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Open Banking Makes Foray Into the Middle East

Globally, initiatives across different jurisdictions have emerged to make open banking a reality, ranging from direct regulatory requirements, like what’s been done in the UK and the European Union (EU), to market-coordination and industry-led initiatives such as in the US and Switzerland.

In the Middle East, open banking remains in its infancy with just a handful of startups and so far only one jurisdiction having taken significant steps towards the change.

In the region, Bahrain has been a pioneer in the domain, and was the first country in the Middle East and North Africa (MENA) to introduce regulations requiring all retail banks in the country to adopt open banking.

The regulatory mandates, a landmark for the region, was set by the Central Bank of Bahrain (CBB) in November 2018. It was followed in October 2020 by the launch of the Bahrain Open Banking Framework (Bahrain OBF). The framework includes detailed operational guidelines, security standards and guidelines, customer experience guidelines, technical open application programming interface (API) specifications and the overall governance framework needed to protect customer data.

In parallel, Bahrain has welcomed the first open banking product for the MENA region, with the National Bank of Bahrain (NBB) becoming the first financial institution to adopt Tarabut Gateway’s Open Banking infrastructure in December 2019. Tarabut Gateway is known for being the first company to graduate from the CBB’s Regulatory Sandbox that same year.

Riding on its first-mover advantage, Tarabut Gateway has already started expanding across the region, launching its platform in the United Arab Emirates (UAE) and opening two new offices in Abu Dhabi (Hub71) and Dubai (DIFC Fintech Hive) in October 2020. It now has plans to enter the Saudi Arabian market, according to a report by Arabian Business.

Tarabut Gateway, which was founded in 2017, currently has multiple retail banks as its partners in its home country but also in Kuwait, Lebanon, the UK and India, and offers three products: Account Aggregation, Payment Initiation, and Infrastructure Access.

Having already raised about US$10 million in funding, it is now planning another round scheduled to take place in December, Abdulla Almoayed, founder and CEO of Tarabut Gateway, told the Arabian Business.

What neighboring jurisdictions are doing

While Bahrain was the first country in the Middle East to adopt open banking regulations, other jurisdictions have somewhat manifested interest in following suit.

Saudi Arabia is reportedly looking to move “more aggressively” towards similar regulations within the next two years, Mohammed Aziz, co-founder of open banking startup DAPI told Fintech Futures in May 2020.

His startup, which is based in Abu Dhabi and San Francisco, was founded in 2019 with hopes to becoming a “powerhouse for fintech across emerging markets in the MENA region.”

Short for Data Aggregation and Payment Initiation, DAPI offers an API-enabled solution that lets fintech applications connect with their users’ bank accounts, to authorize bank transactions, initiate payments and access real-time banking data.

The solution is already live in the UAE, Saudi Arabia, Kuwait, Egypt, Pakistan and South Africa with platforms that include Denarii Cash, a money transfer service, and Ziina, a social payments app, both from the UAE.

Since August 2019, DAPI has been part of the Abu Dhabi Global Market (ADGM)’s Regulatory Laboratory (RegLab) fourth cohort, and in September 2019, it was accepted into Plug and Play ADGM’s three-month accelerator program. The startup already raised an undisclosed seed funding round.

Besides Tarabut Gateway and DAPI, another open banking startup in the region is Lean Technologies, a Saudi Arabian company. Founded in 2019, Lean Technologies builds developer-friendly APIs to provide fintechs with access to customer financial data and payment initiation capabilities.

The startup has plans to expand to the UAE, Kuwait and Egypt, and wants to be operational across most of the Middle East by 2021. It raised US$3.5 million in June 2020.

These three startups are part of a tiny group of innovators looking to bring open banking to the region. In the UAE, banks are slowly waking up to the potential of open banking and open APIs.

According to the Open Banking and collaboration: State of the nation survey 2020 by Finastra, 88% of the UAE financial institutions surveyed said their business was currently adopting or looking to adopt open APIs within the next 12 months.