Saudi Arabia’s financial services sector has undergone rapid growth and structural transformation in recent years, driven by regulatory reforms, increased foreign investment, digital innovation and the Kingdom’s Vision 2030 economic diversification plan. This expansion supports broader economic goals, with Saudi banks financing major projects in renewable energy, infrastructure and tourism. By fostering these sectors, the industry is helping to diversify the Kingdom’s economy and position itself as a cornerstone of long-term economic resilience and stability.
Sector Priorities
Key to the banking sector’s role in the broader economy is the Saudi Central Bank’s (SAMA) introduction of progressive regulatory frameworks designed to ensure financial stability and consumer protection, while enabling technological innovation. These reforms have opened the door for new entrants, including digital banks and financial technology (fintech) firms, which are reshaping the market. The rise of digital-only banks like STC Bank and Vision Bank, which were issued licences in June 2021, and D360, licenced in February 2022, underscores a shift towards a more inclusive, tech-driven financial ecosystem.
Meanwhile, rising credit demand across the board has contributed to a substantial expansion of banks’ balance sheets in recent years. Commercial bank deposits reached SR2.7trn ($712bn) in the second quarter of 2024, up 9.4% from SR2.4trn ($651bn) in the same quarter of 2023. This follows on from 2022, when deposits increased by 9.1%, according to SAMA data. This rapidly growing deposit base – and the corporate development lending it facilitates – positions Saudi banks not only as important financial partners to businesses across the Kingdom, but as essential partners in the country’s journey towards a more diversified and resilient economy.
Structure
Of the 37 banks licensed with SAMA as of mid-2024, 14 were local, Saudi-headquartered banks, including 11 traditional institutions and three fully digital banks. The remaining 23 were foreign bank branches, which include both regional and global financial brands, such as Qatar National Bank, Germany’s Deutsche Bank and UK-based Standard Chartered. According to SAMA data, six of these banks had been licensed, but had not yet launched business in the Kingdom as of October 2024, including Bank of China, Bank of Jordan and Egypt-based Banque Misr. In addition to the banking segment, SAMA has issued licences to 61 finance and 12 finance-support companies, including general financing firms, real estate finance companies, debt collection firms, microfinance and fintech companies, debt-based crowdfunding firms, financial aggregators and buy now/pay later companies. Some 25 payments companies serve the Kingdom, all of which are licensed and regulated by SAMA.
By the second quarter of 2024 there were 1903 commercial bank branches operating in Saudi Arabia, down 8.3% from the end of 2019 primarily due to the expansion of digital banking. Similarly, as of the second quarter of 2024 the Kingdom had 15,716 ATMs, down from 18,882 in 2019, which reflects the ongoing rise of digital transactions across both the country and the region. The issuance of ATM guidelines in August 2024 has encouraged optimal coverage of ATMs, ensuring access to cash for all.
The banking sector employed 44,761 individuals as of 2022, of which Saudis accounted for more than 95% of the total workforce. These numbers reflect the financial industry’s commitment to training and hiring nationals, and developing local talent. “As financial markets expand and new technologies emerge, it is essential for institutions to adapt to maintain competitiveness,” Mana Al Khamsan, CEO of the Financial Academy, told OBG. “The resilience and skill of the workforce will ultimately determine how effectively the sector can meet future challenges.”
Key Players
The Saudi banking sector offers a dynamic and evolving environment, characterised by a blend of established legacy institutions and emerging digital players. Traditionally, the sector has been dominated by a few large, well-capitalised banks that hold a significant share of the market. Prominent among these are Al Rajhi Bank, Saudi National Bank (SNB) and Riyad Bank, which have long been the pillars of the Kingdom’s financial system. These providers offer a wide range of services, from retail banking to corporate financing and property lending, and are instrumental in supporting the country’s economic activities, particularly in sectors such as oil and real estate. In its 2024 rating of banks by Tier 1 capital, The Banker magazine ranked SNB, Al Rajhi Bank and Riyad Bank as Saudi’s top-three banks. Globally, these three institutions were ranked 63rd, 77th and 126th, respectively, on The Banker’s list, reflecting the Kingdom’s overall capital growth and economic strength in recent years.
The structure of the Saudi financial services sector has undergone significant diversification in recent years, with the entry of three digital-only banks and some 230 fintech firms. These new players are at the forefront of innovation, providing financial banking services that appeal to a tech-savvy and increasingly digital-first population. Digital banks, in particular, provide a range of services that are accessible via smartphones and online platforms, significantly enhancing customer convenience and expanding financial inclusion.
Oversight
Until recently, the Banking Control Law of 1966 has governed the Kingdom’s banking sector, while SAMA, established in 1952, served as the key regulatory authority. In January 2023 the Kingdom announced a new Draft Banking Law, proposing significant revisions to the existing Banking Control Law. The law would apply to all banks and financial institutions that provide banking services to clients in the Kingdom, including those based outside of the country. SAMA proposed a series of updates to the banking law, including the development of a Depositors Protection Fund to enhance the financial safety net in times of distress. As of October 2024, the revised rules had not yet been implemented.
SAMA’s responsibilities include maintaining monetary stability, managing the national currency and supervising financial institutions. Its role is pivotal in ensuring the stability, resilience and soundness of Saudi Arabia’s financial system. SAMA regulates the banking sector through a robust framework designed to promote financial stability and consumer safety while simultaneously fostering innovation and growth. It enforces strict regulatory standards on capital adequacy, liquidity and risk management – ensuring that banks operate prudently and maintain healthy balance sheets. These regulations align with international standards such as Basel III, which SAMA, one of the early adopters, implemented in January 2023 to enhance the sector’s resilience and ability to withstand macroeconomic shocks.
Key Objectives
Since the launch of the Financial Sector Development Programme (FSDP) in 2018 under the Kingdom’s Vision 2030, SAMA has been working to achieve the programme’s objectives in close collaboration with the Capital Market Authority (CMA) and the recently established Insurance Authority (IA). FSDP is one of the key Vision Realisation Programmes under Vision 2030 (see the Capital Markets chapter). The programme’s goals include increasing the financial sector’s contribution to GDP, enhancing financial inclusion, promoting digital transformation, diversifying the sector, and improving its integration with global markets. It also focuses on developing a resilient capital market and encouraging private sector growth. The FSDP is chaired by the minister of finance, with the governor of SAMA serving on the board.
SAMA is staying abreast of local and international developments by updating rules and regulations to ensure progress on the FSDP, and the orderly development of the financial sector. In October 2024 SAMA published regulations on debt-based crowdfunding and continues to align with international best practices to strengthen the financial sector. SAMA had licensed three digital banks as of October 2024 and aims to facilitate their commercial launch. Additionally, SAMA supports local and international fintech firms through initiatives like the Regulatory Sandbox and the Makken programme, among others, while also developing new digital solutions to oversee the wider financial sector. SAMA has amended the rules governing bank savings products and the Finance Companies Control Law, with the amendments to the latter approved by the Council of Ministers in June 2024.
One of SAMA’s key innovations under the FSDP is the Open Banking Lab (OBL) initiative, which was launched in early 2023 following the establishment of the Open Banking Framework in 2022 (see analysis). The OBL provides a live digital testing environment for banks and fintech companies, thus enabling these firms to develop, test and certify their operations in advance of a commercial launch. Open banking allows third-party providers to access consumer banking data, with their consent, through secure application programming interfaces (APIs).
This system enables customers to share their financial information with multiple service providers, fostering greater competition and innovation in the financial services sector. It also facilitates the development of personalised financial products, such as budgeting tools, payment services, by leveraging consumer data. It aims to enhance customer experience, promote transparency and increase access to a wide range of financial services, ultimately creating a more dynamic and customer-centric banking ecosystem.
Regulatory Updates
SAMA updated regulatory requirements for various components of the financial services sector throughout 2023 and the first six months of 2024. In July 2023 the central bank introduced a set of new rules around payments and payment services, in what was widely regarded as a response to the rapid expansion of the Kingdom’s financial sector over the previous year. The new regulations were designed to protect and stabilise the payments segment even as they aimed to create a more attractive investment and operating environment for innovation in the segment.
In October 2023 SAMA released a draft framework on baseline requirements for third-party outsourcing arrangements. The new framework reflects the increasing legal and operational complexity of the Kingdom’s finance industry, where outsourcing arrangements may have implications not only for consumer privacy, but also for risk management and resilience. Lastly, compliance principles and internal audit principles for finance companies and real estate refinance companies were approved in October 2024. The new regulations require, among other things, that finance companies maintain an active, independent compliance unit, and that firms implement a written compliance policy.
Performance
The banking sector has posted strong numbers in recent years. Total assets held by the country’s 37 commercial banks reached SR4.2trn ($1.1trn) at the end of the second quarter of 2024, a rise of 10.2% year-on-year (y-o-y) and up 60% since the end of 2019. A majority of commercial banking assets in the second quarter of 2024 – some 64% – were concentrated in claims on the private sector, a category that includes retail, corporate and wholesale loans. This trend reflects the strength and success of the Kingdom’s ongoing economic development and diversification drive, which has served the private sector well in recent years, driving increased demand for financing across multiple sectors, including tourism, alternative energy and the financial services industry itself. In 2023 total commercial banking assets increased by 9.3%, whereas deposits grew by 7.8%. Meanwhile, sector profit experienced a rise of 11.7%.
At the end of 2023 commercial bank credit to the private sector was concentrated in personal loans, which accounted for around half of the total loan book, followed by the real estate sector, at 23.5% of total bank credit; wholesale and retail trade, at 6.9%; and manufacturing, at 6.7%. Other key recipients of private sector lending from commercial banks included the utilities sector, the construction industry, and the financial and insurance sectors, according to SAMA data. Regarding the commercial banking sector’s personal loan book, at the end of 2023 this credit was concentrated in credit card loans, vehicle loans and property improvement loans.
Islamic Banking
Data for Islamic banking is tracked both as part of the Kingdom’s overall banking performance and separately. According to SAMA, in the second quarter of 2024 Islamic banks had total assets of SR3.2trn ($850bn), up from nearly SR3trn ($795bn) at the end of 2023 and, for comparison’s sake, SR1.7trn ($466bn) at the end of 2019. Indeed, Islamic banking has grown apace with the overall expansion across the sector in recent years, given how closely integrated sharia-compliant and conventional banking activities are in Saudi Arabia. Financing by Islamic institutions reached SR2.2trn ($582bn) at the end of 2023, while deposits topped nearly SR2trn ($526bn), both up on the previous year. Moreover, those figures had reached SR2.3trn ($613bn) and SR2.1trn ($565bn), respectively, in the second quarter of 2024, demonstrating that growth across the Islamic segment – and across the banking sector as a whole – has continued apace.
Market Leaders
Saudi Arabia’s main banks are among the largest in the region. In early 2024 Forbes Middle East announced that the Kingdom had topped its ranking of the 30-most-valuable listed banks in the Middle East, with 10 entries at an aggregated market value of $279.5bn. This figure represents almost half the total value of all the banks on the list.
Al Rajhi Bank topped the ranking, with a total value of $92.3bn at the end of 2023, up some $21.7bn over the previous 12 months. In 2023 Al Rajhi completed a four-year digital transformation programme, which saw the institution investing heavily in digital services of all kinds. The bank reported 298% growth in retail bank accounts and 63% growth in business accounts opened online in 2023 alone. Some 15% of all retail financing at the bank was initiated via digital channels in 2023, while 86% of new corporate customers were onboarded online. Al Rajhi reported total assets of SR808bn ($215bn) at the end of 2023 – a figure that has more than doubled over the past five years. For comparison’s sake, Al Rajhi’s total assets were at SR384bn ($102bn) at the end of 2019. In March and again in May 2024 Al Rajhi raised $1bn from sale of a five-year sukuk (Islamic bond) on Saudi Arabia’s stock exchange, known as the Tadawul. The proceeds from the sales were to be used to cover the bank’s strategic objectives moving forward.
Saudi National Bank (SNB) was ranked second on the Forbes list, with a market value of $68.2bn as of December 2023. Although it was not ranked as the largest bank by market capitalisation, SNB reported total assets of SR1trn ($276.5bn) at the end of 2023, making it the largest bank by asset size. This figure is up 10% from SR945.5bn ($252.1bn) at the end of 2022 and SR914.1bn ($243.7bn) at the end of 2021.
SNB was formed in April 2021, when National Commercial Bank merged with the Samba Financial Group. The institution reported net income of SR20bn ($5.3bn) for 2023, up around 8% from SR18.6bn ($5bn) in 2022. At the end of the year, the bank boasted some 470 branches in, the UAE, Bahrain, Lebanon, Pakistan, Qatar, Singapore and Turkey, with some 16,000 employees in total. Like its com petitors in the Kingdom, SNB has invested heavily in digital services in recent years. As a onestop digital shop, SNB achieved 85% in retail digital penetration in 2023, while digital transaction migration reached 99%. The bank’s digital innovations unit supports technological initiatives by linking internal and external stakeholders and partners, while a dedicated digital ventures unit acts as an incubator for third-party innovation initiatives.
Riyad Bank, which was ranked eighth on the Forbes list, reported assets of SR387bn ($103bn) at the end of 2023, reflecting an 8% uptick from the previous year. Annual income reached SR8bn ($2.1bn) on the year, up 15% from the end of 2022. The bank, primarily owned by Saudi Arabia’s sovereign wealth fund – the Public Investment Fund – has focused on developing its digital banking services in recent years and has worked to expand its loan offerings to small and medium-sized enterprises (SMEs) by launching the Riyad Bank Centre for SMEs. Other major local lenders in the Kingdom include Alinma Bank, Saudi Awwal Bank, Banque Saudi Fransi and Arab National Bank, among others.
Financial Inclusion
Despite the rapid growth of the banking industry in Saudi Arabia in recent years, there remains potential for increasing the population’s access to banking services. As of early 2024 around 94% of the adult Saudi population aged 15 and above had a traditional account with a financial institution, or an e-wallet account, compared to nearly 90% among high-income economies in Asia, Europe and North America. Moreover, efforts are under way to enhance financial inclusion in the Kingdom. As of 2021, 74% of adults were account holders, with 63% being women were account holders, according to survey data from the “Global Findex Database 2021” report published by the World Bank. Financial regulators and public sector entities are working to increase access financial services, and promote financial planning, especially for underserved segments as part of Vision 2030.
A central component of this initiative is to support SMEs, which tend to benefit segments of society that may not have access to resources such as debt financing instruments on Tadawul. Under the FSDP, SAMA aims to boost SMEs’ share of credit facilities to 20% of total lending by 2030. In the second quarter of 2024 local banks and finance companies had issued SR307bn ($81.8bn) in credit facilities to SMEs, up from SR229bn ($61.1bn) at the end of 2022, and almost three times the 2019 figure of SR117.4bn ($31.3bn). Overall, the 2024 data represented 9% of total credit facilities. Aided by the SME Financing Guarantee Programme, known as Kafalah, this figure has risen from approximately 6% in 2019.
While further progress is required to reach the target of 20% by 2030, SME lending has kept pace – and continued to grow as a percentage of the total – as overall lending has risen in recent years. “Key challenges for Saudi SMEs include access to financing, skill shortages and the speed of execution in relation to Vision 2030 projects,” Homam Hashem, CEO of Kafalah, told OBG. “The authorities addressed these challenges by simplifying regulations, enhancing SME-focused financial products and investing in skills development programmes.”
Fintech
At the end of 2023 Saudi Arabia boasted 216 fintech enterprises, employing over 6500 individuals and drawing some $1.9bn in venture capital into the country. Open banking firms, in particular, have been the primary focus of recent regulatory expansions. SAMA’s move to standardise open banking standards in recent years requires revamping the Kingdom’s technical financial infrastructure. This shift, along with improving financial integration and Vision 2030-related investment lending, has driven the expansion of fintech in recent years.
Open banking requires that legacy players open their systems and share data with third-party firms, fostering greater collaboration and innovation across the sector. The primary mechanism for facilitating this data sharing is through the establishment of an API, a digital contract that organises and enables secure communication between two or more entities. SAMA plays a pivotal role in regulating API security and data-sharing standards. Looking ahead, distributed ledger technology, cloud-native applications, and artificial intelligence are increasingly influencing the banking sector, offering new opportunities for efficiency and service innovation. To accelerate this transformation, SAMA has launched pilot projects in several of these areas, aiming to catalyse innovation in the country’s banking sector.
The development of fintech has been accelerated by the 2018 launch of Fintech Saudi, a joint initiative between SAMA and the CMA. This initiative has leveraged government support to build out the Kingdom’s nascent fintech industry into the largest in the MENA region. The initiative sits at the centre of the fintech industry today, offering a business accelerator programme, a career fair and training sessions on a year-round basis. Since it was established, there has reportedly been a 20-fold increase in the number of fintechs operating in the Kingdom, with more than SR4bn ($1.1bn) invested into the industry between 2019 and April 2024.
Beyond Fintech Saudi, the government has been pursuing new areas and technologies to develop the local market. SAMA also hosts the Regulatory Sandbox, which has proven to be pivotal in boosting the fintech sector. The Regulatory Sandbox has enabled fintech companies to test their innovative ideas and concepts in a controlled environment. Since its launch in 2018, the Regulatory Sandbox has received close to 500 applications from fintech start-ups. For instance, in January 2019 SAMA launched a central bank digital currency project in collaboration with the Central Bank of the UAE. The initiative was designed to explore options for establishing a joint system to facilitate cross-border payments between the two countries using digital currency. In early 2023 SAMA announced that the project was progressing, and the bank would soon decide whether to issue a digital currency or not.
Outlook
The growing influence of fintech, the introduction of digital-only banks, and the continuous updating of regulatory standards and operating frameworks have collectively enhanced the banking sector’s resilience, competitiveness and inclusivity. These developments not only highlight SAMA’s efforts to translate global trends to the local market, but also underscore the sector’s pivotal role in driving economic diversification and supporting sustainable growth. As Saudi Arabia continues to progress along its journey of modernisation, its banking sector is poised to be a cornerstone of future economic success, effectively balancing innovation with financial stability. The ongoing evolution within the sector towards open banking and digitalisation emphasises its importance in shaping a more diversified and robust economic landscape, positioning the Kingdom as a leading financial centre both in the GCC region and across the Middle East.
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