Abdulla Almoayed is the founder and CEO of Tarabut Gateway, an open banking startup headquartered in the UAE

The tide of open banking regulation in the Middle East is rapidly evolving. In the past year, we witnessed preparatory outlines and regulatory discussions for open banking implementation. This year, the conversation continues, and implementation plans are set in motion with regulators leading the market.

Open banking’s value proposition hinges on the availability of dynamic and straightforward regulatory frameworks. Ecosystem scaling requires fintechs, banks, and third-party service providers (TPPs) to be able to interact without friction when building new products and services.

The Middle East and North Africa's (Mena) overall regulatory landscape is a picture of rapid improvement and development. The Dubai Financial Services Authority (DFSA) has introduced licences authorising the provision of account information services (AIS) and payment initiation services (PIS) activities. 

On the other hand, Saudi Arabia is putting its 2021-introduced open banking policy into practice as part of the country’s "Vision 2030" plan to optimally position the kingdom for a digitised world economy. In its endeavours to encourage open banking and fintech innovation, the Saudi Central Bank (SAMA) is leading the way, now requiring banks to open their APIs.

Outside of the GCC, open banking is increasingly high on the agenda. For example, while Egypt’s regulatory situation is not yet formalised, its central bank recently made its national payments system more versatile, paving the way for the growth of an open banking ecosystem. While Morocco has introduced bespoke payments on regulation and is working on an open banking framework. Similarly, Jordan is at the preparatory stage of open banking regulation. 

Regional powerhouses moving towards open banking: UAE and Saudi Arabia. 

In a milestone decision in April, the Dubai Financial Services Authority (DFSA) granted its very first open banking licence to Tarabut Gateway. The legitimacy and reassurance bestowed upon open banking service providers through licensing is key for collaboration among disruptors and legacy players across the financial system. 

The DFSA operates on a licensing framework enabling AIS and PIS activities ahead of final regulatory clarity. Similarly, Abu Dhabi Global Markets has contributed a licensing framework attempting to map a way forward for the emerging open banking and open finance sectors.

In keeping with the Emirates’ ambitious ‘Vision 2030’, on 28 June - the Dubai International Financial Center launched its Open Finance Lab, an exploratory incubator for open finance solutions with Tarabut Gateway as its preferred platform partner.

Meanwhile, the drafting of high-level regulation happens at the Central Bank of UAE. The federal institution is consulting with government and private entities about the extent of binding laws and the long-term regulatory environment for open banking.

Open banking in Saudi Arabia has been characterised by incredible speed when it comes to ecosystem and regulatory innovation this year. Observing and learning from the UK’s regime on open banking, SAMA has moved boldly in recent months, drawing up comprehensive fintech regulations and gearing its financial services towards innovation. An AIS and PIS licensing regime is expected very shortly.

Synergies in Saudi Arabia multiply, as the country’s ‘Vision 2030’ – aiming at the transition to a knowledge-based economy – aligns companies and state actors on innovative sector goals. The kingdom has declared its intention to achieve 70 per cent digital payment transactions by 2030, which open banking can help empower by enabling instant and direct bank to bank payments that removes frictions in the current payment journey.

For potential fintech customers, the Saudi market is compelling with a young population of underserved but tech-savvy potential users. At the start of 2022, the country counted 81 fintech startups, recording a 37 per cent increase over the course of last year.

The kingdom has already become a viable centre of peer-to-peer (P2P) lending ventures, with P2P players benefitting from novel digital banking infrastructure, e-KYC standards, and a Credit Bureau.

Bahrain as a fintech pioneer

The region’s fintech pioneer, Bahrain, has steadily grown its domestic fintech ecosystem. The Central Bank of Bahrain’s (CBB) Financial Services Development Strategy maps out the sector’s development goals between 2022 and 2026. 

June 2022 has seen implemented rules mandating financial institutions to make data available about ATM and branch locations, and domestic and international payments - another step towards an open data environment.

Having successfully nurtured regional fintech champions, Bahrain’s focus in 2022 and beyond will be to increase investments in the sector, introduce a digital version of its currency - the ‘digital dinar’ - and implement an open finance framework, the next step in the open banking’s movement.

Up and coming: Oman and Egypt

In early 2022, Oman joined its neighbours by deliberating on an open banking API strategy. The country’s roadmap plans several ecosystem accelerators including a regulatory sandbox, a cloud computing framework and an e-KYC initiative.

In light of the Gulf’s thriving fintech ecosystem and forward-looking regulatory approach, Egypt has also made notable advances. Its central bank (The CBE) is actively pushing for a national network of instantaneous payments. Since launching its InstaPay app in March 2022, a network of ten banks now support Egypt’s move towards a digitised banking system. In March, the CBE introduced a KYC project to facilitate online banking account creation, thus eliminating a crucial obstacle for wider open banking adoption.

What lies ahead for the ecosystem?

Considering the recent and ongoing developments, fintech innovators may look forward to the next step in open banking implementation across Mena. 

Examples of use cases likely to dominate the industry in 2022 include digital payments and instant cross-border payments, ‘buy now, pay later’ (BNPL), AIS & PIS products, KYC, and personalised digital banking. For instance, 21 per cent of total online payments will be made through wallets by 2024, overtaking cash on delivery transactions.  

Open Banking API infrastructure sits at the intersection of all use-cases. Tarabut Gateway empowers banks, fintechs and TPPs to build out the concrete ecosystem that forward-looking regulation has provided the safeguards for - so all boats may rise with the tide.

Open banking will not stop at transactions and payments. The first cross-sector collaborations are already underway and developing towards an open finance data sharing model, integrating telecommunications, insurance, utilities, transportation, and health.