Bahrain, UAE and Saudi Arabia Recognized as Open Banking Leaders in the GCC

Bahrain, UAE and Saudi Arabia Recognized as Open Banking Leaders in the GCC

In the Gulf Cooperation Council (GCC), the open banking phenomenon is evolving at a rapid pace. Across the region, regulators are embracing the imperative aggressively, having acknowledged the potential of data sharing to improve customer experience and increase financial inclusiveness.

A new analysis by Whitesight, a research firm focused on the global fintech space, looks at the state of open banking in the GCC, delving into the region’s frontrunners and how they’ve approached the trend.

According to the report, three jurisdictions, namely Saudi Arabia, Bahrain and the United Arab Emirates (UAE), have emerged as open banking leaders in the GCC, recognized for their efforts in setting up the foundation for open banking to thrive.

Bahrain, an early adopter of open banking in the region, embarked on its open banking journey in 2017 by drafting new rules covering the space. Open banking regulation was subsequently issued in late 2018.

This was followed the years after by a slew of initiatives that included the launch of the Bahrain Open Banking Framework by the Central Bank of Bahrain (CBB) in 2020, the introduction of electronic know-your-customer (eKYC) in 2021, and the granting of the country’s first license for open banking that same year.

These initiatives set the stage for a period of accelerated innovation in the broader Bahraini banking sector, which saw, among other things, i2c partnering with BEYON Money and Visa to launch an open banking super app, as well as the launch of telco open banking payments by Tarabut Gateway and Zain Bahrain in 2021, the report notes.

After Bahrain, the UAE is another regional leader in open banking adoption, a commitment that began in October 2010 with the Abu Dhabi Global Market (ADGM) freezone regulator, the Financial Services Regulatory Authority (FSRA), issuing guidance on the development and use of APIs.

This was followed in May 2020 by the launch of Account Information and Payment Initiative licenses by the Dubai Financial Services Authority (DFSA), the financial regulatory agency of the Dubai International Financial Centre (DIFC), and the granting of a license to Tarabut Gateway to operate as an open banking platform in the DIFC in April 2022.

Finally, Saudi Arabia has adopted a more proactive role in supporting open banking, having issued a formal strategy in 2021 that set out the central bank’s ambitions and a timeline for development, implementation and go-live of open banking in the country. This was followed a few months later by the launch of the Open Data Platform, a platform where stakeholders can access up-to-date economic, financial and monetary statistics.

Most recently, the Saudi Central Bank issued its Open Banking Framework, a document that comprises a comprehensive set of legislation, regulatory guidelines and technical standards for banks and fintech companies looking to provide open banking services in the country.

Open banking is expected to go live in Saudi Arabia in Q1 2023.

Open banking and fintech ecosystem frontrunners in the GCC, Source: Whitesight, Nov 2022

Open banking and fintech ecosystem frontrunners in the GCC, Source: Whitesight, Nov 2022

After Bahrain, the UAE and Saudi Arabia, the Whitesight analysis notes the presence of a three “fast followers”. Though not as proactive and swift as the region’s open banking leaders, Qatar, Oman and Kuwait have nevertheless launched initiatives to foster open banking innovation, including regulatory sandboxes.

Kuwait and Oman have shared plans to develop open banking-related products and services in their respective sandboxes, while in Qatar, efforts have been made in the private sector to embrace the trend. An example is the public launch of Qatar National Bank’s Open Banking Platform in June 2022, Whitesight notes.

This year, the Central Bank of Oman (CBO) confirmed that open banking is currently in the works and will be rolled out in the near future.

Rising interest in open banking from the GCC’s financial regulators comes at a time when the region’s fintech industry is growing at a fast pace, fueled by booming usage of digital financial solutions and soaring venture capital (VC) activity.

Mastercard’s New Payments Index 2022, which polled consumers across the Middle East and North Africa (MENA), found that 85% of people in the region have used at least one emerging payment method in the last year, including tappable smartphone mobile wallets, buy now, pay later (BNPL), biometrics, and payment-enabled wearable tech devices.

About three quarters (73%) indicated knowing about open banking and using it to pay their bills, do their banking, secure or refinance loans, and make BNPL payments, showcasing a high level of awareness of data sharing across the region.

Fintech funding in MENA has reached US$1.3 billion this year, surpassing the previous record of US$911 million secured in 2021, data from Dealroom show.

Fintech funding in MENA, Source: Dealroom, Nov 2022

Fintech funding in MENA, Source: Dealroom, Nov 2022


Featured image credit: Edited from Freepik

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