The Open Banking Journey
Today the financial services sector is seen as one of the most rapidly evolving industries across the globe, solely due to how drastically overdue the sector has been in need to adapt to the new era of digitalization, and how much potential tech has within financial services. This leaves a whole ecosystem on the verge of a technological bloom. As a result, Open Banking has become a key innovator in the merge of tech and finance. Since PSD2 came into effect, the UK legislation enabled open banking across all of Europe. There has been a global surge in the Open Banking awakening. Today, Open Banking has spread to practically every continent on the planet. The MENA region is being hailed as the new poster child for open banking, owing to its solid foundation, which positions the region for huge potential.
Why MENA is in a good position
The MENA regions’ economic vision of a data-driven economy and the leveraging of data due to the discovery of its value is a significant factor for driving the priority of developing financial technologies. In comparison to the rest of the globe, the MENA region is a late adopter of open banking. As the region begins to diversify away from oil, the phrase “last but not least” has never been more relevant. With the current size of the financial services sector, the number of active institutions, and backing from not just regulators but also customers, 82 percent are receptive to utilizing Fintechs for financial management. The scene is prepared for open banking to take flight, and the conditions are as favorable as can be. This is when leapfrogging comes into play.
What is Leapfrogging
As a “late adopter” we get to learn from more developed regions such as Europe, North America, and even Asia. All providing diverse insight on Open Banking. This allows the MENA to leapfrog into full-blown Open Banking adoption. Leapfrogging is a notion that originated in the realm of industrial organization and economic growth and is now utilized in many disciplines of economics and business. The underlying notion behind the concept of leapfrogging is using previous experiences and knowledge to discover the most effective way to utilize resources and approach a plan. Resulting in an optimal path for planning and development, creating a shortcut to success. By leapfrogging, the MENA region does not need to go through a trial-and-error phase. Instead through market research and analyses of prior implementation and case studies, the ecosystem leaders such as regulators, banks & fintechs can analyze the best approach for their respective markets.
Technology can also benefit greatly from the effects of leapfrogging. Typically, with new technology, there are multiple different phases, testing, and updates months before and even after it has gone live. Developers are constantly troubleshooting issues with new technology regardless of how well it has been tested. Solely because going live with a new product or service means you have a much wider pool of different users with different situations. However, by using technology that has been trialed and tested vigorously in much larger markets such as Europe, developers in MENA can skip past all the prior iterations of technology while creating the infrastructure and directly go to the most recent version.
In conclusion, leapfrogging will empower the financial services sector in the MENA region to achieve their goals, in a timely and cost-efficient manner, which otherwise would typically take decades to learn and develop through the natural process of tech evolution.