Capability Is the New Capital. How are policy, payments, and founder capability driving the next wave?

Abstract

Across MENA fintech innovation is increasingly pulled forward by policy, payments infrastructure, and founder capability; not just by capital availability. In 2024, total MENA startup funding landed at roughly $1.9B, a subdued headline number; yet the investor base broadened and early‑stage resilience persisted. By H1 2025, Saudi Arabia led the region by venture dollars, reflecting the compounding effect of regulatory enablement, maturing rails, and a founder pipeline that treats compliance as a product feature. We argue that in this context the winning venture thesis is “From Capital to Capability”: pairing checks with hands‑on help in licensing, distribution, data access, and risk/compliance so founders can cross the “policy–product” chasm faster.

1) Context: A cyclical slowdown masking structural progress

Headline VC flows softened in 2024, but the quality and diversity of investors rose. MAGNiTT estimates MENA startups raised $1.9B in 2024; by 9M‑2024, funding was $1.316B (‑6% YoY) even as unique investors increased 34%, a sign of broadening participation and improving market depth. In H1‑2025, Saudi Arabia topped regional rankings with $860M across 114 deals (+116% YoY), underscoring a re‑weighting of capital toward ecosystems with policy momentum and market‑making institutions.

This cyclical/structural divergence matters. For fintech, the structural drivers: payments digitization, open banking, pro‑innovation licensing, and regional cross‑border rails are accelerating even when global risk appetite oscillates.

2) The regulatory flywheel: when rails + rules compound

Three policy‑infrastructure dynamics now shape MENA fintech outcomes:

(a) Digitization of payments reaches critical mass. In Saudi Arabia, electronic (non‑cash) payments reached 79% of retail transactions in 2024, up from 70% in 2023, a +9 p.p. (+13%) relative increase in one year, alongside 12.6Be‑payment transactions (10.8B in 2023). This is not just usage; it’s an adoption threshold that pulls new business models (embedded finance, instant disbursements, SME tools) into viability.

(b) Market‑opening policies. Saudi’s Open Banking program (supervised by Saudi Central Bank – SAMA) is operational, with frameworks designed to let TPPs access bank data under a security/compliance umbrella, foundational for aggregation, credit scoring, and B2B finance. Approval for D360 Bank to commence operations further illustrates a regulatory stance that welcomes digital entrants under robust oversight.

(c) Cross‑border payment infrastructure. The Arab Monetary Fund Buna (The Arab Regional Payments Clearing and Settlement Organization) platform is linking banks and instant payment systems across the region (e.g., Buna–Raast interlinking), while partnerships (e.g., Mastercard × Buna) aim to reduce cost and latency of cross‑border flows; key for trade, travel, and SME commerce.

Complementing this, Google pay officially launched in KSA in September 2025 and @Alipay+ acceptance is slated via madaby 2026; signals that global networks are converging with local rails and standards.

3) Entrepreneurial supply: depth, breadth, & policy literacy

The founder pipeline has scaled materially. Licensed/operating fintech companies in Saudi Arabia reached 261 by end‑2024, up from 60 in 2020 (per KPMG), surpassing interim targets under the Financial Sector Development Program. The mix tilts toward PayTech and crowdfunding/lending, with RegTech, InsurTech, and digital banking rising next. Policy‑literate founding teams are increasingly treating compliance and integrations as “table‑stakes UX,” not after‑thoughts.

The UAE, meanwhile, shows merchant‑side traction: merchant acquiring revenues estimated around $470M in 2024 on $150Bin TPV; evidence of scale effects that attract global and regional PSPs, issuer‑processors, BNPL, and alt‑wallets.

Capital markets are also maturing: the Rasan(insurtech) IPO pricing at the top of its range in 2024 pointed to investor receptivity for fintech assets with real revenue and risk discipline, vital for later‑stage financing pathways.

4) What this means for early‑stage VC: “From Capital to Capability”

Thesis: In MENA fintech, durable alpha is less about being first money in and more about providing capability leverage that compresses the path from regulated idea → licensed product → scaled distribution.

We define four capability pillars VCs should bring beyond capital:

• Regulatory Readiness & Licensing Practical help interpreting frameworks (e.g., open banking scopes, EMI/payment licensing, lending/crowdfunding rules) and organizing timely pre‑filings and sandboxes. VCs with live templates, regulatory advisors, and case‑based know‑how reduce founder cycle‑time significantly. (Context: KSA’s open banking rollout; rapid rise in licensed entities.)
• Distribution Access & Ecosystem Brokerage Warm paths into banks, PSPs, telcos, and large enterprises remain the #1 constraint post‑MVP. Cross‑border platforms (Buna), and local scheme upgrades (e.g., mada integrations with Google Pay / future Alipay+) lower friction if founders can plug into the right nodes. VCs that can “broker” these integrations meaningfully expand TAM.
• Data Advantage & Risk/Compliance Tooling Open banking data, merchant acquiring datasets, and KYC/AML rails are raw inputs to underwriting and fraud. Portfolio‑level RegTech partnerships (e.g., AML/sanctions, orchestration, consent management) now act like shared services, improving unit economics and go‑to‑market speed. (Market depth illustrated by UAE acquiring TPV; KSA e‑payments penetration.)
• Talent, Operating Discipline & Capital Efficiency With higher funding selectivity, cost control and governance are differentiators. Founder education: product‑risk reviews, “compliance‑by‑design,” and evidence‑driven pricing, shortens time to bank‑grade partnerships and, ultimately, public‑market readiness (cf. Rasan trajectory).

5) Sectors we believe are “capability‑ready”

Given current rails and rules, we see near‑term opportunity in:

• B2B Payments & Working‑Capital Infra:invoice factoring with bank‑grade data, FX/treasury tools for SMEs tied to cross‑border rails (e.g., Buna corridors).
• Merchant Services & Acceptance:orchestration layers that unify cards, A2A, BNPL, RTP, and wallets (Google Pay now live; Alipay+ acceptance planned).
• RegTech & Compliance Automation:AML/KYC orchestration, transaction monitoring tuned to regional typologies; high attach‑rates across banks and fintechs as licensed footprints grow (261 firms at end‑2024).
• Open‑Finance‑Native Credit:consented data underwriting for SME cash‑flow lending, payroll‑linked credit, and embedded insurance, aligned with open banking program objectives.

6) A brief note on S60 Ventures’ vantage point

S60 Ventures is a fintech‑focused VC managed by Alistithmar Capital (a subsidiary of The Saudi Investment Bank), investing from Pre‑Seed to Series A (with selective co‑investment later) across KSA, UAE, the UK & Europe. The firm also launched an S60 Accelerator with Fintech Saudi (Money20/20 Middle East), and announced a $100Mfintech fund in 2025; signals of long‑term ecosystem commitment.

This institutional positioning and proximity to banks, regulators, and fintech operators maps directly to the “capability” thesis: regulatory clarity, distribution brokerage, and hands‑on build support can be delivered at scale.

7) A practical framework for founders & investors

To operationalize “From Capital to Capability,” we propose three checklists:

A. Readiness Index (pre‑seed/seed)

• Regulatory: clear license pathway (or sponsor‑bank model) mapped to 12–18‑month milestones; sandbox options validated.
• Data: well‑scoped bank or merchant data sources; privacy/consent flows architected for open‑banking norms.
• Distribution: ≥2 active pilot channels (bank, PSP, enterprise) with quantified CAC/payback targets.
• Risk:measurable fraud/credit‑risk guardrails; early AML/KYC orchestration. (These map to observed enablers in KSA/UAE market design.)

B. Capability Stack (seed–A)

• Licensing project plan (with external counsel + internal owner).
• Go‑to‑market built around merchant acquiring, RTP, or wallet rails.
• Data advantage backed by model governance; versioned risk policy.
• Unit economics stress‑tested under higher cost of capital.

C. Regionalization Playbook (post‑A)

• Rail selection (e.g., Buna corridors + local schemes) matched to corridor economics.
• Local compliance overlays (KYC, data residency, consumer claims).
• Partnership architecture(banks, telcos, PSPs) sequenced by time‑to‑revenue.

8) Policy suggestions to keep the flywheel turning

• Passporting & Mutual Recognition:Standardized “lite” regimes for specific low‑risk payment and data services would compress market‑entry costs across GCC/MENA. (Buna’s regional remit shows appetite for cross‑border harmonization.)
• Open Finance (beyond open banking):Expand to payroll, telco, tax, and commerce data under regulated consent to fuel SME finance and alternative underwriting.
• RegTech Sandboxes: Co‑develop shared testing environments for AML/KYC and transaction monitoring models to raise baseline safety without stifling entry.

Conclusion

MENA fintech is crossing from promise to policy‑enabled scale. The combination of payments digitization, open banking, bankable exits, and cross‑border rails is steadily lowering variance in early‑stage outcomes. In this environment, capital alone is not sufficient. The edge lies in capability: understanding the rails, earning regulatory trust, and brokering high‑signal distribution. That is the venture playbook we believe will define the next cohort of category leaders.

Sources

• MAGNiTT FY‑2024 and 9M‑2024 / investor base trends.
• H1‑2025 KSA leads MENA venture flows.
• SAMA retail e‑payments share (2023–2024).
• Open Banking (KSA) overview.
• FSDP/SPA: licensed fintechs 261 by end‑2024.
• KPMG: fintech count growth since 2020.
• Buna cross‑border rails; Buna–Raast; Mastercard × Buna.
• SAMA: Google Pay launch (2025); Alipay+ acceptance by 2026.
• UAE merchant acquiring estimates (2024).
• Reuters: Rasan IPO pricing.
• S60 Ventures focus and scope.