The Saudi Central Bank (SAMA) is launching a new initiative – Open Banking – that promises to stimulate growth and innovation in the Kingdom’s financial services industry.
Already an established protocol in the UK and Europe, Open Banking allows consenting customers to securely share their data with third parties. Once deployed in KSA in the first half of 2022, it will allow fintechs and other non-banks to create new financial products and services that make customer journeys simpler and more efficient.
A key part of Saudi Vision 2030
Open Banking will be a key component in the development of financial services in Saudi Arabia. It dovetails with the strategic priorities set out in both the Saudi Vision 2030 and the Financial Sector Development Program (FSDP), namely: developing the digital economy and supporting private sector growth in financial services.
SAMA has done a lot of work in this area over the last couple of years, including the launch of Fintech Saudi in 2018, establishing a regulatory sandbox, issuing Payment Services Provider (PSP) regulation and launching licenses for financial institutions that aren’t banks.
Benefits of Open Banking
The next and possibly most important step on the digital finance journey is Open Banking. As has already been seen in territories that were the early adopters of the initiative, Open Banking brings a host of benefits to both customers and providers in the financial services industry. These include:
Stimulating innovation by enhancing opportunities to develop new products and services that will increase value proposition and create additional revenue streams;
Increasing competition, reducing barriers to entry for new participants and providing them with a better understanding of customer needs;
Improving financial inclusion in Saudi Arabia – Open Banking can expand access to credit for a larger number of people and help improve their financial awareness. This includes helping lower-income customers to reduce excessive expenditures, improving savings behaviors, and encouraging better control of finances;
Creating greater efficiency in the banking system. Additionally, new technologies may reduce the cost of innovation providing an easy way to partnering with third-party providers.
Launch of Open Banking in Saudi Arabia
SAMA plans to go live with Open Banking during the first half of 2022. In order to meet this challenging deadline, the bank has already analyzed the adoption of Open Banking globally and collected feedback from local financial market participants.
Now, SAMA is assessing the potential impact Open Banking may have on the Saudi financial sector and is working to identify the most suitable approach to implementing the initiative in the Kingdom.
SOURCE: Nardin Bardawil
