Abdulla Al-Moayed, CEO and founder of the Dubai-based fintech company Tarabut Gateway, revealed that open banking has become a strategic option for growing digital transformation in regional countries as they move towards digital payments and cashless societies.
Banking through fintech in the Middle East has tripled at a time when the number of emerging companies operating in the promising sector is increasing, revealed Al-Moayed.
Al-Moayed pointed out that open banking’s importance emerged with current developments, especially that the number of smartphone users in the Middle East and North Africa (MENA) region has reached 80% of the population.
More than 90% of the population in Arab Gulf countries also are using smartphones.
Banking services provided to Tech-savvy youth in the region are still not enough, added Al-Moayed in an exclusive interview with Asharq Al-Awsat.
There are ample opportunities to use banking products and services with a generation that uses mobile applications and digital transformation technologies to manage their financial affairs, he noted.
Open Banking
“Open banking uses a data exchange model in agreement with all stakeholders through an application programming interface (API) that is built on software blocks that enable communication and exchange of information between financial entities and third parties,” explained Al-Moayed.
“This increases the level of financial transparency and contributes to providing superior financial products and services to consumers.”
Open banking differs greatly from traditional banking which keeps most of the user’s data idle and preserved only in the bank’s database.
Al-Moayed pointed out that enabling consumers to have significant control over financial services is at the heart of the concept of open banking.
Open banking investigates specific indicators in the user’s data and transforms traditional financial services into personal financial offers, which increases the user’s level of financial awareness and well-being.
Al-Moayed affirmed that flexibility, transparency, security, and speed in using financial services are key features in open banking solutions.
All these factors are in the interest of the client as they unlock opportunities for start-ups in fintech services and provide financial institutions with new avenues for growth.
Growth Factor
Technological developments are a major factor in the establishment of open banking, especially that Internet access has spread rapidly in the MENA, according to Al-Moayed.
The GSM Association revealed that 93% of the region’s estimated population of 580 million is connected to the Internet.
Moreover, it is expected that the number of smartphone users in the MENA will reach 80% of the population by 2025.
“Banking services provided to tech-savvy youth are still insufficient,” noted Al-Moayed, adding that many are waiting for the opportunity to use better banking products and services.
Companies’ Ambitions
Another factor that drives the spread and growth of open banking is the aspiration of companies and regulators to raise levels of financial inclusion in the region’s societies, clarified Al-Moayed.
Efforts to grow financial inclusion in the region include Saudi Arabia’s commitment to developing fintech within the framework of its national transformation plan, “Vision 2030,” the advanced framework for open banking in the UAE and Bahrain, as well as test programs launched by regulators across the Middle East to test open banking technologies.
Interfaces Perspective
The main and most important element of open banking from a technical perspective remains the application programming interfaces, which represent the infrastructure of the sector, and act as channels for transferring data smoothly and securely between databases of various concerned institutions.
“The API infrastructure enables the integration of various emerging technologies in the banking sector, which leads to innovation in products, such as (save now and pay later) or (buy now and pay later), (cryptocurrency wallets), and (pay via sectors), (know your customer), personal financial management tools, and many more,” revealed Al-Moayed.
A combination of modern technology capabilities, customer demand, and progressive regulatory legislation has contributed strongly to the push towards the spread and strengthening of open banking.
Therefore, it is not surprising that financial technology is growing in the MENA region, where about 800 emerging financial technology companies with a combined value of approximately $15.5 billion have been established, according to a 2022 report published by the “Deal Room” website.
Gulf Competition
The Gulf region may have been slower in adopting open banking compared to some Western countries, such as the US and Britain, noted Al-Moayed, but the financial technology ecosystem in the MENA region is developing rapidly and is likely to be ahead of other regions.
“There is great interest in open banking in our region, as the economic vision pushes forward the preparation of regulatory models aimed at encouraging and facilitating innovation,” said Al-Moayed.
“Egypt, Jordan and Tunisia are also making progress in this regard, and there is growing confidence from sector players that the region will gain a good reputation as a center for the development and use of fintech,” he added.
Saudi Banking
“Open banking in Saudi Arabia this year is characterized by rapid progress in terms of its ecosystem and regulatory innovation,” affirmed Al-Moayed.
By following the UK’s experience in open banking and drawing lessons from it, the Saudi Central Bank (SAMA) has taken bold steps over the past months.
These steps include the enactment of extensive and comprehensive regulatory legislation and directing its financial services towards innovation.
Additionally, it is expected that a licensing agency for information services will soon be established.
“One of the main advantages of SAMA’s regulatory pilot environment is that it is open to both domestic and international fintech applicants through an ‘always open’ approach rather than a block-based approach,” said Al-Moayed.
“This allows more flexibility for those who apply to test their solutions, to apply when they are ready,” he explained.
“SAMA has also designed a framework to be implemented within Saudi Vision 2030.”
“With the launch of the (Saudi Fintech) initiative, a strong platform was created aimed at supporting the community of financial technology entrepreneurs in the Kingdom, and the number of startups operating in financial technology in Saudi Arabia increased by 37%, to reach 81 companies in 2021.”
Tarabut Gateway is very concerned with the Kingdom’s market, asserted Al-Moayed, adding that his software company helps the actors in the financial services as a provider of the infrastructure for open banking.
“Our priorities include supporting the Kingdom’s economic policies, as they benefit the Saudi consumer, merchants, banks, and financial technology companies,” said Al-Moayed.
“Earlier this year, we announced key partnerships with Saudi banks and continue to look forward to working closely with banks and financial technology companies to enable the ecosystem.”
Open banking applications can contribute to enabling instant and direct payment between one bank and another bank, thus eliminating any shortages that may arise during the completion of the payment process.
