In recent years, Open Banking has been gaining traction in the MENA region. This trend is set to continue, with traditional banks and fintech startups increasingly embracing the concept, with a vision of enhancing customer experience, opening access to data, and providing a simple, secure, and frictionless payment journey.

MENA countries are actively pushing to position themselves as global fintech hubs. Over the recent years, the region has seen an astonishing financial transformation, following innovative and exciting Open Banking frameworks across various countries in the area.

What is Open Banking?

In simple terms, Open Banking is the practice of providing third-party financial service providers with access to customer financial data, through secure application programming interfaces (APIs). This allows for the creation of new innovative financial services and gives consumers greater control over their financial data.

How is Open Banking evolving in the MENA region?

In the MENA region, the adoption of Open Banking has been picking up speed in recent years. Let’s have a closer look at five early adopters of Open Banking in the region.

Bahrain

In 2019, the Central Bank of Bahrain, which is considered a pioneer of fintech experimentation in the MENA region, launched a regulatory sandbox for Open Banking, allowing major players such as Tarabut Gateway to test their innovative financial services in a controlled environment. Their Open Banking Framework (OBF) was launched in October 2020, allowing to lay a solid foundation for the market to stimulate competition, encourage innovation, and foster financial inclusion.

Kuwait

Open Banking in Kuwait is an emerging and evolving landscape, with notable advancements driven by fintech companies like Spare. While Kuwait is still in the early stages of adopting
Open Banking practices, the potential for growth and innovation is evident. Fintech companies, such as Spare, are playing a pivotal role in shaping the Open Banking ecosystem in Kuwait. Spare offers cutting-edge open banking solutions, facilitating secure data sharing, seamless integration, and enhanced payment services. As Kuwaiti financial institutions and regulatory bodies recognize the importance of Open Banking, partnerships with companies like Spare are becoming increasingly prevalent. These collaborations are crucial in driving digital transformation, fostering financial inclusion, and providing customers with innovative financial solutions.

UAE

In February 2023, the Central Bank of UAE launched a Financial Infrastructure Transformation Program (FIT Program) with nine key initiatives including Open Finance, to be fully implemented by 2026.

In the context of Open Banking in the UAE market, three prominent technologies that are often discussed are DAPI, Lean Technologies, and Salt Edge. DAPI focuses on providing secure and standardized access to customer banking data, enabling third-party applications to retrieve and analyze financial information with user consent, and fostering innovation and competition in the banking sector. Renowned for its efficiency and agility, Lean emphasizes a streamlined and iterative approach to product development, allowing for rapid deployment and continuous improvement.

As a leading open banking in the Middle East, Salt Edge plays a crucial role in enabling financial institutions to embrace Open Banking effectively. It provides a comprehensive set of tools and services that facilitate secure data aggregation, payment initiation, and bank-to-bank connectivity. Salt Edge offers robust API solutions that adhere to strict security standards, enabling banks and fintech companies to safely access customer data and build innovative financial products and services.

Saudi Arabia

In January 2023, the Central Bank of Saudi Arabia released an Account Information Service (AIS) framework and established an Open Banking lab, with plans to unveil its Payment Initiation Service (PIS) framework. This is considered a significant step towards the adoption of Open Banking in the country. The fintech startup ecosystem in KSA is growing rapidly, with several innovative companies emerging in the Open Banking space. One example is Lean Technologies, a company licensed under the SAMA Regulatory Sandbox. Another example is X^2, an Open Banking platform driving the shift from card to bank payments, with the best-in-class coverage for open banking payment initiation, data access and compliance in Saudi Arabia.

Egypt

Underlie, an Egypt-based Open Banking platform in MENA offering application programming interface (APIs) to banks and businesses was founded in 2021. More recently, UAE-based Open Finance platform Fintech Galaxy has acquired Underlie. With the acquisition, Fintech Galaxy aims to expand its offerings and bring Underlie’s technology to its existing clients in the region. Egypt now is Fintech Galaxy’s sixth market after the UAE, Saudi Arabia, Bahrain, Lebanon and Moldova.

Challenges facing the Middle East in terms of Open Banking

Despite these positive developments, there are still challenges facing the MENA region when it comes to Open Banking in MENA Region. One of the main challenges is the lack of a standardized regulatory framework across the region. While some countries have made progress in this area, others have yet to develop a regulatory framework for Open Banking.

In addition, there are concerns around data privacy and security. With Open Banking, consumers’ financial data is shared with third-party providers, which raises questions about how this data is stored and protected. Addressing these concerns will be crucial to ensuring the long-term success of Open Banking in the region.

There is still room for growth and potential

Overall, Open Banking and Open Finance in MENA is in a state of growth and potential in the MENA region. While there are challenges to be addressed, the positive developments we’ve discussed in the post demonstrate that there is significant interest and momentum behind the adoption of Open Banking. As traditional banks and fintech startups continue to embrace the concept, we can expect to see even more innovative financial services being developed, which will ultimately benefit consumers and businesses alike.

 Follow us on LinkedIn for more updates