In recent years, Open Banking has emerged as a global phenomenon, revolutionizing the financial landscape and creating new opportunities for both consumers and businesses. The Middle East, in particular, is rapidly embracing this transformative technology, with several countries in the region actively adopting Open Banking frameworks to unlock the potential of fintech innovation.
Bahrain
Bahrain, known for its pioneering role in fintech experimentation, has taken significant strides in implementing Open Banking. The Central Bank of Bahrain (CBB) launched the Open Banking Framework in 2020, providing comprehensive rules and guidelines for account information and payment initiation services.
As of the time of writing, CBB has identified seventeen banks that are in compliance with the Open Banking framework.
This framework, inspired by the European PSD2 (Payment services directive) and the UK’s OBIE (Open Banking standard), has laid a solid foundation for competition, innovation, and financial inclusion in the market.
Saudi
Saudi Arabia has taken a regulator-led approach in embracing Open Banking, with the introduction of a comprehensive framework in November 2022 that encompasses account information services (AIS) and payment initiation services (PIS). The Saudi Central Bank (SAMA) mandated banks to make their AIS APIs available by the end of the year, followed by PIS APIs by the end of March, although there was a slight extension to these deadlines.
To facilitate the implementation of the framework, SAMA launched the Open Banking Lab in January. This innovative platform provides a technical environment for banks and third-party players (TPPs) to develop, test, and certify their Open Banking services in adherence to the established framework.
UAE
The United Arab Emirates (UAE) has adopted a market-led strategy in embracing Open Finance, actively working towards the development of a comprehensive regulatory framework. To facilitate this process, the Central Bank of UAE has initiated the Financial Infrastructure Transformation Programme, with the ambitious goal of achieving full implementation of Open Finance by 2026.
Although a formal framework is yet to be established, the UAE has made significant progress by implementing a live API standard. This step has allowed industry players to explore and experiment with Open Banking services, laying the foundation for future advancements in the financial sector.
The UAE’s market-led approach demonstrates a commitment to fostering innovation and collaboration between traditional financial institutions and emerging fintech companies.
Qatar
In fact, while Open Banking is still in its nascent stage of adoption in Qatar, the efforts of the Qatar Central Bank (QCB) and the growing interest among the country’s financial institutions indicate a clear intent to develop a robust framework for Open Banking and explore its potential benefits.
In March 2023, the QCB released the Fintech Sector Strategy Summary, which is built upon four strategic pillars. The primary objective of this strategy is to facilitate the digital transformation of Qatar’s financial services ecosystem, attract foreign direct investment, and promote financial literacy skills. Developing an Open Banking architecture is prominently featured in the strategy for the next five years, along with the introduction of fintech regulations encompassing Open Banking and associated standards.
Additionally, the anticipated regulatory framework will provide guidelines for the authorization and supervision of third-party providers, secure sharing of customer data, and obtaining customer consent. By establishing these regulations, Qatar aims to ensure a secure and transparent Open Banking environment that safeguards the interests of customers and fosters innovation in the financial sector.
Moreover,Qatar’s financial institutions are proactively exploring avenues to implement Open Banking and collaborating with fintech companies to introduce new services and products for their customers. In 2022, Qatar National Bank (QNB) took the lead by launching its dedicated Open Banking Platform, enabling customers and partners to access their APIs.
Oman
Oman has made significant progress in the development of its fintech framework and roadmap, and it is now actively working towards formulating an Open Banking API strategy. This comprehensive strategy encompasses a range of initiatives aimed at fostering a strong fintech ecosystem that drives innovation within the financial sector.
Also, one of the key initiatives in Oman’s Open Banking API strategy is the establishment of sandboxes. These controlled environments provide a platform for fintech companies to test and refine their products and services in a secure and regulated setting. By facilitating experimentation and collaboration, these sandboxes contribute to the growth and development of innovative solutions in the financial industry.
Additionally, Oman is leveraging cloud-based frameworks to support the implementation of Open Banking. Cloud technology enables efficient and scalable infrastructure, facilitating seamless integration and interaction between financial institutions and third-party providers. This approach promotes agility, cost-effectiveness, and improved service delivery within the fintech ecosystem.
Besides, Oman is actively involved in eKYC (electronic Know Your Customer)-related activities. By digitizing and streamlining customer identification and verification processes, eKYC initiatives enhance efficiency, security, and customer experience. This digital transformation enables financial institutions to onboard customers more swiftly and securely, while complying with regulatory requirements.
Read more: Open banking: A window of opportunity to drive change
Kuwait
Similarly, the Central Bank of Kuwait (CBK) is exploring an approach that combines Open Banking with Europe’s General Data Protection Regulation (GDPR) to ensure the protection of consumer data. In 2018, the CBK introduced a Regulatory Sandbox, which provides a secure environment for testing innovative fintech products and services without compromising the stability of the banking and financial system. Additionally, to enhance its effectiveness, the Sandbox was expanded in 2019 to accommodate a wider range of products and services.
In addition, recognizing the significance of a Regulatory Framework and API specifications for Open Banking, specialists at the CBK conducted a comprehensive study. As a result, the CBK established the “CBK Open Banking Working Group,” which comprises experts from the CBK and Kuwaiti banks. This working group is responsible for developing the necessary regulatory framework and defining API standards to govern Open Banking activities in Kuwait.
By merging Open Banking with GDPR, the CBK aims to strike a balance between innovation and data protection. This approach ensures that the implementation of Open Banking in Kuwait aligns with the stringent data privacy regulations set forth by GDPR.
Furthermore, through these initiatives, the CBK is actively promoting the growth of Open Banking in Kuwait, encouraging the adoption of advanced fintech solutions, and facilitating secure data sharing within the financial sector.
A promising Middle East
Finally, by embracing Open Banking, the Middle East aims to enhance customer experiences, promote financial inclusion, and stimulate fintech innovation. As countries in the region continue to adopt Open Banking frameworks and foster collaboration between traditional financial institutions and fintech companies, we can expect a surge in diverse use cases and the emergence of a vibrant and dynamic fintech ecosystem in the Middle East.
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