Open Banking Gains Momentum in the Middle East
Richard Ransom Head of Payments and Transaction Banking , Europe & Middle East , Virtusa
Open banking is now a reality The term ‘ open banking ’ covers a wide range of activity , broadly around banks opening up access to data and services through open Application Programming Interfaces ( API ). This could be bank-controlled third party access for FinTech collaboration , direct connectivity for corporate customers , or regulator-controlled access to third party FinTechs , or other banks . Although the open banking concept is relatively new , it has become a major influence on the agenda globally . The UK ’ s ‘ Open Banking ’ initiative , has steadily gained momentum since it became available to customers in early 2018 with over 125 third party FinTechs registered to offer payment initiation and account information services . Across Europe , PSD2 is starting to have an impact on payment services , and in Australia , their take on the UK model is close to becoming a reality . Banks are growing their externally facing API libraries , offering services such as instant cash positions to corporate customers .
2019 – a pivotal year for open banking in the Middle East
The open banking revolution is an opportunity for growth . Encouraging progress is being made by regulators , banks and FinTechs in the Middle East region towards adoption . In May this year , National Bank of Bahrain launched open banking services in the country . It was based on the EU ’ s PSD2 model of enabling account holder permitted third party access to view account and transaction data , and to initiate payments . In August , UAE ’ s Emirates NBD certified their first five FinTech startups through their API Sandbox .
To illustrate the potential in the region , In September Dubai International Financial Centre ( DIFC ) had registered 100 FinTech companies . Elsewhere , banks in Saudi Arabia are exploring FinTech collaboration , and will soon be able to leverage a new national real-time payment system announced earlier this year .
Making open banking work for the customer and the bank
Even though open banking adoption requires significant innovation investments , it is possible to leverage these investments to obtain a commercial return through new revenue opportunities . To enable such API-driven services , banks need to make significant changes to their information infrastructures . For many banks , these APIs will become a set of discrete products , addressing a rapidly evolving financial services ecosystem . Furthermore , by monetizing APIs in a strategic way , banks can protect their market share and disarm the threat of nimble FinTechs . API monetization could simply be in the form of new external APIs bringing new or extended access to bank services such as more timely or detailed transactional data , however , banks are increasingly collaborating with FinTechs to build new joint propositions and improve internal processes .
Open innovation strategies FinTech collaboration works best when done on purpose . For instance , through an open innovation platform that can facilitate innovation for banks beyond standard sandbox without impacting live systems . Curated FinTechs can be onboarded to help solve internal bank challenges or create new propositions to provide directly to customers . A ‘ building block ’ approach to FinTech collaboration can bring greater rewards , creating combinations of different FinTech and bank applications to improve processes such as corporate customer onboarding or KYC ongoing due diligence . Building and testing such solutions at speed and with quality can be achieved through a purpose-built innovation and gamified development platform , such as Virtusa ’ s Open Innovation Platform . Learn how Emirates NBD leverages Open Innovation Platform to drive better outcomes for its innovation program .