- The move could open the market to numerous fintech services, spurring competition and increasing users’ options when it comes to managing their own finances.
- With some 70% of the kingdom’s 34 million population under the age of 30 and highly digitally literate, it’s a potentially lucrative market for fintech providers and start-ups.
Saudi Arabia’s central bank, the Saudi Arabian Monetary Authority (SAMA), is launching a framework for open banking in the kingdom, allowing a dramatically new direction for a sector known much more for its dedication to stability rather than for change and innovation.
“With the support of market participants, SAMA plans to go live with open banking during the first half of 2022,” the regulator announced earlier this week. The decision is set to present significant opportunities for fintech companies and Saudis themselves, locals and experts in the finance sector say.
The central bank’s move “is set to revolutionize how customers, merchants and financial institutions augment the value they reap from accessing financial data,” Tala al Jabri, a Saudi national and venture capital investor based in Dubai, told CNBC. She expects it to “open up opportunities beyond financial inclusion by placing greater emphasis on Saudis to become more financially literate and in command of their finances.”
Open banking, used in numerous countries around the world, allows third-party developers to access customer data (with their permission) from their banks and act as a bridge to financial technology platforms like accounting and personal finance apps. It’s what enables payment platforms like Venmo to operate in the United States.
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The idea is that through transparent and regulated open banking, which uses what are called application programming interfaces (APIs) to enable data-sharing, customers and businesses can have more control over their finances and access bespoke financial services. That will in turn open the market to numerous fintech services, spurring competition, innovation and increased consumer choice.
With some 70% of the kingdom’s 34 million population under the age of 30 and highly-digitally literate, it’s a lucrative market for fintech providers and start-ups.
Hisham al-Falih, CEO of Riyadh and London-based fintech start-up Lean Technologies, sees this as essential for further modernization and digitization of Saudi banking and finance.
SAMA has been “slowly enabling more and more technologies and innovations to the market. However, these fintechs can only go so far without being able to access customer data, so I’m really happy to see Saudi adopt open banking,” al-Falih said. Bahrain adopted open banking last year, and financial institutions have done so in the UAE, though not yet alongside an official central bank policy.