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Open banking flourishing across the GCC region

Visa executive touches on challenges and opportunities
Open banking flourishing across the GCC region
Godfrey Sullivan, senior vice president, CEMEA's head of strategy, Visa

Open banking is key to reshaping the conventional banking experience into a digitally empowered one. This concept entails financial institutions granting third parties access to consumer data through application programming interfaces. This subsequently enables more entities to innovate and offer new financial products and services to enhance the overall customer experience.

In this interview, we caught up with Godfrey Sullivan, senior vice president, head of strategy Central and Eastern Europe, Middle East and Africa at Visa to discuss open banking within Gulf Cooperation Council countries (GCC). Our conversation also explores the challenges and opportunities as well as Visa’s pivotal role in driving forward the banking industry in the region.

What are your perspectives on how open banking has evolved since its inception in the GCC region? How has it impacted the financial ecosystem here, and are there any notable global parallels or contrasts?

Open banking is becoming popular with both consumers and financial institutions alike. And while Europe and the U.S. were the first to adopt it on a large scale, the GCC region is starting to catch up, fueled by regulatory changes and forward-thinking leadership.

Bahrain is a pioneer in the open banking space, having launched regulations almost three years ago. It has also established a digital sandbox where providers can test new ideas – ensuring they are fit for end users and compliant with regulations – before taking them to market. The country’s Financial Services Development Strategy has mapped out the sector’s development goals up to 2026, including a plan to release an open finance framework.

The Saudi Central Bank (SAMA) has been particularly forward-looking in its approach to open banking, launching its open banking framework in November 2022 followed by its own Open Banking Lab earlier this year. The latter provides banks and fintechs with a technical testing environment that enables them to develop, test and certify their open banking services to ensure compatibility.

In the United Arab Emirates, the Central Bank (CBUAE) has played a leading role in positioning the nation as an open banking hub, with its Financial Infrastructure Transformation program enhancing competition and driving innovation in the sector. It has also committed to hiring some of the world’s leading open banking talent to support its drive in this area. In the coming months, we can anticipate the emergence of even more forward-thinking regulations from the CBUAE.

How pivotal are collaborations in growing the open banking sector in this region? How is the Kingdom of Saudi Arabia positioned to lead tech innovation in the forthcoming banking ecosystem, and what steps can the industry take to remain at the forefront?

Collaborations between industry leaders like Visa and innovative fintechs play a pivotal role in driving the growth of the open banking sector across our region. These partnerships bring together expertise, technology and resources to create a robust ecosystem that fosters innovation, enhances customer experiences and expands financial access.

KSA’s commitment to open banking and tech innovation is commendable. The launch of the Open Banking Lab, the introduction of the Account Information Services and Payment Initiation Services frameworks, and the flexible regulatory sandbox approach highlight the proactive stance of the Saudi Central Bank in creating an environment conducive to innovation. By embracing open banking, the Kingdom is poised to lead the tech innovation in the forthcoming banking ecosystem.

To remain at the forefront, the industry should continue to nurture collaboration between regulators, financial institutions and fintechs, fostering a culture of experimentation and investing in robust cybersecurity frameworks.

Open banking

Open banking is rapidly evolving. What challenges and opportunities do you foresee for financial institutions, fintechs and consumers over the next decade? Also, how can Saudi Arabia’s economic landscape address adoption barriers to further embrace open banking?

Open banking’s rapid evolution brings both significant opportunities and unique challenges for financial institutions, fintechs and consumers over the next decade.

The opportunities are immense – customer data remains siloed across not only banks but many other organizations. Done effectively, it will improve credit risk scoring for banks, consumers and SMEs, easing access to financing. Open banking’s personal financial management may take time but promises to revolutionize finance tracking across institutions, benefiting many.

Read: Embracing Open Banking: A gateway to fintech innovation in the Middle East

One of the most noteworthy challenges is going to be around consent management. How do regulators and banks ensure that customers always remain in control of their data and how it is used?

This is particularly important for us at Visa, where our global research team has spent a lot of time exploring this point with our banking partners and formulating our industry perspective on how consent management should work.

What is Visa’s role in enabling open banking?

Visa is the network of networks that helps knit the ecosystem together. Its Tink platform, for example, connects to more than 3,400 banks with a single API, enabling money movement, financial data aggregation and services such as risk insight and account verification. Meanwhile, the cloud-native platform Yellow Pepper facilitates payment flows through multiple rails via a single connection.

In the GCC region, we have also invested in one of the leading open banking players, Tarabut Gateway, and have a very exciting commercial partnership in place to help develop the sector.

With Tarabut, Visa has made its first investment in open banking in GCC. Can you provide insights into the essence of this collaboration and its potential impact on the financial landscape in the region?

The partnership between Visa and Tarabut Gateway is a testament to our shared commitment to redefining open banking in the GCC region. By joining forces, we are harnessing the power of Visa’s global payments network and Tarabut Gateway’s innovative open banking platform to deliver cutting-edge financial services tailored to the unique needs of this market. Our collaboration is not just about products; it’s about driving innovation and inclusivity.

Our partnership aims to leverage this power to introduce data-driven solutions such as credit risk assessments and advanced analytics. Additional anticipated solutions will involve cross-border payments and lending.

This collaboration demonstrates how industry leaders can come together to catalyze innovation, create new opportunities and address challenges collectively.

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