The worldwide push for open banking, open finance, and, ultimately, an open data economy continues to grow stronger. COVID-19 has only accelerated this trend.
In the Middle East, two phenomena support quicker local adoption. First, national governments such as the UAE, Saudi Arabia, and Qatar have placed key digital initiatives at the core of their sweeping national transformation agendas. Second, consumers in the region are majority digital natives—people who have grown up in the information age—and they expect technology to improve their everyday lives. The Accenture 2020 Global Banking Consumer Study found that most consumers in both Saudi Arabia and the UAE are ‘pioneers’—risk-takers who are tech-savvy and hungry for innovation. Open Banking, and more broadly, open finance, is where the market is headed and many of the necessary ingredients exist to accelerate this shift.
Not all regions are keeping up, and the Middle East—except for Bahrain—is one of them. Data from Open Banking Tracker indicates a significant lag in terms of bank APIs, API aggregators, and third-party providers in the Middle East compared to elsewhere—for example, as of December 2021, there were no registered TPPs in the region.
Open finance maturity remains low in the region despite growing regulatory involvement. The Central Bank of Bahrain, for example, adopted open banking rules as early as 2018 and launched the Bahrain Open Banking Framework in October 2020, which is now in its second phase. In Saudi Arabia, regulatory approval was more recent, and the regulator is currently in the process of rolling it out. Since 2020, in the UAE, the Dubai Financial Services Authority has granted select open-banking-related licenses that are restricted to activities within the Dubai International Financial Centre—yet more formal regulation from the central bank is still lacking.
This slow rate of progress matters. It’s putting the countries in the region at risk of missing out on the numerous benefits open finance enables for the entire ecosystem. Some of these benefits include all stakeholders in the market profiting from data being shared on a constant basis and in real-time. For central banks and regulators, increased data transmission, via an integrated platform operated by the regulator, will allow for a cleaner and more cost-effective reporting and compliance process.