Arab News, Sun, May 26, 2024 | Dhu al-Qadah 18, 1445
Saudi Arabia’s open banking strategy a game-changer
Saudi Arabia:
Saudi Arabia’s embracing of open banking has transformed the region’s financial
ecosystem, according to a top fintech CEO.
In an interview with Arab News, Abdulla Al-Moayed,
head of Tarabut, praised the Kingdom’s central bank for its inclusive regulatory
impact on the financial sector.
In May 2022, the institution, also known as SAMA,
went live with its open banking initiative, which has altered the future of
financial technology in the Kingdom and the wider region.
Open banking is a technological innovation that
enables customers to securely share their data with third parties.
“Open banking changes the very nature of
relationships across the financial ecosystem for Saudi Arabia and for the region
as a whole. This is only a good thing,” said Al-Moayed.
Echoing those sentiments, CEO of US-based fintech
MoneyHash Nader Abdelrazik, told Arab News: “Open banking (in Saudi Arabia) will
significantly catalyze the relationship between banks and fintech, and it will
open up a multitude of business use-cases.”
He added: “Banking and finance innovation is
highly dependent on access and adoption of open data frameworks. Once these
frameworks are in place, not only the existing banks and fintechs will
collaborate more, but it will also attract more banks and fintechs to expand to
the market and embed their solutions.”
Abdelrazik believes this will increase the
economy’s digital sophistication and competitiveness, “but the real winner here
is the consumer.”
In its Open Banking Policy report, SAMA said its
initiatives focus on “nurturing the rise of digital technologies and their
impact on the new financial services enabled by them, as well as building the
regulatory framework needed to adopt these initiatives.”
The release further stated: “This opens the door
to create and offer new financial services. Therefore, SAMA sees open banking as
a pivotal role in the further development of the Kingdom’s financial sector.”
Al-Moayed explained that SAMA’s efforts to
standardize application programming interfaces or APIs, are enhancing the
country’s monetary platforms, which aim to broaden financial inclusion by
facilitating secure, seamless, and affordable access to services and advice.
APIs allow different software applications to
communicate with each other, facilitating the integration and sharing of data
and functions.
“Standardized APIs enable interoperability between
providers, leading to a more cohesive financial ecosystem,” Al-Moayed said.
“This allows for the development of innovative
financial services and products that can cater to a wider range of customer
needs. By opening access to financial data, these APIs are fostering an
environment of innovation, allowing fintech startups to focus on end-user
problems; away from the worries of connectivity and access to data,” he added.
Being one of the region’s leading providers of
APIs, Tarabut has set a prime example for others to follow.
“Our mission is to enable the connections
necessary to expand financial inclusion for everyone, by building the
infrastructure that enables secure, seamless, and inexpensive financial services
and advice. As with all financial and personal data, we should be clear that
trust, security, and safety are a non-negotiable part of the process,” Al-Moayed
stated.
Regarding security, the CEO highlighted: “At
Tarabut, we take a series of continuous steps to ensure security, such as
ensuring that all transactions and data access requests are authenticated using
multiple factors to enhance security, as well as the requirements to also employ
state-of-the-art encryption standards to protect data during transmission and
storage.”
He further explained: “Data access controls, such
as implementing strict controls on who can access specific data and for what
purpose, ensure that customer data is not misused.”
Al-Moayed adde: “There are also continuous and
regular compliance checks and audits to ensure that all participants in the open
banking ecosystem adhere to the highest security standards and regulatory
requirements.”
He also underscored the collaborative effort with
SAMA during the regulatory sandbox period, which showcased the potential of open
banking to transform financial accessibility.
Fostering symbiotic relationships
“Looking at Saudi Arabia, we see a nationwide
ambition to promote a symbiotic relationship between banks and fintechs, by
enabling data sharing and the adoption of innovative technology solutions,”
Al-Moayed said.
“Banks provide fintech companies with access to
valuable financial data with customer consent, and the fintechs and the banks
can work together to create more personalized and innovative financial
products,” he added.
Al-Moayed explained that banks looking to partner
with a fintech company could lead to new revenue streams and open up customer
segments, enhancing their market reach and product offerings — as well as
ensuring adaptability and innovation for the young, digitally-native population
of the Kingdom.
“Together, banks and fintech can reach underserved
segments of the population, as well as those who could benefit from improved
awareness and access to different services, providing each with the many
benefits and impacts that are inaccessible by traditional means,” he said.
Safeguarding consumer data
According to Al-Moayed, SAMA has established a
robust legal framework essential for safeguarding consumer data, which mandates
explicit consent before sharing financial information with third-party
providers.
“SAMA have rightfully identified consumer data
protection and privacy as crucial for consumer trust and participation,” stated
Al-Moayed.
He elaborated that this approach not only provides
consumers control over their personal information but also “gives consumers
control over their data, including the right to know how their information is
being used and the ability to revoke access at any time, builds trust and
encourages participation in the open banking ecosystem,” which is vital for
building trust within the banking sector.
“We believe this is a critical part of the
trust-building process for banking customers across Saudi Arabia. By making it
clear to people that every person is the true owner of their data, they can feel
empowered to make the best access decisions for their personal needs,” he added.
A smooth transition
As the Kingdom transitions toward open banking,
traditional banks are seizing the opportunity to redefine their roles.
“We have been hugely impressed by the vision and
appetite for transformation from banks across the Kingdom,” Al-Moayed expressed.
He explained that financial institutes are
transitioning from being mere custodians of customer funds to becoming more
integral participants in their customers’ financial lives.
“The banks we partner with truly see open banking
as so much more than a new series of regulations to comply with,” he said.
“Recognizing the value of innovation brought by
fintech startups, like ours, many banks are forming partnerships and
collaborations to leverage the best available technology to enhance their
offerings,” Al-Moayed added.
MoneyHash’s Abdelrazik stated that traditional
banking will continue to thrive and be active, at least in the short term.
“But with the rise of open banking and numerous
opportunities in the fintech sphere, banks implementing a robust digital
strategy, and leveraging strategic alliances with fintechs, can be much more
competitive and agile to this dynamic market,” he added.