Evolving the Paradigm of Open Banking in the Region

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The opportunities and innovation within open banking are key drivers for the growth of fintech in the region. The recent compliance requirements issued, and the regulatory frameworks developed is one of the ways in which new industry standards and practices are achieved, by shifting the purpose from being a core payment services platform to building a model that services all types of asset classes that drive ROI (Return on Investment) for banks, FinTechs, Third-Party Providers and most importantly the end customer.  

The Central Bank of Bahrain has been an enabler of open banking by defining regulatory standards and guidelines to be adhered to by retail banks, and third-party providers (TPPs) providing Account Information and Payment Initiation services in Bahrain with the primary objective of fostering innovation and attracting the right Fintechs to benefit banks and their customers.  Using an agile framework that would enable TPPs to allow banks to test their products for newly formed use cases, Fintech innovators can integrate with the platform and showcase value along with ROI opportunities. IT & data security in line with the Personal Data Protection Law for customer experience and technical specification standards is fundamental for TPPs to leverage API connections to banks & FIs. Customers who share their consent to avail open banking services should benefit from a plethora of use cases that bring to them the right product, at the right place, at the right time. 

Dissecting how Banks in the region plan to manage the disruption by laying a foundational approach in their strategy roadmap with open banking as a key component is a way to better define the paradigm not only from a revenue standpoint but also in the building of partnerships and reaching new customers when contemporizing the pipeline business model. Further accentuating the new business models that our modern challenger, neo, and digital banks have been adopting, enabled, and amplified with open banking, it is reasonable to expect more activity in the following areas: 

Banking-as-a-Service (BaaS): Banks distributing their data and financial services via APIs to ASPSPsFinTechs, and non-financial institutions- 

  • Non-direct to Customer 
  • Provisioning of data and outward-facing APIs to comply with regulations and go beyond: 
    • Login-by-bank solutions 
    • Sharing product details (credit cards, offers, instant loans) 
    • Credit-scoring (risk profiling) 
    • KYC/Identity Management 

Bank-as-Third-Party-Provider (BaTPP): Banks leveraging data and services shared by other ASPSPS, and TPPs to address customer needs directly- 

  • Linking multiple bank accounts. 
  • Budgeting 
  • Fund Transfer services 
  • Personal Financial Management (investment marketplace, financings) 

Banking-as-a-Platform (BaaP): Partnering up with TPPs to build ecosystems that offer product suites- 

  • Bank-branded/white label products 
  • Closed-loop platform of the large retail group with multiple brands consolidating the following services: 
    • Cash in 
    • IBAN payment 
    • Recurring payments (fixed or variable) 
    • Gamification (loyalty, points) 
    • Credit (buy now, pay later) 

All in all, the omnichannel engagement that arises from Banking-as-an-Experience places the end customer at the heart of the engine. 

While Open Banking can help financial institutions to monetize and create grand user experiences for their customers, it important to note that one of the key drivers of these opportunities is also the rapid evolvement of Open Banking policies within the region such as Saudia Arabia’s Central Bank SAMA recent issuance of their Open Banking policy. Other jurisdictions in the region have also shown interest in developing and implement similar strategies 

Interested to know more about OB regulation in Bahrain? Read more on this through our Beyond Compliance piece.

Are you a financial institute looking to understand how to be OB compliant? Let’s have a chat! 

Linkedin: Emir Isik – Relationship Manager
Email: e.isik@tarabutgateway.com
Phone: +97339148265

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