Fintech Market Overview

This article does not constitute legal advice.

Cross-border payments in Saudi Arabia

Fintech Software

Activities that are regulated or licensed by a foreign jurisdiction cannot be passported to Saudi Arabia's jurisdiction. For a foreign company to carry out its activities in Saudi Arabia, it must have local legal presence in Saudi Arabia subject to local licensing. Hence, the company from another jurisdiction will be required to seek the relevant licensing in Saudi Arabia depending on its activities from SAMA, the CMA or both, and from the Ministry of Investment (MISA).1

If the foreign entity attempts to undertake its activities in Saudi Arabia without legal presence in Saudi Arabia, the transfer of monetary amounts from the local account to the foreign account may trigger a red flag with the banks, which may subject the entity to investigation. To avoid this, the foreign entity should have a local bank account and opening a local bank account entails having a local presence.1

Cross-border services or products cannot be offered without a local presence. Hence, the fintech service or product can be offered in Saudi Arabia once the company offering the service or product establishes local presence either by establishing a new company and obtaining a MISA licence or, in limited instances, appointing a Saudi-licensed agent in Saudi Arabia to provide the services or products on their behalf.1

Marketing is subject to specific licensing, whether carried out by a local or foreign entity. Accordingly, if the foreign entity wishes to appoint a local entity to solicit the services, it shall ensure that the local entity is licensed by the MCI to carry out marketing and advertisement activities provided that the advertisement is in line with the Banking Consumer Protection Principles issued by SAMA. The only difference between appointing a local partner and actively marketing is where the entity chooses the option to appoint a partner to solicit the service; this will exempt that entity from seeking the necessary marketing licence provided that the local partner is licensed by the relevant authorities. Owing to the importance of the licensing requirement, we usually ask foreign entities to conduct licensing-related due diligence before deciding to appoint a local partner.1

First, regarding foreign exchange or currency control, for an entity to open a bank account in Saudi Arabia it must establish legal local existence, which subjects it to MISA licensing. Also, if it is seeking local existence then opening a bank account in Saudi Arabia is required.1

Once an entity has successfully established itself in Saudi Arabia and has opened a local bank account, the transfer of the amounts collected in Saudi Arabia to the parent company's offshore account will be permissible.1

To contribute to diversifying the economy in support of Saudi Arabia's Vision 2030, MISA minimised its requirements for foreigners to obtain the necessary licences to establish entities in Saudi Arabia. Thus, for foreign persons to enjoy the right of ownership in Saudi Arabia, they will be subject to MISA licensing based on the activities they wish to carry out. However, there are some activities that may not be carried out by foreigners as per MISA's list of activities that are restricted for foreign visitors. In addition, some activities may entail the satisfaction of certain requirements or partnering with a local shareholder. These requirements differ based on the activities carried out by the company to be established in Saudi Arabia. The foreign entity has four available options to carry out its activity in Saudi Arabia. It may:

  • establish a subsidiary of an existing foreign company by obtaining the relevant MISA licence;
  • start a new fintech company through MISA's entrepreneurial licence;
  • license the fintech company to a Saudi start-up; or
  • appoint a sales agent in Saudi Arabia. 1

Fintech in Saudi Arabia

Fintech in other countries

  1. https://thelawreviews.co.uk/title/the-financial-technology-law-review/saudi-arabia
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