The boom of financial technologies predicts more bank mergers in Saudi Arabia
The return of economic activity gives banks the opportunity for major restructuring
Friday – 13 Dhu al-Hijjah 1442 AH – 23 July 2021 AD Issue No. [
Saudi Arabia is witnessing a leap in financial technologies and government licensing of digital banks (Middle East)
Riyadh: «Middle East»
The global consulting company, KPMG, said in a report entitled “Banking Visions for the Year 2021… Trends and Ideas Shaping the Industry in Saudi Arabia”, that what encourages the dynamic transformation of integration in the banking scene in line with the regional trend, is the recent movement with the merger of the National Bank Commercial Bank and Samba Financial Group, which spawned the largest lender in the Kingdom.
The report added that the countries of the Gulf Cooperation Council are widely seen as suffering from excessive banks, stressing that this is accompanied by increasing pressure from financial technology companies and other products entering the market, which contributed to generating an environment that may lead to more mergers and acquisitions in near future.
The report pointed out that the “Corona emerging” pandemic represents an additional incentive to conclude merger and acquisition deals, if economic growth continues, especially if doubtful loans continue to grow.
The KPMG report finds that there are a number of technical reasons to expect an increase in banking mergers and acquisitions in 2021. It points to the increasing scope of rescue and deal restructuring, private equity interests and the booming non-performing loan market. However, the report confirms that the growth of financial technology is a fundamental reason that may drive the movement of mergers and acquisitions in the coming period, indicating that the boom of financial technologies has contributed to the flexibility of digital transactions, ease of regulatory transaction barriers, and increased cooperation between financial technology companies and financial institutions.
According to the details, financial technology companies can put pressure on the banking sector in the Kingdom; As the young population has a strong desire to change the reality of the traditional banking sector, they are moving at the speed of the development of modern technologies, which reduces the pie available to banks.
The report added that although financial technology companies have not penetrated the personal finance sector in Saudi Arabia yet, they have proven their skill in quickly winning market share in other countries such as China and the United States, indicating at the same time that returning to a semblance of normality will give banks some necessary clarity. for major restructuring; As they can better predict economic and asset performance, as well as set a long-term operating strategy, banks will be more comfortable making big decisions.
The KPMG report believes that the Saudi and regional banking sector has basic characteristics for making deals, so it must come out with a flood of activities stronger and more prepared for the combined basic market conditions and the early emergence of the economic slowdown of the epidemic.
And Saudi Arabia officially began launching digital banking, as the Council of Ministers agreed in late June, headed by the Custodian of the Two Holy Mosques, King Salman bin Abdulaziz, for the Minister of Finance to issue the necessary license to each of “STC Bank”, under establishment, with a capital of 2.5 billion riyals ($666 million) and the Saudi Digital Bank, under establishment, with a capital of 1.5 billion riyals ($400 million), to be the first licensed digital bank in the country.
Specialists confirm that the beneficiary of the presence of virtual banks is the state’s economy, the public and private sectors and customers, especially as the Kingdom is preparing for the future in order to develop the financial sector supported by legislation and infrastructure in the technical field.
Commenting on the launch of digital banking in the Kingdom, the Saudi Minister of Finance and Head of the Financial Sector Development Program, Muhammad Al-Jadaan, said that the council’s approval embodies the leadership’s keenness to keep pace with the rapid development in “financial technology” and enable the Kingdom to be among the largest financial centers in the world through its full support. The Financial Sector Development Program, one of the most prominent programs to achieve the “Kingdom’s Vision 2030”, which aims to keep pace with global developments and achieve qualitative leaps in the field of financial services, in line with the continuous development in business and services in the Kingdom.
He pointed out at the time that the Financial Sector Development Program worked on developing a strategy for the sector during the period from 2021 to 2025, which includes a number of initiatives related to financial technology that would develop the sector, support the development of the national economy and diversify its sources of income.