The open banking market is set to grow by 25 per cent in Arab countries over the next five years according to The Arab Monetary Fund (AMF).
The AMF report was produced by members of the Arab Regional Fintech Working Group (WG) in collaboration with 10 Arab central banks and regional open banking firm Fintech Galaxy. The guide was released in line with the Fund’s endeavours to support Arab central banks adopt an effective framework for open banking/finance schemes.
The Guidelines for an Effective Open Banking/ Finance Adoption explores the landscape of open banking/finance in the Arab region. It highlights key developments and associated challenges in several Arab countries. These include Jordan, UAE, Bahrain, Saudi Arabia, Iraq, and Oman. Additionally, it also covers Palestine, Kuwait, Egypt, and Morocco.
It dives into global regulatory frameworks surrounding open banking/ finance, looking at the best practices from leading jurisdictions, requirements and prerequisites for adoption. It also looks at challenges in deployment and lessons learned from global adoption. Finally, it provides recommendations for a successful implementation and financial inclusion enhancement.
Commenting on the guide, His Excellency Dr. Abdulrahman Al-Hamidy, director general chairman of the board of Arab Monetary Fund, praised the initiatives of the Arab Reginal Fintech WG in issuing the guide. He recommended it as a source of valuable insights for Arab countries in implementing efficient open banking/finance frameworks.
What creates a successful framework
An effective open banking/finance regulatory framework takes into consideration diverse aspects to provide a sound foundation for the open banking ecosystem. These include:
- a definition of open banking
- types of participants
- the scope of shared data
- data access and sharing requirements
- consent mechanism and informed consent
- data security.
- identifying the regulated Third Party Providers (TPPs)
- access to TPPs
- licensing of diverse service providers
- operational and technical requirements
- consumer safeguards
- governance scheme for the implementation of the open banking/finance framework and application programming interfaces (APIs)
- standardisation of APIs
- standardisation of contractual terms with non-regulated entities.
To embrace open banking/finance, authorities need to incorporate relevant frameworks and enable the market to leverage the potential of open banking and APIs to deploy several use cases. This includes account aggregation, credit scoring services, digital identity verification, remote customer onboarding and digital lending. Furthermore, it includes personal financial management, account-to-account payments for large purchases, as well as Buy Now Pay Later (BNPL) arrangements.
The report draws some lessons learned from global experiences. Most open banking regulations are based on consultation and deep dialogue with stakeholders.
Furthermore, the report provides a step-by-step and practical guide, along with the concerned stakeholders, outlining the key considerations and actions needed to establish successful open banking/finance frameworks. It also highlights that open banking/finance framework should be tailored according to each country’s specific conditions. Additionally, it should consider its financial digital infrastructure, levels of readiness and progress, as well as respective legal and regulatory frameworks.
Mirna Sleiman, founder and CEO of Fintech Galaxy, highlights: “This guideline offers a roadmap that everyone can learn from and grow with as it simplifies complex concepts. It also helps fast-track open banking adoption across the region. The collaborative approach aims to share best practices, present new opportunities and create value to all parties.”