Open Banking in Saudi Arabia: Fuelling Tech Innovation

Open banking is gaining speed in the MENA region; governments, technology, and people are all making it happen as regulatory initiatives, technological advancements, and a savvy population are driving its adoption.

In fact, countries like Bahrain, Saudi Arabia, Kuwait, Egypt and the UAE are all in different stages of welcoming the technology. Consumers and businesses alike are also starting to see the benefits of open banking and the opportunities it can bring. It’s an exciting time for the financial industry in the MENA region, and it’s especially important for the Saudi Arabian market considering the recent launch of the Open Banking Framework.

A Progressive Vision

Saudi Arabia recognises the significance of being a leader in the inevitable shift towards open banking. The government has a progressive vision focused on the customer and is taking steps to create regulations that address the specific needs of their country, while at the same time taking into account learnings from other open banking markets.

KSA’s momentum accelerated with the Saudi Central Bank (SAMA) issuing its policy on open banking in 2021, allowing the country’s financial services sector to diversify and commence operations. The policy outlined the regulator’s ambitions and highlighted a plan for its implementation and go-live. And the establishment of the Open Banking Program is where it all begins, serving as a key initiative under the Kingdom’s Fintech Strategy and part of its ‘Vision 2030’.

Ahead of the curve in open banking implementation

In late 2022, the region was abuzz with SAMA’s issuance of the Open Banking Framework – as part of the Open Banking Program – currently focused on Account Information Services (AIS).  Put simply, this first issuance outlines guidance on the sharing of banking data. It’s very clear that SAMA is adopting a unique and adaptable approach to open banking, tailoring it to the Kingdom’s needs:

  • Always open sandbox: Instead of a ‘cohort-based’ regulatory sandbox, which limits participation and application to specific cohort start and end dates, SAMA’s sandbox is ‘always open’ to accept applications from fintechs at any time. This is because, for the Kingdom, it’s all about open regulations for open banking.
  • Technical enablement: The launch of the country’s Open Banking Lab is expected to take the Saudi Arabian fintech industry to the next level. SAMA is monitoring the readiness of banks and fintechs, with the aim of launching open banking services very soon. The Lab aims to inspire innovation and boost open banking’s growth in the country. At the same time, it will serve as the go-to tech environment where banks and fintechs can test and verify their services and ensure compatibility with the Framework.

AIS Framework: Guidelines and Use-cases

Three examples showcase how things will work in practice and the benefits of the AIS framework for sharing banking data:

  • With account aggregation, banks and fintechs can now offer their customers a complete and personalised view of their finances across different accounts and institutions, providing more transparency and supporting more-informed financial decisions. Banks and fintechs can also benefit from data sharing, with customer consent, as it can help them understand better what to build. For instance, personal financial management (PFM) fintechs can now leverage data insights to better understand customer behaviour to improve their experience by providing them with a complete analysis of their spending habits.
  • With credit risk assessment, banks can increase risk assessment accuracy for loan applicants through a more seamless open banking process. By enhancing the slow application process, creditworthy customers won’t miss out or face delays. Access to better quality data on credit risk allows fintechs to develop personalised loan services, including micro-lending to customers who would not otherwise meet traditional bank loan requirements.
  • Financial institutions can accelerate customer onboarding so that customers can bid farewell to repetitive, lengthy, and manual onboarding processes. This means that open banking will take the existing complicated customer journey and reduce it to a mere consent confirmation which would then allow their information to be shared among banks and financial service providers.

 The KSA market and its readiness

Did you know that KSA has one of the highest internet usage rates globally, reaching 98% in 2021? And it’s only expected to grow further. With a young and tech-savvy consumer base, KSA is on its way to lead open banking and fintech opportunities in the region. Customer satisfaction is but one benefit of open banking, as it can also help improve the financial literacy and overall financial health of citizens in the Kingdom.

As the country diversifies away from oil and gas revenues, there’s no denying that fintech will be key to revolutionising the financial services sector, making it instrumental to the Kingdom’s vision of data-driven economies.

What’s next? 

Following SAMA’s rollout of phase one of its Open Banking Framework, live development and implementation of use cases in early 2023 are on the horizon, while phase two will deliver the Payment Initiation Services Framework.

Soon, the full benefits of open banking will be obvious to everyone:

  • Customers regaining data control
  • Newly generated revenue streams for banks
  • Innovation in financial products and services

All of which are in line with the Kingdom’s guidelines.  It’s clear that Saudi Arabia is leading this space, for the benefit of the Saudi consumer.

Bridging the infrastructure gap  

As an ecosystem enabler, we provide the best API infrastructure to ensure secure and seamless connectivity for data and payments to flow between banks, fintechs, and other businesses.

Our priority is to simplify the process for banks to share their data to comply with regulations, commercialise data and drive optimal financial products and services. We also empower fintechs and merchants to build scalable propositions by providing access to region-wide bank data and payment rails through one simple seamless API integration.

To get your open banking journey and unlock endless opportunities, contact us.

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