Digital Banks: The Next Big Thing in Saudi Banking Sector

The Advantages of Digital Banking for KSA
Saudi Central Bank Governor Fahad al-Mubarak speaks during a news conference in Riyadh March 3, 2013. REUTERS/Faisal Al Nasser/File Photo
Digital banks come to realize the Saudi Digital Transformation Plan, which represents an integral part of the Kingdom Vision 2030. Photo credit: Reuters

With the announcement of Fahad Al Mubarak, Governor of the Saudi Central Bank, about the Kingdom’s intention to license more digital banks, the Saudi banking community should be ready for the newcomers who are expected to get a slice of the banking sector pie.

Currently, 11 local banks and 19 foreign banks (4 of which have not started operations) are licensed by the Saudi Central Bank and approved by the Saudi cabinet. Last June, a couple of licenses were granted to digital banks, which are currently getting ready to launch their services once they meet all the operational requirements.

Digital banks come to realize the Saudi Digital Transformation Plan, which represents an integral part of the Kingdom Vision 2030. 

What are the differences between digital banks and the traditional banks’ apps through which they can carry out their daily financial transactions? Does the Kingdom need more banks, digital or traditional? What can digital banks offer to customers?


Digital banks are fintech (financial technology) firms that do not physically exist (branchless) aimed at tech-savvy customers and provide all the banking and financial services through a digital platform. All front office operations (interacting with customers) and back-office operations (production of services, background processing and quality checking) are fully digitalized. Digital banks employ artificial intelligence (AI) to process data and connect the customers’ information with government, private and credit agencies.

It is interesting to note that Monzo, a UK-based digital bank established in 2017, is the first digital bank in the world. It has around 6 million customers currently.  

Can digital banks fully replace human interaction?

“Digital banks use Chatbots, which employ conversational AI to help customers interact with computers and are used to answer questions and perform routine customer activities. However, there is always a team for client servicing that can help customers with serious problems. This can be done through voice/ video calls, emails, etc.,” said financial and accounting expert Abdulrahman Ahmed.

When asked about the differences between digital banks as entities and digital banking that is executed through traditional banks’ apps and websites, Ahmed said: “The traditional banks’ apps and online portals are applications of digital banking, and they all belong to existing traditional banks, meaning you must have an account at the traditional bank that physically exists to enjoy the digital banking services. On the other hand, digital banks are independent, branchless and app-based banks. They exist only in the cyber space. In a nutshell, digital banks are fintech entities while traditional banks use fintech to provide digital banking services.”


Last April, Saudi Arabia witnessed the merger of two banks, National Commercial Bank and SAMBA Financial Group, to form a new entity called the National Saudi Bank. Two years before the formation of the National Saudi Bank, SABB Bank and ALAWWAL Bank merged, bringing down the number of Saudi local banks from 13 to 11.

“The Saudi market is huge. The Kingdom needs more banks to heat up the competition and provide quality services and attract more clients to raise the bar of the Saudi banking industry. The local market can accommodate more banks. The Kingdom can have regional banks and community banks. Digital banks will be a game changer,” said expert Ahmed.

“The Saudi Central Bank does not grant bank licenses easily. The founders need to fully comply the regulations to start a new bank. This means the local banking environment is perfect for a healthy competition.”


STC Bank and the Saudi Digital Bank (SDB) were licensed six months ago. The solid digital infrastructure, the advanced internet services and the technical progress achieved in the Kingdom over the past few years have made it easier for digital banks to find their way into the world of banking.

STC Bank used to be an e-wallet under the name STC Pay and was launched in 2018 as a subsidiary of the Saudi Telecom Company (STC). The e-wallet has evolved into a financial app that provides international money transfer services in cooperation with Western Union, which later bought a 15% stake of STC Pay and is going to be a partner in the newly formed digital bank. The capital of STC Bank is USD 670 million.

The Saudi Digital Bank is led by Abdul Rahman Saad Al-Rashed and Sons Company, a Saudi holding company with a portfolio of subsidiaries specialized in investment management, real estate, construction, and other sectors. The new digital bank has a capital of USD 400 million.

Both banks are expected to enable customers to open accounts, get debit and credit cards, apply for loans, and invest their money.

“Unlike other startups that need funds to prosper and grow, both STC Bank and SDB have strong financial muscle to start their operations. Saudi digital banks are expected to expand their services to compete with traditional banks and increase the banking sector participation in the GDP. STC Bank succeeded in attracting a heavyweight foreign partner. It is a sign that digital banks are the next big thing in the Saudi banking sector,” concluded expert Abdulrahman Ahmed.

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