Home Open Banking & Finance Saudi Arabia to launch open banking in 2022

Saudi Arabia to launch open banking in 2022

Riyadh: Saudi's central bank is ‘working to identify’ the most suitable approach to implement open banking, having split its rollout timeline into three phases | Credit: SofieLayla Thal; Pixabay

Saudi Arabia’s central bank has issued a roadmap for the rollout of open banking, which it is aiming to launch in the first half of next year.

Open banking refers to the use of open Application Programming Interfaces (API) to enable third-party developers – fintech companies – to build applications and services. It is a global trend with countries taking different approaches and speeds to encourage its implementation.

The Saudi Central Bank (SAMA)’s newly published open banking policy is, the central bank says, aligned with its efforts to ensure the sector’s infrastructure is ready for the use of ‘the most prominent’ financial technologies and ‘ensure the application of leading supervisory practices for new and innovative technologies-enabled financial services’.

Its plans for open banking are part of the priorities set out in ‘Saudi Vision 2030’, a strategy to diversify the oil-rich economy published almost five years ago, and in Saudi’s Financial Sector Development Programme (FSDP). These priorities include developing a digital economy and working to open up financial services to new companies.

Open banking’s ‘pivotal’ role

SAMA says that it is ‘working to identify’ the most suitable approach to implement open banking but has split its timeline into three phases: design – in the first half of this year; implementation – in the second half of this year; and then ‘go live’ in the first half of 2022. The middle phase will include testing and ‘enhancement of customer awareness’.

In its six-page open banking policy document (published in English), SAMA states that it sees open banking as having a ‘pivotal’ role in the development of the financial sector.

SAMA – which is located in Saudi capital Riyadh and was known as the Saudi Arabian Monetary Authority (hence the acronym SAMA) until a name-change a couple of months ago – sets out the benefits of open banking as encouraging innovation and competition, as well as increased efficiency in the banking system.

SAMA also notes that open banking will increase financial inclusion. ‘Open banking products have the potential to expand access to credit for a larger portion of individuals,’ its document notes, adding that ‘at the same time, it contributes to increased financial health and financial awareness… this includes helping lower-income customers to reduce excessive expenditures, improving savings behaviours, and, in general, encouraging better control on financials.’

Further fintech initiatives

Other Saudi fintech-related developments have included, in 2018, the launch of a regulatory sandbox to allow financial institutions and fintechs to test and launch their products – the sandbox welcomed its third cohort last year, with applications having opened last week for the 2021 cohort; Fintech Saudi, launched by SAMA in partnership with the Capital Market Authority in April 2018 to act as a catalyst for the development of fintech in Saudi Arabia; and; and, in 2020, the issuance of payment services provider (PSP) regulation.

Reacting to SAMA’s open banking ambitions, Hisham al-Falih, chief executive of Riyadh- and London-based fintech company Lean Technologies, told CNBC.com that SAMA has been “slowly enabling more and more technologies and innovations to the market. However, these fintechs can only go so far without being able to access customer data, so I’m really happy to see Saudi adopt open banking,”.

Launch of SAMA’s open banking timeline comes shortly after the publication of ‘A Vision of Open Banking in the Arab World’ by the Arab Monetary Fund (AMF). Eighteen Arab central banks, including SAMA, participated in the 22-page report, which outlined the different approaches taken to open banking across the diverse region.

Global Government Fintech’s sister title Global Government Forum organised ‘Putting Citizens First 2019’, a one-day international conference in Riyadh in April 2019. Click
here to find out more and watch video footage.