According to a recent report released by the Arab Monetary Fund (AMF), the Open Banking market in Arab countries is projected to experience an annual growth rate of 25 percent over the next five years. The report, titled “Effective Open Banking/Finance Adoption,” was developed by the Arab Regional Fintech Working Group (WG) in collaboration with 10 Arab Central Banks and Fintech Galaxy, a regional Open Banking firm. This comprehensive guide aligns with the Fund’s commitment to assist Arab central banks in establishing a robust framework for implementing Open Banking/Finance initiatives.
 Read more: Embracing Open Banking: A gateway to fintech innovation in the Middle East
The “Guidelines for an Effective Open Banking/Finance Adoption” delves into the realm of Open Banking/Finance in the Arab region, shedding light on key developments and associated challenges across various Arab countries such as Jordan, UAE, Bahrain, Saudi Arabia, Iraq, Oman, Palestine, Kuwait, Egypt, and Morocco.
Furthermore, the report extensively examines global regulatory frameworks pertaining to Open Banking/Finance, draws insights from exemplary jurisdictions, outlines adoption requirements and prerequisites, addresses deployment challenges, draws upon lessons learned from global implementation experiences, and provides recommendations for successful implementation and the enhancement of financial inclusion.
Effective regulatory framework
To establish a robust foundation for the Open Banking ecosystem, an effective regulatory framework must consider various aspects. These encompass defining Open Banking, identifying participant types, determining the scope of shared data, establishing requirements for data access and sharing, implementing consent mechanisms and ensuring informed consent, addressing data security, identifying regulated Third Party Providers (TPPs), enabling TPP access, licensing diverse service providers, establishing operational and technical requirements, implementing consumer safeguards, devising a governance scheme for framework implementation, regulating Application Programming Interfaces (APIs), standardizing APIs, and standardizing contractual terms with non-regulated entities.
Pertinent frameworks
In order to embrace Open Banking/Finance, authorities must adopt pertinent frameworks and empower the market to harness the potential of Open Banking and APIs for various use cases. These encompass account aggregation, credit scoring services, digital identity verification, remote customer onboarding, digital lending, personal financial management, account-to-account payments for significant purchases, and Buy Now Pay Later (BNPL) arrangements.
The report highlights valuable insights gained from global experiences, underscoring the significance of extensive stakeholder consultation and dialogue preceding the release of most Open Banking regulations.
Practical guide
It also provides a step-by-step and practical guide, along with the concerned stakeholders, outlining the key considerations and actions needed to establish successful Open Banking/Finance frameworks. It also highlights that Open Banking/Finance framework should be tailored according to each country’s specific conditions, its financial digital infrastructure, levels of readiness and progress, as well as respective legal and regulatory frameworks.
Valuable resource
Commenting on the guide, Dr. Abdulrahman Al-Hamidy, director general chairman of the Board of AMF, commended the Arab Regional Fintech Working Group for their efforts in producing the guide. He expressed his recommendation of the guide as a valuable resource for Arab countries, offering insightful guidance for the implementation of efficient Open Banking/Finance frameworks.
Roadmap for growth
Mirna Sleiman, founder and CEO of Fintech Galaxy, highlighted that “Prepared in partnership with Fintech Galaxy and Central Banks from various Arab countries, this guideline offers a roadmap that everyone can learn from and grow with as it simplifies complex concepts and helps fast-track Open Banking adoption across the region. The collaborative approach aims to share best practices, present new opportunities and create value to all parties.”
For more news on banking and finance, click here.
