Home Open Banking & Finance Kazakhstan steps up open banking implementation after pilot project

Kazakhstan steps up open banking implementation after pilot project

Almaty, Kazakhstan: state authorities in the former Soviet nation have been working with banks to test open banking infrastructure | Credit: Александр Шаварёв; Pixabay

Authorities in Kazakhstan have published an update on plans to encourage the use of open banking technology across the financial sector, buoyed by a recently concluded pilot initiative involving five banks and the current accounts of 128 ‘real’ customers.

The ‘Open API и [and] Open Banking: Report on the result of the pilot project (January 2024)’ publication from the National Bank of Kazakhstan and the National Payment Corporation of Kazakhstan, a recently created organisation charged with the implementation of digital financial infrastructure in the former Soviet nation, sets out progress towards introducing open banking during 2023 and concludes with a roadmap for 2024 and beyond.

The 54-page publication explains that an ‘open API platform’ has been created and tested. This acts as a dedicated (isolated) technical environment for safe API testing and code ‘debugging’, as well as enabling actual API sharing, service integration, billing and query management. Open API standards and a ‘centralised customer consent management system’ have also been developed.

Priorities for 2024 include involving further banks, expanding into business use cases and implementing an ‘open API technology sandbox’ – described as a ‘collaborative platform providing market participants with access to open APIs [where they can] test and refine their ideas, thereby contributing to the creation of innovative solutions in the field of financial technology’.

Priorities for 2025 include implementing ‘product-based’ APIs that allow ‘interaction with specific financial products’, as well as ‘deepening collaboration’ across the private sector and ‘enhancing customers’ satisfaction by providing access to a wider range of advanced financial products through improved open APIs’.

Kazakhstan’s API to help

In December 2022 the central bank and Agency for Regulation and Development of the Financial Market of the Republic of Kazakhstan, in collaboration with the Agency for Protection and Development of Competition of the Republic of Kazakhstan, developed and approved a plan for open banking’s development for the years 2023-2025.

The open API platform is the focus and fulcrum of activity, with the pilot having achieved the development of what the report refers to as a ‘minimum viable product’.

The five banks were connected to the platform, with testing running for two months from 1 November 2023. After ‘necessary checks’ the banks could publish their APIs and connect to other participants’ APIs. ‘Banks acting as API users successfully improved their mobile applications, providing focus group participants with the ability to view information about their accounts with other participating banks, and manage their data consents,’ the report notes.

Testing was deemed successful overall but difficulties were encountered in ‘ensuring the stability of network connections’, according to the report. ‘In addition, at the initial stages, some participants encountered difficulties in ensuring the proper processing time (according to service-level agreement) of requests on the API side,’ the report also acknowledges. ‘These issues were identified by the open API platform, and information about them was provided to the participants. As a result, participants carried out optimisation work on the API to address these problems.’

The report states that an online survey with the 128 customers ‘to assess satisfaction with the implemented user journey’ saw 11.9 per cent describe themselves as ‘satisfied’; 81 per cent were ‘satisfied but wanted to expand functionality’; and 7.1 per cent were ‘not satisfied’. The participants ‘expressed a desire to see the functionality of applications based on open banking expanded… for example, customers expressed needs to make transfers between accounts at different banks in one application.’

RELATED ARTICLE Kazakhstan CBDC platform ‘put into operation’ in contactless transaction demo – a news story (27 November 2023) on a transaction using contactless card technology being demoed during an event in Kazakhstan marketed as the launch of the digital tenge (central bank digital currency)

CBDC crossover

National Payment Corporation of Kazakhstan chief executive officer Binur Zhalenov wrote in a LinkedIn post that the pilot activity had ‘tested and refined our approach to [bank] account aggregation’.

He described the open API platform as ‘robust’, stating that it involved ‘a unique blend of open API orchestration, biometric-enabled digital consent and critical supporting infrastructure to ensure security and ease of use.’

Expanding on the plans for 2024, he wrote that ‘ambitious’ goals include ‘scaling-up account aggregation to production-grade levels’, ‘expanding access to legal entities’ and ‘collaborating with non-bank fintechs [companies] to broaden our ecosystem’.

The National Payment Corporation of Kazakhstan has also been involved with the development of a central bank digital currency (CBDC) – a digital tenge – for the country, which has a population of about 19 million people. Although CBDC is not mentioned in the 54-page report, Zhalenov referred to CBDC in his LinkedIn post, stating that the authorities were looking integrate its open banking programme with the digital tenge. ‘Perhaps most significantly [looking to the future], we are setting the stage for the integration of Open API [platform] with the national processing and our Central Bank Digital Currency (Digital Tenge), paving the way for complex use-cases and seamless interoperability across platforms,’ he wrote.

The National Payment Corporation of Kazakhstan was created last year. It is a re-constitution of the Kazakhstan Interbank Settlements Centre.

RELATED ARTICLE Open goal for fintech: governments capitalise on open banking for payments – a write-up of a panel session at the Global Government Fintech Lab 2023 (18 May) featuring Nazim Gasimzade, director of Azerbaijan’s State Treasury Agency