The payments company Geidea is one of Saudi Arabia’s largest fintechs. Founded in 2008, and receiving an initial merchant service provider (MSP) licence in 2016, the company — which is co-owned by UAE-based Gulf Capital and Saudi investment house Al Othman Holding, and specialises in payment solutions for small and medium-sized enterprises provides more than 600,000 point-of-sale terminals to more than 150,000 merchants.
After receiving an initial MSP licence in 2016, it became the first non-bank financial institution to be licensed as a payment services company by the Saudi Central Bank in January 2020, and became the first non-bank to be awarded an acquiring licence in April 2021.
The same month saw the company become the first fintech in the Middle East and North Africa (MENA) region to launch tap-on-phone technology. Geidea also further built partnerships with Visa and Mastercard to roll out this technology across the region. In less than a month, it signed more than 500 live merchants to its platform.
Geidea’s founder and co-chairman Abdullah Al-Othman spoke to The Banker about the growth of digital payment methods during the pandemic, the company’s expansion plans in the UAE and elsewhere, and the prospects for Saudi Arabia’s first digital-only banks.
Q: What have been the key enablers for fintechs, such as Geidea, in Saudi Arabia over the past five years?
A: The ultimate driver of fintech is innovation, but without the proper regulatory environment, innovation is impossible. What’s been key to the growth of the fintech community in Saudi Arabia has been government enablement from the Saudi Central Bank (SAMA), the Capital Market Authority and other government entities. They’ve all provided a robust regulatory infrastructure that has enabled companies like Geidea to grow.
In addition to this, customer behaviour has changed dramatically in recent years in Saudi Arabia, and elsewhere within the MENA region. Saudi Arabia’s high smartphone penetration means that customers expect to be able to use their devices to carry out payments. This, of course, brings new challenges for merchants, especially for small businesses and freelancers. We’ve been able to work with them to provide them with the payment solutions they need, including cards, contactless, and even QR codes, in addition to cash.
Q: To what extent has the coronavirus pandemic accelerated the usage of digital payment methods in the country?
A: Even before the pandemic, there had been a huge growth in digital payments, and that’s only increased since the beginning of the pandemic.
When the original curfews began, most merchants were no longer able to accept cash, meaning that digital payments became mandatory. We’ve been working hard to ensure that small merchants and even freelancers can now have such methods at their disposal. We’re proud to have begun offering tap-on-phone methods to this group, too.
The ultimate driver of fintech is innovation, but without the proper regulatory environment, innovation is impossible
Cashless payments accounted for about 40% of payments in Saudi Arabia before the pandemic. Since then it’s risen to 60% and sometimes as high as 70% on a monthly basis.
In April, we signed an agreement with Mastercard to bring their tap-on-phone app-based payment to Saudi Arabia — the first deal of its kind in the MENA region.
Q: Geidea is a principal member of Visa and Mastercard, has been awarded an acquiring licence by SAMA and been added to the country’s Mada payment system. How will this help Geidea grow and expand?
A: Our goal is to be able to own the whole payments value chain, in order to provide a simpler and better payment experience for merchants. It’s important for us to run system-neutral, so that we can help merchants with their interactions with banks, with their direct payment needs and also with their interactions with third-party fintechs.
Q: You’ve already begun offering services in Egypt in conjunction with Banque Misr and National Bank of Egypt. Which other markets are you planning to enter?
A: We’re in discussion with the Central Bank of the UAE about receiving an acquiring licence, and also with a couple of local banks. We hope to be up and running in the fourth quarter of this year.
Following this, we’re looking at entering the remaining four markets in the Gulf Co-operation Council, and then in our second phase we’re targeting other markets in North Africa. Yet, Saudi Arabia — as the largest economy in the region — remains a priority.
Our ultimate aim is to be the biggest acquirer in the region. Each country has its own distinct regulations; it’s not like in the EU where a licence in one country can be used to access other markets in the bloc. At Geidea we’re trying to localise our offering based on the specific regulations of each market, but also trying to make connections among different markets in the region.
Q: How are you planning to fund such expansions? Are you open to third-party investment, similar to Western Union’s $200m investment in STC Pay?
A: For the time being, we are self-funded, and have managed to fund our growth from company revenues. This remains our plan in the short-term. No decision has yet been made about what mechanisms we will use beyond that. If an investor comes and knocks on our door, we’re always open.
Q: SAMA awarded Saudi Arabia’s first digital-only banking licences to STC Pay and Saudi Digital Bank in late June. Will Geidea also seek a banking licence?
A: For the time being we’re focusing on the acquiring side of things, and providing the best payment acceptance and e-commerce experience for merchants across the whole region.
Q: How much of a threat does the licensing of new entrants, together with the anticipated rollout of open banking in 2022, pose to Saudi Arabia’s established banks?
A: Customer behaviour continues to evolve at a very fast pace, especially as a result of the pandemic. Customers are increasingly demanding to interact with businesses remotely, whether that’s dining or banking. So, all banks need to continually enhance their digital channel offerings, with competition increasing with the new digital entrants.
For Geidea, some banks and other fintechs may see us as a threat, but I believe the opposite is true. Now that we’re active throughout the whole value chain, we can provide a better service to merchants, banks and fintechs. We run neutral, and we collaborate with banks to provide our solutions and services to their merchant customers, and we’ll do the same for the new digital banks.
