Open banking is set to shake up the traditional banking game and governments around the world, including those in the GCC, are ready to embrace it!
In this digital age, data management is all the more sensitive and important, and customers need to know that they are in full control of their financial data – which they are, with open banking! It’s equally important to make sure that providing access to data should be as easy to revoke as it is to give.
More established open banking markets have implemented or updated their banking regulations to prioritise consumer protection and standardize API requirements for interoperability, or more simply, seamless data exchange. The role of regulation shouldn’t be underestimated here, especially as the value proposition and on-the-ground implementation of open banking hinge on dynamic and clear guidance. However, navigating this novel landscape in the region can be challenging; fortunately, regional banks in MENA can look to the experience of early adopters in the UK and Europe for some guidance.
What banks need to know
In an earlier webinar hosted as part of the Open Finance Lab in partnership with DIFC, we explored the process of preparing to meet open banking standards in the region. We spoke with a senior executive at one of the first banks selected to meet open banking compliance standards and asked about the lessons learned from the experience. So, without further ado, here are four considerations that banks in the region need to know:
Open banking regulation usually requires banks to invest in new technology that meets specific standards. Focusing only on meeting those standards, however, would be a missed opportunity. The implementation of open banking is just the chance needed for banks to take their customer experience to the next level. It allows them to look at what customers need, what they want, what would ease their banking experience, and what would delight them. On the other hand, it also provides insight into what competitors are doing, analyse forecasts of the banking and commercial landscape, and think about the customer journey of the future. Open banking is expected to increase competition in the financial market, so playing it safe and staying within the traditional lines will not give banks the competitive edge. Go beyond compliance and place the customer at the centre of the transformation process.
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Meet your customers where they are
Being aware of the digitalisation of customer habits and accommodating those needs at a surface-level is no longer enough. Banking customers are becoming increasingly international, connected, and digitally savvy, and banks now need to meet customers where they are, not where they think they are, or where they want them to be. There’s a lot to learn about customer needs, wants and challenges. And, banks have the power to gain a much more detailed understanding due to the wealth of data at their fingertips, as well as their direct relationship with their customers.
Sharing data with fintechs or businesses, such as personal finance apps, can give banks visibility into their customers’ e-commerce, payment and saving habits, as well as their values and preferences. That way, banks will be better informed through detailed customer data analysis which can then help them design solutions that meet their exact needs and solve their challenges in this digital age.
Many would argue that tech development and adoption are critical to survival and success, and this is especially true now for banks as we progress into data-driven economies. The role of banks will change, and senior managers need to decide where their organisation will fit and how. It’s an opportunity for banks to evolve into data champions and custodians given their advantage of having established trust with their customers, more than anyone else. And open banking will further reinforce this trust as banks carefully choose to implement secure data-sharing APIs, or partner with a reputable open banking provider. This shift, however, requires a consistent budget, one that enables banks to consistently build on the insights gained from data-sharing to enhance and customise user experience.
The new data economy will be a competitive environment for banks, and some are moving ahead rapidly. A survey of 308 European financial services decision-makers showed that nearly half, 47%, had expanded their open banking budget in 2021. As open banking moves quickly towards mainstream adoption, time is of the essence to remain competitive.
Open banking empowers purposeful banking. How? It puts the financial health of customers and the communities that banks serve in perspective, and that’s possible through data. Data analysis and tech innovation allows banks to design solutions that, for example, provide better financial education or even broaden financial inclusion. Open banking provides the opportunity to think big, think beyond compliance, and truly think about the customer, beyond just a bank’s balance sheet. This will lead to the bank securing a more prominent role in the community, which helps everyone, including bank employees.
As we see the domino effect of open banking regulations being rolled out across different countries in the MENA region, we think it’s a great time for banks to consider and adopt the learnings from more established markets to gain an early competitive advantage. Banks that see this as an opportunity, and not an obligation, have the most to gain from the endless opportunities on the open banking horizon. But, where does it all start?
Open banking is just a connection away!
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