Middle East Finance: AI, Regulations, and Digital Transformation

This initiative aims to address new risks arising from the kingdom's mega-projects and a significant increase in tourism. The Authority was established three years ago to oversee this comprehensive transformation, underscoring the strategic importance of insurance in the nation's economic diversification efforts.

Saudi Arabia's insurance authority is transitioning from a traditional supervisory and control role to actively enabling market development. This strategic shift involves significant investment in infrastructure and data hubs designed to support the burgeoning insurance ecosystem. The authority is also fostering an environment conducive to innovation, notably through the establishment of an insurance innovation lab.

Naji Altoimi, speaking on this shift, stated, "Our mandate is probably unique. Probably we have couple of regulator on the globe. They have a mandate where extended I mean to do more in the market development."

This approach aims to create a dynamic landscape where new solutions can emerge and thrive. By nurturing the market, the regulator seeks to drive growth and efficiency within the sector.

This move acknowledges that technological advancements and evolving market needs require a more proactive regulatory stance. It sets the stage for a more collaborative relationship between the regulator and market participants, focusing on collective growth and resilience.

This lab offers a welcoming environment for innovators, businesses, and investors to experiment with new ideas. A regulatory sandbox complements this initiative, providing a secure space for testing novel solutions.

According to Naji Altoimi, "We launched a few weeks back the innovation lab we call it. So it is basically welcome anybody any innovators any business or investor who are willing entrepreneurial also to really test solutions." This open approach extends to licensing new foreign digital insurers, such as Alan Insurance, further integrating global expertise into the local market.

This pilot stage is crucial for testing and learning before the full implementation in January 2027. The sector's total capital has already seen significant growth, reaching 36 billion SAR, an increase from 25 billion SAR, indicating robust financial health.

Naji Altoimi confirmed, "We introduced this year since January the RBC which is riskbased capital and it is in a pilot stage for this year to test and to learn." In parallel, the authority is actively licensing new multinational reinsurers, aiming to diversify and strengthen the market's capacity.

Tabby has significantly expanded its financial capabilities by securing consumer and SME financing licenses. This development allows the company to offer a broader range of services beyond its initial offerings. The service now reaches 25 million customers, marking substantial growth in its market penetration.

Abdul Aziz Saja explained, "What this funding round allows us to do is do much more than that. We've secured the consumer financing and theme financing licenses." This expansion brings increased responsibility to maintain high financial standards and robust consumer protection, as Tabby navigates its role as a key player in the evolving digital finance landscape.

State Street has strategically evolved from a traditional fund administration service provider to an integrated platform approach, a shift initiated in 2018. This transformation involved acquiring front office systems and consolidating front services, technology, and data under a unified banner. The flagship offering, 'State Street Alpha,' provides a single, integrated solution for clients.

Mustafa Taheri elaborated, "In 2018 we decided to become a platform which means we acquired front office systems and we integrated front services front technology and data under one single banner." This move redefines client relationships, shifting them from a service provider dynamic to a strategic partnership dependency, offering comprehensive support across the investment lifecycle.

Digital assets are increasingly being treated as a mainstream asset class, necessitating seamless integration. Tokenization, for example, is identified as a key mechanism to facilitate pension funds' access to private markets.

Mustafa stated, "the problem have never been technology we have an abundance of technology the problem is adoption and adoption when it make sense." This highlights the need for technology to meet stringent standards of safety and quality to ensure successful implementation and widespread acceptance across the industry.

The emphasis is now on measuring actual impact rather than simply the number of projects undertaken.

Mustafa remarked, "we moved away from counting number of pilots to big domain transformation." This involves a fundamental rewiring of organizational structures around high-stakes deliverables, ensuring that resources and efforts are concentrated on initiatives that promise significant, measurable change across critical business areas.

This shift reflects a maturation in how companies approach innovation and digital transformation, recognizing that piecemeal efforts often fall short of achieving strategic objectives. By concentrating on broader domains, organizations can achieve more profound and sustainable changes, fostering a culture of accountability for results.

This new strategy prioritizes systemic change over incremental improvements, driving a more cohesive and impactful transformation agenda. It encourages a holistic view of business operations, where technology and process improvements are integrated to deliver value across an entire domain.

Financial regulators are increasingly concerned about the systemic risks introduced by AI-driven automated agents. The rapid advancement of AI necessitates a balance between fostering innovation and ensuring robust regulatory oversight. As AI tools become more sophisticated, the potential for new vulnerabilities grows, prompting regulators to reconsider existing frameworks.

Mustafa emphasized, "if you use agent that mean you create more risk and I'm more concerned about you the reality as I told this person you should be concerned about us if we are not." This statement highlights the tension where regulators fear that automated agents could introduce unforeseen risks.

However, there is also a recognition that defense against emerging threats requires the counter-adoption of AI technologies. This dual approach means leveraging AI for security and risk management while also regulating its deployment. Transparency in the underlying infrastructure of AI systems is critical for regulators to ensure compliance and mitigate potential dangers.

This ongoing dialogue between innovators and regulators seeks to establish a framework that supports technological progress without compromising financial stability. The goal is to define clear guidelines for AI use, ensuring that its benefits are realized responsibly and securely across the financial sector.

This involves annotating obligations using a precise taxonomy, which facilitates easier cross-border comparisons. The goal is to create a more consistent and transparent regulatory environment.

Dr. Mansour Alle questioned, "can we take those regulations and have a more fine grained structures within them?" This approach allows for automated analysis to identify policy gaps and inconsistencies, leading to more harmonized and effective regulation. Such codification can significantly streamline compliance processes for financial institutions operating across multiple jurisdictions.

This infrastructure is built upon four critical pillars: digital identity, e-invoicing, interoperability, and robust payment systems.

Mario Noble strongly articulated, "I strongly believe that the building blocks, we call them building blocks like Lego of the digital public infrastructure will be, you know, uh as important as payment rails have been during the last 20 years." These building blocks are considered essential for facilitating seamless cross-border operations within a market comprising 27 countries.

The widespread adoption and integration of DPI are expected to significantly enhance efficiency, reduce friction, and foster greater inclusion across various sectors. This foundational shift is poised to unlock new economic opportunities and streamline interactions for businesses and citizens alike.

The Saudi Central Bank (SAMA) is experimenting with 'policy codification' to create regulations that are not only machine-readable but also machine-executable. This innovative approach aims to establish a single, definitive reference point for all obligations and articles within various financial policies. The objective is to eliminate ambiguity and ensure consistent interpretation and implementation across the financial sector.

Mansour emphasized, "The way forward for this is just to have one single reference reading for the obligations or the articles within the policies the various policies. And that's what we call policy codification or you know a code that machine can execute." By converting regulatory text into executable code, SAMA seeks to significantly reduce the gap between policy intent and its practical application by regulated entities.

This method offers a powerful tool for regulators to test draft policies for potential ambiguities or unintended consequences before they are finalized and enacted. Such proactive testing can lead to more robust, clearer, and ultimately more effective regulations.

Ultimately, policy codification is expected to enhance regulatory efficiency, streamline compliance efforts for financial institutions, and foster a more predictable and transparent regulatory environment within Saudi Arabia's rapidly evolving financial landscape.

This granular approach aims to move the debate beyond generalized 'AI fear' to specific, application-based safety standards. The levels are being applied across adoption, procurement, and development processes for AI technologies.

Mario explained, "In the financial sector, in the health care sector, you move from level two to level three to level four. Sometimes it's important not talking about agents against someone. See which is the autonomy level in your specific application." This method allows for a more nuanced understanding of AI's role and risks within different financial applications, ensuring that regulatory efforts are targeted and effective.

By defining clear autonomy levels, regulators can establish appropriate oversight mechanisms for various AI deployments, fostering responsible innovation. This framework helps stakeholders evaluate the specific risks and benefits associated with different degrees of AI autonomy, promoting a more constructive dialogue around its integration into critical financial processes.

This strategic shift aims to create a regulatory environment that both encourages technological advancement and safeguards against potential misuse or unintended consequences. It provides clarity for developers and users of AI, facilitating its safe and effective deployment in a complex and regulated industry.

This inclusion is expected to unlock more two-way investment and trade flows between Guernsey and the GCC countries.

William Mason stated, "We've just been included in the UK uh Gulf Corporation Council Saudi Trade Treaty for Services. So, I'm certainly here hoping that that trade treaty will unlock more two-way flows between our our two countries." The treaty aims to boost investment confidence and minimize future withholding taxes, creating a more favorable environment for cross-border financial activities.

Further cementing this relationship, Guernsey and Saudi Arabia are in the process of signing a Memorandum of Understanding (MoU) specifically focused on collaboration between their respective insurance authorities. This initiative underscores the growing strategic partnership and shared interest in developing robust financial sectors.

His early caution regarding ICOs reflected a broader regulatory apprehension towards nascent technologies. This initial stance, however, evolved significantly over time.

William Mason admitted, "Well, I I suppose I started off slightly as a skeptic. I think we were quite skeptical about things like initial coin offerings in Gernzi." To bridge the knowledge gap, he initiated an internal AI project team 5-6 years ago.

Further demonstrating his commitment to understanding the technology, he completed an MIT course, emphasizing the need to "get hands dirty" with the subject matter. This hands-on approach allowed him to gain a deeper, practical understanding of AI's capabilities and implications.

Now, his focus is on developing 'Goldilocks zone' regulation, which aims to avoid bureaucratic stagnation while effectively managing risks. This balanced approach seeks to foster innovation without imposing overly burdensome or premature restrictions, striking the right balance for the evolving digital landscape.

This evolution, initiated in 2026, aims to process more complex optimizations across their network and handle increased transaction volumes.

Rory O'Neal highlighted the immediate impact, noting that 'Agent HAL' generated 70% of engineering pull requests in Q2 2026, demonstrating significant automation in development. Additionally, 'Agent Max' is under development to identify idle liquidity within their network, promising improved capital efficiency.

Natural language processing (NLP) is also playing a crucial role, helping merchants integrate 81% faster. This comprehensive adoption of advanced AI is poised to enhance operational efficiency, optimize financial flows, and accelerate merchant onboarding processes for Checkout.com.

A recent survey reveals that 55% of Saudi consumers are worried about the security of agentic payments. This concern is further amplified by fears of deepfakes and other forms of fraud, with 49% expressing apprehension.

Rory O'Neal underscored these concerns, stating, "55% of Saudi consumers are worried about using agentic payments for security reasons. 49% of them are worried about deep fakes and other aspects of fraud." This indicates that while discovery phase adoption of AI-powered services might be progressing, actual payment adoption lags due to these security anxieties.

For the next phase of growth in AI payments, ensuring total security and privacy is not merely a preference but a mandatory prerequisite. Addressing these consumer fears through robust security measures and clear communication will be critical for fostering trust and accelerating adoption.

This journey highlighted that migration and reinvention are not solely the responsibility of technology departments but require a company-wide mandate and collective effort. Every function—from business to compliance—must move together for successful implementation.

Mansour Zaharani stressed, "The key points that we learned from this journey is about you know the organiz organization itself it should move together in this transformation means the transformation The migration the reinvention is not a responsibility for technology for business compliance and other business." Significant investments were made in state-of-the-art infrastructure, enabling the launch of 25 new products in 2025/2026, showcasing the fruits of this unified approach.

Early and close collaboration with the Saudi Central Bank (SAMA) proved vital for navigating regulatory landscapes and ensuring compliance throughout the transformation process. This proactive engagement helped streamline approvals and integrate regulatory requirements seamlessly into the new banking structure.

The successful transition demonstrates that a holistic, integrated strategy involving all organizational units and external stakeholders like regulators is essential for large-scale digital transformation initiatives. This ensures not only technological advancement but also regulatory adherence and market acceptance.

This cohesive strategy prevents silos and ensures that the entire organization is aligned toward common goals, fostering a more efficient and effective transformation. It highlights that change management, beyond just technology deployment, is a cornerstone for such ambitious endeavors.

This new approach involves building extensive networks of technology partners to co-create and integrate new ideas onto their platforms. The aim is to foster a broader ecosystem where external fintechs can leverage existing infrastructure.

Muhammad explained, "So in in recent years we adopted a new form of not only relying on our own teams to come up with the new ideas and innovative ideas but we have built a lot of technology partners that enables us really to uh bring new ideas to our platform or enable a third party fintech that is looking really for an infrastructure or a or a bigger partner." This strategy views the firm's role as an 'ecosystem' provider rather than the sole innovator.

By enabling third-party fintechs with infrastructure and access, these firms aim to accelerate the pace of innovation and bring diverse solutions to the market more efficiently. This collaborative model allows for greater flexibility and scalability, leveraging specialized expertise from various partners.

This shift reflects a recognition that no single entity can innovate in isolation in today's rapidly evolving financial landscape. Partnerships allow for shared risks, combined resources, and faster time-to-market for new products and services, ultimately benefiting consumers and driving sector growth.

Initially, its value proposition was tied to its presence during the purchase decision and the context of the transaction. The new strategy focuses on becoming a broader financial services provider.

Hosam Arab elaborated, "The challenge with um being at the point of checkout is you're only there when that decision needs to happen... that's where we see kind of the the next phase of the business going is how can we own more and more of that relationship with a customer?" This involves expanding offerings, such as the introduction of 'Tabby Cash.'

Evidence of this strategic shift and its success is seen in the rapid scale of new product adoption, with over a million cards and wallets opened within just three weeks. This indicates strong market demand for integrated financial solutions that extend beyond simple payment processing.

By owning more of the customer relationship, Tabby aims to increase engagement, loyalty, and lifetime value. This move positions the company as a more central and indispensable part of its customers' financial lives, providing a wider array of services that cater to evolving needs.

The first priority is to minimize interoperability challenges and fragmentation across the payment ecosystem, aiming for seamless transactions.

Alli outlined, "I look at three things or three areas that we face today is one, how do we reduce fragmentation and interoperability across the ecosystem. The second one from our perspective, how can we bring a global products and solutions to local markets and how can we localize these solutions. And the third one of course how to provide the right customer experience." The second focus is on adapting global products and solutions to local markets, ensuring regulatory compliance and cultural relevance.

Finally, Visa is committed to enhancing customer experience through the seamless and effective delivery of its products. This holistic strategy aims to create a more efficient, accessible, and user-friendly payment environment globally. By addressing these three pillars, Visa seeks to maintain its competitive edge and drive further innovation in the digital payment landscape.

The act of moving money from point A to point B is increasingly becoming a commoditized service, no longer serving as a primary differentiator for financial institutions. Customers now expect payments to be secure, instant, and traceable as a basic hygiene factor. This fundamental shift means that competitive advantage must be sought elsewhere.

Malikica stated, "I think this payments and the money will be commoditizing facets because now simply you know the moving money from A to B is not anymore you know the differentiating factor and customers are expecting to do this payments in a secure instant and traceable way. This is now already became an hygiene." In this evolving landscape, data insights and highly specialized products are emerging as the true sources of competitive advantage.

These insights allow institutions to offer tailored services and predictive solutions that truly add value beyond basic transactions. Furthermore, robust licensing frameworks now serve as a crucial 'moat' for businesses, providing protection and a competitive edge in a rapidly shifting regulatory environment. This highlights a transition towards value-added services and strategic positioning as key drivers of success.

This move is expected to significantly enhance the financial ecosystem within Saudi Arabia, offering new opportunities for both consumers and businesses. Lean is currently in the certification process with various banks and SAMA itself.

Hisham expressed optimism, stating, "the Saudi central bank is officially launch the next phase of PIS which is payment initiation service. We are currently in the process of certification with the banks and with the central bank and are hopeful that in the next few months we'll be able to launch the service in Saudi." The introduction of PIS is anticipated to reduce costs for merchants by streamlining payment processes.

Furthermore, this service is expected to increase financial inclusion by making payment services more accessible and efficient for a wider segment of the population. The successful rollout of PIS in the coming months will mark a significant milestone in Saudi Arabia's journey towards a more advanced and integrated digital financial infrastructure.