The Saudi Central Bank (SAMA) launched the Open Banking Lab recently, as per its Open Banking Framework (OBF) released in November last year.
The lab seeks to give banks as well as other fintech companies a technical testing environment to enable them to develop, test, and certify their open banking services to ensure compatibility with the OBF.
Helping us understand the significance of open banking, Richard Gardner, CEO of fintech giant Modulus Global, said that it essentially gives consumers, be it individuals or businesses, better control over their financial data, by facilitating easy access to third parties enabling them to create new products and services.
“One of the most critical use cases involved is the personalization of financial services,” explained Gardener. “This includes better access to fintech firms which utilizes transaction data to create customized budgets, debt repayment, and investment plans, among others.”
Bradley Allgood, co-founder, and CEO of fintech infrastructure company Fluent Finance agrees. He explains that by enabling greater freedom in the flow of money and financial products, open banking could lead to reduced costs for delivering services.
“It also enables new use cases that are not currently possible with the existing banking system in the region, such as easier expansion for Western businesses and the development of local fintech startups,” said Allgood.
SAMA’s OBF includes a comprehensive set of legislation, regulatory guidelines, and technical standards based on international best practices to support banks and fintech in the region. Allgood shared that his company is currently evaluating SAMA’s OBF and opportunities within the Neom special economic zone to determine how it aligns with their interests in banking innovation.
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Open Banking in MENA
While Saudi Arabia has just started dabbling in Open Banking, one of its neighbors, and a fellow member of the Gulf Cooperation Council (GCC), Bahrain has had a legislative framework in place to facilitate open banking since 2019.
Both our experts believe there are plenty of positives that can be gleaned from the Central Bank of Bahrain’s (CBB) tryst with open banking.
Pointing to some of CBB’s major wins, including spearheading testing with J.P. Morgan to address cross-border payment inefficiencies, Gardener is of the opinion that it only makes sense for SAMA to learn from CBB’s experience.
“The CBB was definitely a leading force of innovation in open banking, developing a legislative framework based on pieces of the EU’s PSD2 regulation, as well as the UK’s OBIE, using the ISO 20022 standard,” reiterates Gardener.
According to Allgood, SAMA can gain valuable insights from Bahrain’s experience with open banking, which they can then build upon. “It is important to have a strong understanding of not just traditional banking, but also new banking frameworks and technologies such as blockchain and ISO20022,” said Allgood.
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