will occur over three phases: design, implementation and go-live. According to the central bank’s policy document, “The implementation phase will cover the development of the defined frameworks, technology building blocks and rollout activities including testing with financial market participants, and enhancement of customer awareness.”18 The central bank plans to go live in the first half of 2022. 

 

Cross-Border Central Bank Digital Currency Pilot, 29 November 2020

The central banks of Saudi Arabia and the United Arab Emirates successfully completed a cross-border central bank digital currency (CBDC) pilot, called Project Aber. The experiment utilized distributed ledger technology (DLT) to facilitate cross-border payments between the two countries, with a dual-issued digital currency. Three use cases were tested: payment between central banks, domestic payments between commercial banks and cross-border payments between commercial banks. The report notes that its distributed payment system is a “significant improvement over centralized payment systems in terms of architectural resilience.”

 

National Strategy for Data and Artificial Intelligence, 21 October 2020

The Saudi Data and Artificial Intelligence Authority (SDAIA) launched the National Strategy for Data and Artificial Intelligence (NSDAI), which aims to invest USD $20 billion in AI and train 2,000 data and AI specialists over a ten-year period.19 Speaking at a G20 media briefing, head of SDAIA Abdullah al-Ghamdi stated, “We aspire to have artificial intelligence as a component of an alternative economy through startups and innovation companies…”20


Reference:

1. Azhar, Saeed. “Saudi Arabia's economy grew 1.5% in Q2, first expansion since pandemic.” Nasdaq, 09 August 2021. https://www.nasdaq.com/articles/saudi-arabias-economy-grew-1.5-in-q2-first-expansion-since-pandemic-2021-08-09.

2. “GCC Countries Back on Path to Economic Growth after Contraction Due to the Pandemic.” The World Bank, 04 August 2021. https://www.worldbank.org/en/news/press-release/2021/08/03/gcc-countries-back-on-path-to-economic-growth-after-contraction-due-to-the-pandemic.

3. Nereim, Vivian. “Saudi Arabia Now Has The World’s Toughest Vaccine Rules.” Bloomberg, 01 September 2021. https://www.bloomberg.com/news/articles/2021-09-01/saudi-arabia-now-has-the-world-s-toughest-vaccine-rules.

4. “Forecasting Saudi Arabia’s economy amid a global pandemic.” The Economist, 25 June 2021. https://www.eiu.com/n/forecasting-saudi-arabias-economy-amid-a-global-pandemic/.

5. “Saudi Arabia ‘holds 10 times more fintech companies than planned.’” Arab News, 13 July 2021. https://www.arabnews.com/node/1893086/business-economy.

6. Hafiz, Talat Zaki. “Fintech is driving Saudi Arabia toward a cashless society.” Arab News, 16 August 2021. https://www.arabnews.com/node/1912256.

7. “Saudi e-commerce posts record growth of 70% in two months.” Saudi Gazette, 13 July 2020. https://saudigazette.com.sa/article/595437.

8. “Fintech firms dominate Saudi startup scene, attracting venture capitalists.” Arab News, 11 August 2021. https://www.arabnews.com/node/1908861/business-economy.

9. “Saudi Arabia is biggest 5G adopter in the Gulf, report shows.” Arab News, 20 April 2021. https://www.arabnews.com/node/1845696/business-economy.

10. Hamid, Triska and Nesma Abdel Azim. “Can Saudi Arabia become the region's fintech frontrunner?” Wamda, 10 June 2021. https://www.wamda.com/2021/06/saudi-arabia-regions-fintech-frontrunner.

11. “Saudi Arabia to Deploy Iris Biometrics at its Borders.” Find Biometrics, 12 November 2020. https://findbiometrics.com/saudi-arabia-deploy-iris-biometrics-borders-111208/.

12. Hossain, Mohammad Raafi. “A Rising Crypto Capital: Why All Eyes Are Turning to MENA for Blockchain and Digital Asset Innovation.” Nasdaq, 30 August 2021. https://www.nasdaq.com/articles/a-rising-crypto-capital%3A-why-all-eyes-are-turning-to-mena-for-blockchain-and-digital-asset.

13. Ihab, Nada and Hussein Abdul-Enein. “Access Alert: Introducing Saudi Arabia’s E-Government Regulatory Framework.” Access Partnership, 03 August 2021. https://www.accesspartnership.com/access-alert-introducing-saudi-arabias-e-government-regulatory-framework/.

14. Bhat, Divsha. “Saudi announces $1.2bn tech initiatives, including all-new LEAP and @Hack events.” Gulf Business, 25 August 2021. https://gulfbusiness.com/saudi-announces-1-2bn-tech-initiatives-including-all-new-leap-and-hack-events/.

15. Nasrallah, Tawfiq. “Saudi Arabia: Over 7 million cyber attacks foiled in 3 months.” Gulf News, 27 March 2021. https://gulfnews.com/world/gulf/saudi/saudi-arabia-over-7-million-cyber-attacks-foiled-in-3-months-1.78142613.

16. “Saudi Payments switches on instant payment system.” Finextra, 21 April 2021. https://www.finextra.com/pressarticle/87227/saudi-payments-switches-on-instant-payment-system.

17. Krimly, Reem. “Saudi Arabia launches digital ID project on ‘Tawakkalna’ app.” Alarabiya News, 25 March 2021. https://english.alarabiya.net/News/gulf/2021/03/25/Saudi-Arabia-launches-digital-ID-project-on-Tawakkalna-app.

18. “Open Banking Policy.” Saudi Central Bank. https://www.sama.gov.sa/en-US/Documents/Open_Banking_Policy-EN.pdf.

19. “Saudis launch national artificial intelligence strategy.” Reuters, 21 October 2021. https://www.reuters.com/article/us-saudi-economy-ai-idUSKBN2761LZ.

20. “Saudi Arabia to invest $20 billion in Artificial Intelligence by 2030.” The Economic Times, 19 November 2020. https://economictimes.indiatimes.com/news/international/saudi-arabia/saudi-arabia-to-invest-20-billion-in-artificial-intelligence-by-2030/articleshow/79305307.cms?from=mdr.


*DISCLAIMER: This information is OneSpan's interpretation of the compliance requirements as of the date of publication. Please note that not all interpretations or requirements of the applicable laws are well-settled and its application is fact- and context-specific. The information contained in this document should not be relied upon as legal advice or to determine how the law applies to your business or organization. We encourage you to seek guidance from your legal counsel with regard to law applying specifically to your business or organization and how to ensure compliance. This information is provided “as-is” and may be updated or changed without notice. OneSpan does not accept liability for the contents of these materials.

Last updated: November 2021