During a speech by H.E. Dr. Mohammad Y. Al-Hashel, Governor of the Central Bank of Kuwait at the Global Informatics Forum, His Excellency outlined a list of fintech initiatives by the bank to “revamp and upgrade the IT infrastructure” of existing financial systems in Kuwait, in a bid to follow what he called “global best practices”.
However, it should also be noted that these additions will take some time to implement, even the one already in the midst of a rollout.
Some central bank initiatives that were brought up include:
1. The Kuwait National Payment System (KNPS)
One of the key components, Dr. Mohammad opines, is that startups and entrepreneurs could interact with and benefit from an improved payments system.
Therefore, the KNPS mega project is being developed with local banks and payment gateways and set to roll out in two phases—one in 2019 and the other in 2020.
The system will encompass other initiatives by the central bank, including the Government Electronic Banking System and digital currency (two segments mentioned below), along with others like Wages Protection System, digital currency, and Automated Clearing House.
2. The Government Electronic Banking System
The goal is to replace paper-based processes and improve efficiency by executing all government transactions online. The process is an online automated cycle that is instantaneous and more accurate compared to existing protocols.
The system is already live and slowly being rolled out to all government bodies.
3. Infrastructure for Digital Currency
The Central Bank of Kuwait is in the midst of a plan to prepare infrastructure for digital currencies. The infrastructure is being built in anticipation of the bank issuing their own digital currency, where if Kuwait does choose to head in that direction, the central bank would by then already have the tools ready to go live.
The plan would include a Digital Kuwaiti Dinar, which the bank aims to facilitate exchange against tokenised assets.
4. The Launch of a Regulatory Sandbox Framework
The Central Bank of Kuwait has also announced the Regulatory Sandbox Framework, a monitored and safe space for fintechs to experiment with innovative products and services. Usually, while regulators are keeping an eye on fintechs in a sandbox, regulations are lighter to encourage experimentation. Fintechs in the sandbox could benefit from fast-tracked approvals or, as the central bank opines, lower capital requirements.
The central bank will even take on an advisory mantle for projects in the regulatory sandbox, particularly regarding information security effectiveness, operating model design and most crucially, regulatory compliance.
The central bank is looking for ideas that are secure, useful and beneficial to society.
The central bank will also treat startups differently based on their size and sophistication, with proportionate rules at different scaling levels. Regulations would also be tailored to specific risks inherent in their different business models, and provide a chance for the smaller, less complex firms.
Featured image edited from Francisco Anzola‘s photo on flickr.