OPEN BANKING
The Evolution Revolution The COVID-related restrictions that were implemented to curb the spread of the virus have proved to be a powerful catalyst for open banking and the fintech ecosystem in the Middle East
T
he coronavirus pandemic is shaping up to be a crucial turning point in the financial ser vice sector, changing regulators’ perception towards open banking. “The COVID-19 crisis has reshaped the global economy and society as banks face an urgent imperative to reimagine their business models amid a shift in the operating environment which is having an unprecedented impact on their bottom line,” said McKinsey & Co. Banks in the Middle East region are cautiously exploring technological innovations and new business models such as digital banking, open banking, predictive banking and modernization of payment systems in a bid to enhance user experience (UX) and personalization of products while keeping an eye on surging cyber-attacks. Though digital transformation was already apparent in the financial services sector in the Middle East, the outbreak of
24
the pandemic has brought about more than decades’ worth of changes in the way banks do business in just a few months. Deloitte said that digital technology has been a catalyst for radical innovation, as previously closed industrial systems have become networked and open, providing ideal conditions for open banking to flourish. T h e a d va n c e m e n t s i n d i g i ta l technologies such as artificial intelligence (AI), real-time analytics, machine learning (ML) and blockchain are creating ideal conditions for financial services providers to enhance their services and products from the front, middle and back-office. Open banking platforms allow financial services customers to securely share financial data in real-time and share account information and transaction history with external parties such as vendors, suppliers, business partners and other banks using Application Programming Interfaces (APIs)—a set
Banking and Finance news in the MEA market
of communication protocols used to develop computer applications. It is a paradigm underlying the organisation of the future financial data ecosystem.
The promise of open banking The GCC region’s financial service sector is unarguably mature when it comes to regulators’ preparedness for open banking compared to other emerging markets though there are some teething problems such as the need to modernize the regulatory landscape. PwC said that open banking has the potential to reshape the financial services landscape and several financial centres in the emerging markets, the GCC region included, are making considerable moves in this space. By leveraging API’s, open banking platforms authorise retail and enterprise clients to access consumers’ financial data in real-time and share account information and transaction history with external parties such as vendors, suppliers, business partners and other banks. KPMG said that it expects a rapid uptake of open banking approaches and models over the coming few years as consumers and small to medium enterprises (SMEs) are becoming more aware of the benefits it can bring; the ability to quickly understand their financial position, explore alternatives and make better financial decisions.
