Saudi Central Bank (SAMA) issues its highly-anticipated framework on open banking; being one of the key outputs of its open banking programme.
SAMA has released a set of legislation, regulatory guidelines and technical standards to enable banks and fintechs to provide open banking services in the Kingdom of Saudi Arabia (KSA).
The first version of the open banking services focused on the account information service (AIS) while version two is set to focus on the payment initiation service (PIS).
Being a fairly new concept in the financial industry, open banking seeks to enable the customers of financial institutions to share their personal financial data with a third-party provider, in turn generating more innovative services for the end customer.
It promotes financial infrastructure between banks and fintechs and facilitates the more appropriate use of financial data within a secure setting.
SAMA’s new guidelines reveal the bank’s oversight into ensuring the readiness of banks and fintechs in launching open banking services; which is scheduled for Q1 ’23.
So far, the bank has permitted a select number of fintechs to provide open banking services within the bounds of its regulatory sandbox.
As of last month, the sandbox has 42 participants, of who 15 have graduated by obtaining full authorisations and were licensed by SAMA.
The number of sandbox participants has grown this quarter, due in part to the sandbox’s shift from a cohort-based approach to one that is ‘always open‘.
The sandbox launched back in 2018 in an attempt to consolidate local, regional and international fintechs and bring more innovative financial products and services to Saudi markets.
The regulatory and technical challenges identified from this sandbox were considered in the development of the new open banking framework.
The sandbox runs in parallel with SAMA’s open banking programme, which is one of many initiatives outlined in the fintech strategy of the Saudi Vision 2030 financial sector development programme (FSDP).
The fintech strategy was approved by the Council of Ministers by end of May this year, and aims to turn the KSA into ‘a global fintech hub where technology-based innovation in financial services is the foundation to enhance the economic empowerment of individuals and society’.