Open banking is quickly becoming a reality, thanks to initiatives emerging from different jurisdictions globally, for instance, the UK and EU (European Union) have introduced direct regulatory requirements, while the USA and Switzerland have introduced market coordinated and industry inclined initiatives.
There has been little development of open banking in the middle east as very few startups exist and only one jurisdiction has been proactive about the change so far.
Bahrain is a leader in this aspect in the region, being the first country in the MENA (the Middle East and North Africa) to start initiatives that require all retail banks to use open banking.
In November 2018, the Central Bank of Bahrain set the regulatory mandates, which was a huge milestone for the region. The Bahrain Open Banking Framework (Bahrain OBF) was launched in October 2020 and came with detailed operational guidelines, customer experience guidelines, security standards, and guidelines, technical open application programming interface (API) specifications, as well as the complete governance framework essential for customer data protection.
On the same note, Bahrain has pioneered the introduction of open banking products in the MENA region as in December 2019, the National Bank of Bahrain (NBB) became the first financial institution to use the Open Banking infrastructure of Tarabut Gateway. Tarabut Gateway has been recognized as the first company to leave the confines of the CBB’s Regulatory Sandbox in the same year.
Tarabut Gateway is taking advantage of its first-mover status to expand throughout the region, and its platform has been launched in the United Arab Emirates (UAE), with two new offices set up in Dubai (DIFC Fintech Hive) and Abu Dhabi (Hub71) in October 2020. Also, reports from Arabian Business indicate that they have eyes on the Saudi Arabian market.
Established in 2017, Tarabut Gateway is currently in partnership with several retail banks in its home country, as well as in the UK, Lebanon, Kuwait, and India. It offers the following three products: Infrastructure Access, Payment Initiation, and Account Aggregation.
Founder and CEO of Tarabut Gateway, Abdulla Almoayed revealed to Arabian Business that there are plans to enter a new round of fundraising in December, after raising about US $10 million already.
What Are Neighboring Jurisdictions Up To?
Other jurisdictions seem to be interested in catching up with Bahrain, which was the first country to adopt open banking regulations in the Middle East.
As revealed to Fintech Futures by Mohammed Aziz, the co-founder of DAPI, an open banking startup, Saudi Arabia will spend the next two years making aggressive moves in a similar direction.
Founded in 2019 with outlets in San Francisco and Abu Dhabi, his startup aims to become a force in the emerging fintech market across the MENA region.
DAPI, which is an acronym for Data Aggregation and Payment Initiation, provides an API-enabled solution for fintech applications to connect with the bank accounts of their users so that they can access banking data in real-time, initiate payments, and authorize bank transactions.
The solution is currently available in South Africa, Egypt, Kuwait, Pakistan, Saudi Arabia, and the UAE in the form of platforms like the Ziina social payment app and Denarii Check money transfer service.
DAPI has been involved in the Regulatory Laboratory (RegLab) fourth cohort of the Abu Dhabi Global Market (ADGM) since August 2019 and joined the three-month accelerator program of Plug and Play ADGM. The startup has concluded a seed funding round with an undisclosed amount.
DAPI and Tarabut Gateway are not the only open banking startups in the region. There are also Lean technologies, established in 2019. The Saudi Arabian company builds developer-friendly APIs that enable fintechs to access the financial data of customers and provide payment initiation features.
With plans to be operational in Egypt, Kuwait, and the UAE, the startup intends to expand throughout the Middle East by 2021. By June 2020, it had raised US $3.5 million.
Open banking is gradually becoming a thing in the region because of a small group of innovators, including these three startups. With time, banks in the UAE are understanding the prospects that open APIs and open banking bring.
According to Finastra’s 2020 Open banking and collaboration: State of the nation survey, 88% of the financial institutions involved in the survey in the UAE said their enterprises had adopted or had a 12-month timeframe to adopt open APIs.
