Saudi Arabia's WealthTech Rise, Traditional Banks vs. FinTech, and the 2021 FinTech Stumble - What’s Next? ??
This week’s Espresso covers a lot! We dive into Saudi Arabia's evolving financial landscape, explore FinTech's challenges from a traditional banking perspective, and examine why FinTech stumbled in 2021—only to come back stronger.
Saudi Arabia’s been riding the wave of oil wealth for years, but things are changing. ??
With the world shifting toward greener energy, the country is transforming—and it’s not just about solar panels or electric cars. The financial landscape is evolving too, with FinTech and especially WealthTech stepping into the spotlight. ??
So, how fast is this all happening?
Well, between 2024 and 2031, the Saudi WealthTech market is set to grow at a CAGR of 16.78%—boosting its value from $34.55 million to $119.51 million. ???
While those numbers might not be jaw-dropping just yet, the real action is coming. The broader FinTech market is gearing up to hit $5.95 billion by 2028. So, what's driving this wealth transformation?
Financial Literacy is Leveling Up
What's the key ingredient to WealthTech growth? Financial literacy. For a long time, only the wealthiest in Saudi Arabia had access to top-tier financial tools. But that’s changing fast! More people are getting clued into smart investing, and technology is making it easier than ever for those lower down the wealth ladder to get involved.
Digitization is the Game Changer
AI and machine learning aren’t just buzzwords—they’re changing how people invest. Robo-advisors and trading platforms are putting the power of high-level investing into the hands of a much wider audience. Whether you're a big spender or just starting out, there’s a tool for you.
Cloud Scalability: The Real MVP
Cloud-based services are the backbone of modern WealthTech. Real-time data? Check. AI-driven insights? Check. And all of this within a secure framework that allows WealthTech firms to scale up fast. This tech isn’t just making the market more efficient—it’s making it more profitable, too.
Riyadh: The Hotspot for FinTech Innovation
When it comes to driving change, Riyadh is where it’s happening. The capital is home to leading banks, investment firms, and a rapidly growing number of FinTech startups. As investments shift from oil to tech, Riyadh is positioning itself as a powerhouse for WealthTech growth.
Saudi Arabia’s entire financial foundation is shifting, and it’s not just about oil anymore. With booming interest in FinTech, massive investments in golf ?, boxing ??, and an increasing focus on ESG ??, this country is brimming with opportunities.
As demand for WealthTech grows, Saudi Arabia is emerging as a hotspot for innovation, creating a wealth of investment possibilities and cutting-edge services. The future is looking bright—and profitable.
When we think about technology's impact on finance, it’s easy to focus on FinTech and WealthTech.
But maybe it’s time to zoom in on something else: traditional banks. There’s an intriguing report from Kearney Consultants that digs into where these banks should attack and where they should protect as tech continues to shake things up. So, how are traditional banks handling this digital wave?
At the core of the report is a simple yet powerful idea: the key to success for any financial institution, whether it's a classic bank or a tech-savvy disruptor, is how much of your customer’s wallet you can secure. Sounds basic, but it’s a true measure of staying power.
With the rise of digital challenger banks like Monzo and Revolut, boasting 10s of millions of customers, the game has changed. Add WealthTech into the mix, and now 60% of Europeans are researching and buying financial products remotely. ??
The Kearney report, based on a survey of 6,600 customers across 13 European countries, revealed some interesting facts:
?? Austria takes the prize for customer loyalty, with 77% of people holding all their financial products with one bank. Compare that to just 37% in the UK!
?? The Dutch are the most loyal when it comes to their primary bank accounts, with 73% staying with the same bank for over 10 years. In the UK, the figure is just 15%.
???? In Germany, 18% of banking clients now call a digital bank or FinTech company their primary account provider. The Netherlands comes in at a minimal 3%.
? Sweden and Romania are leading the digital banking revolution, with 38% of customers having a primary or secondary account with a digital bank. The Netherlands is at the bottom of this list at just 14%.
?? Across Europe, 9% of banking clients have their primary account with a digital provider, although this jumps to 16% when it comes to secondary accounts.?
?? The kicker? 67% of people who switch to a digital bank move at least one other financial product, like savings, credit cards, mortgages, or investments. That’s a lot of business slipping through the fingers of traditional banks!
This trend is telling us something loud and clear: digital banks are enveloping traditional banking territory. However, while we marvel at new high-tech services, the true measure of a bank’s success still comes down to this: how much of a customer’s wallet they can control. That’s something we can’t overlook. ??
So, as the digital banking revolution marches on, how are traditional banks going to defend their turf—and more importantly, how can they adapt to attack in this brave new world?
The FinTech industry has certainly faced some bumps in the road recently, coming from nowhere to dominate the financial services industry. Looking back over the past few years, it’s clear things haven’t been all smooth sailing for the sector. But are there any new sectors which haven’t hit a rough patch? ??
Before we dive into what went wrong, let’s rewind a bit—remember the Dot Com bubble? ??
Investors were all in on promises of huge profits in the future, throwing money at companies based on little more than potential. Sound familiar? It’s not too different from FinTech’s early days.
Now, fast-forward to 2021, the year many think was the pinnacle (so far) for FinTech. Stocks like GameStop and Bed Bath & Beyond made a comeback that no one saw coming, and trading platform Robinhood found itself in hot water with regulators. The buzz was real, but so were the cracks starting to show.
So, what went wrong? Let’s break it down:
?? Overpromising, underdelivering: Some FinTechs simply couldn’t live up to the hype.?
?? Regulation struggles: The rules couldn’t keep up with the rapid innovation.?
??? Weak internal controls: Not every company had its house in order.?
?? Funding dried up: Rising interest rates made it harder to raise cash.?
??? Flimsy business models: Many were built on shaky foundations.?
Like the Dot Com era, it was a classic case of excitement outpacing reality. Investors eventually became more selective, the weaker companies fell away, and only the strongest survived. ??
Here’s the good news: FinTech today is stronger, smarter, and more resilient. Giants like Klarna and Stripe may have battle scars, but they’re still standing tall, ready for what’s next. For startups, the journey may be tougher, but there’s still room for innovators to thrive.
When it comes to future investment in FinTech, will investors learn from past experiences? Or will FOMO and greed push them to ignore history? While there’s hope for smarter investing, the temptation to jump on the next big thing might be too strong for some to resist. Only time will tell.
The latest newsletter takes a look at Saudi Arabian WealthTech, the challenges for traditional banking and why FinTech stumbled in 2021 - which of these insights caught your eye? Don't miss out on our Espresso Break! ?
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