For years, the financial industry in the Middle East and North Africa has been buzzing with the concept of ‘open banking’, a practice that provides third-party financial service providers with standardized access to banking, transaction and transaction data. and other consumer financial data through application programming interfaces, or Apis.
Nowhere is this more true than in Saudi Arabia, where, although still in a relative infancy stage, fintech innovations are increasingly a part of Vision 2030 plans to diversify and transform the economy and reduce dependence on oil. While creating a vibrant labor market for Saudis and fostering a high-tech, digitally-driven knowledge economy.
It’s no surprise that fintech is about to take off in Saudi Arabia. After all, 70% of the population of 34 million people are under 30 and digitally savvy. For fintech providers and start-ups, it’s an extremely lucrative market.
In addition, the Kingdom has launched initiatives to support fintech companies, such as the Fintech Regulatory Assessment Tool and the FinTech Data and Research initiative. The Saudi Central Bank (SAMA) and the Capital Markets Authority (CMA) continue to issue regulatory licenses and develop regulations to support FinTech activities.
A welcoming environment for fintech
Even more impressive milestones are also looming on the horizon in the form of the FinTech Saudi Hub in the King Abdullah Financial District. One of the main drivers of these initiatives is SAMA’s plan to launch Open Banking in 2022 – a move that could open up the market to many fintech services, stimulate competition and increase user options when it comes to market. is about managing their own finances.
It will allow Saudi banks and fintechs to work together to develop innovative applications that analyze financial transaction data – with customer consent – to deliver niche products and services that meet their financial needs.
At Fintech Galaxy, we have obtained approval from the Saudi Ministry of Investment (MISA) to open an office and will apply for an AISP / PISP license for “FinX22” from SAMA once the requirements of the kingdom’s open banking framework are met. ready. FinX22 is a unified open API infrastructure for seamless integration between fintechs and institutions with a vision to connect 22 Arab markets on a single API.
The platform aims to democratize financial services by providing secure interoperability channels between industry players for account aggregation, payment initiation and cash flow management up to loan rating / credits. And develop the technology necessary for banks to comply with the requirements of Open Banking.
Spread financial literacy
By opening up to Open Banking, Saudi Arabia is also contributing to increased financial awareness among consumers. This includes helping low-income customers reduce overspending, improve savings behaviors and, in general, encourage Saudis to take better control of their finances.
The Saudi Central Bank (SAMA) is responsible for managing monetary policy and reserves and overseeing financial sector institutions, the credit reporting sector, and the financial technology (fintech) sector. The Capital Market Authority (CMA) regulates the Saudi capital market by issuing the rules required for the implementation of the provisions of the Capital Markets Law.
Both regulators are working to increase the level of financial inclusion in the Kingdom, which in turn is a way to improve financial stability, deepen and diversify financial systems and support structures. Currently, 155 fintechs are registered with Fintech Saudi. Currently, under the aegis of SAMA, 29 fintechs operate, including 14 fintechs under license and 15 fintechs authorized in the regulatory sandbox. The CMA has 114 authorized capital market institutions and 16 fintechs.
CMA FinTech Lab Fintechs are licensed to operate in the market in an experimental environment with the Fintech Experimental License Period, which has a period of two years to experiment before obtaining a full license under the CMA regulations.
Not limited to banking
Open Banking in Saudi Arabia will open up a wide variety of financial services for all industries. For example, this will allow a leasing and lending economy to exist by providing transparency to individuals and businesses wishing to tailor their offerings based on a customer’s financial health.
For the entire banking system, Open Banking will also lead to greater efficiency. Customers will be able to instantly share their banking information with a third party, helping to adopt efficient ways to manage financial information and execute transactions. In the longer term, new technologies are also likely to reduce the cost of innovations by providing an easy way to partner with third-party vendors.
This does not mean that there are no challenges. On the one hand, Saudi Arabia must continue to develop its human capital through skills development, starting with the education system. While the initiatives are focused on creating a fintech-style program, they are still in their infancy, as are fintech clubs and coworking spaces designed to encourage entrepreneurs and expand the talent pool. fintech.
There is no need to worry about these challenges – it’s up to us, as an ecosystem, to make them a reality.