How open banking is transforming the regional financial services

Without a regional framework for open banking, each country is defining its own path through regulation and market-led practices. Bahrain was the original pioneer for open banking in the MENA region, adopting specific rules in December 2018 and also the first to adopt a framework (Bahrain Open Banking Framework) in the latter half of 2020.

Other countries have followed suit. Abu Dhabi Global Market and Dubai International Financial Centre have provided market level guidance and testing sandboxes. The Saudi Central Bank (SAMA) has already taken bold steps towards fintech regulation, introducing its open banking policy, in line with Vision 2030. This will go live this year, with implementation and adoption to follow soon.

According to the Arab Monetary Fund, Oman is also looking to develop its fintech ecosystem, including the drafting of an open banking API Strategy, which is part of its Fintech Framework and Roadmap. These are some of the findings cited in Tarabut Gateway’s 2022 MENA Open Banking Spotlight report.

Abdulla Almoayed, founder and CEO of Tarabut Gateway, says that based on these developments, the open banking sector is undergoing a major transformation. “2022 is set to be a huge year for open banking, helping to drive economic growth, increase revenues for financial services companies and support employment for thousands of people. Over the next 12 months, we will see far greater adoption and implementation of open banking by fintechs and financial institutions, providing customers with faster, better and more competitive products and services.”

The open banking journey
The report also predicts that by the end of 2022, there will be increased alignment between BNPL (or buy now, pay later) and SNPL (or save now, pay later) providers and open banking services. Such platforms are powered by the availability of financial data, and via open banking these businesses can provide enhanced service
and experience, through deeper insight into customer behaviour.

The most common and live use cases for open banking in the region are integrations across regional banks and fintechs, to operate AIS (or account information services) and PIS (or payment initiation services). Over the course of the year, multiple regional jurisdictions are expected to grant licences. This will allow customers with a complete view of their finances across accounts and enable payments to be made directly from their bank accounts.

Outlook for the year
According to the report, regional regulators, enterprises and fintechs will play a pivotal role in the development of innovative products and services. Through aligned visions, the region could leapfrog more mature markets and establish the Middle East as a leading and competitive global financial hub. The report also stated that policies and frameworks could be further defined across the UAE.

Read: The way forward for digital banking in the UAE