Abdulla Almoayed is the founder and CEO of open banking platform Tarabut Gateway, which recently closed a $12 million pre-Series A round led by Tiger Global.

The Middle East’s open banking frontier is evolving, and is changing the very nature of banking and banking institutions.

Rapid change is being brought about by new government and regulatory measures, as well as the introduction of new platforms and payment methods launched in the region. Digital transactions have continued to grow at a strong pace, where Mena's online payments penetration reached 76 per cent and it is expected to keep on growing. 

Local GCC banks appear well positioned to capitalise on a strong internet banking trend, based on a number of fundamental indicators including changing consumer demographics, a shift in online behaviour, and an increased e-adoption rate. 

Open banking regulations are pushing banks to open up their systems, reinvent their payments business models, and build a platform showcasing a mix of in-demand products and services that go beyond customers’ traditional financial needs.

Banks in the region have shown an appetite for open banking, as they realise that Innovation is imperative. Banks now face high cost pressures, intense competition and demanding customer expectations. Banks are rising up to these challenges, with open banking as the gateway to do just that.

The Mena region has done this by fostering a thriving fintech and startup environment. Among the leaders is Bahrain, who started the open banking journey in 2018, and established the Bahrain Open Banking framework in 2020. Tarabut Gateway is a key player in driving this transformation, and is Mena’s first and largest regulated open banking platform that connects a regional network of banks and fintechs via a universal applications programming interface (API).

Other countries in the GCC such as the UAE and Saudi Arabia have also launched their own open banking directives. 

The Saudi Central Bank has announced the launch of an open banking framework expected to go live in 2022. In the UAE, the Dubai Financial Services Authority (DFSA) granted specific licences in April 2020 commencing their involvement within the open banking scene.

To go further, with open banking APIs, consumers can use online banking payments to pay merchants. These payments are authenticated directly between consumers and their banks which offers a range of benefits. Payments can be made more conveniently, securely, and faster than traditional methods. There are no hassles, no middlemen and high transaction fees.

Future solutions 

Open banking brings in a lot of features to enhance the payment experience. On the consumer side, open banking enables direct payments without sharing sensitive information at check-out. There won’t be a need to manually enter your card details or trust a website to store those details for you. Instead, it will be automated, mobile first and a seamless experience. 

This not only grants consumers more options for payments, but businesses as well, which enables them to cut costs and avoid paying high transaction processing fees for payment networks. 

High fraud and chargebacks were highlighted by 36 per cent of merchants as their top two pain points, according to the Open Banking Expo. With open banking, there is an additional layer of security by eliminating card details from the payment process.  Consumers can authenticate payments on their mobile device using facial recognition or their fingerprint to log into their applications. Additionally, there is a reduced risk of fraud due to the lack of chargeback fees within payment transactions.

Open banking is an essential strategy for financial firms to compete and flourish. Even more importantly, open banking will enable the development of previously unimaginable new products and services. Banks and fintechs can combine efforts to offer services as features across new distribution channels, develop unique value propositions, and differentiate through tailored digital experiences. Such collaboration could build revenue, accelerate digital transformation, attract mobile-first consumers, and even experiment with new business models.

The beginning

We are now at the beginning of the open banking payments journey, and exciting times are ahead, unlocking opportunities for all generations when it comes to payments. Whereas banking institutions formerly faced commoditisation as providers of financial infrastructure to third-party providers, open banking is today viewed as a possible source of new income and a foundation for creativity. 

Open banking solutions can turn things around for banks, and unlock even more opportunities for them to lead. This will bring greater transparency and diversity to the industry.

With more data available than ever before, business leaders can use time-saving, value-added open banking technologies to improve their operations and consumer experiences.