Home Open Banking & Finance Saudi Central Bank establishes ‘Open Banking Lab’

Saudi Central Bank establishes ‘Open Banking Lab’

Riyadh: a ‘FinTech Strategy Implementation Plan’ aims to make Saudi’s capital a ‘global fintech hub’| Credit: apriltan18; Pixabay

Saudi Arabia’s central bank has introduced an ‘Open Banking Lab’ as it looks to speed up open banking’s development.

Open banking, which aims to encourage innovation and boost competition in financial services,  is being encouraged by state authorities across the globe at different paces and in different ways. It refers to the use of open application programming interfaces (APIs) to enable developers to build new services and enable customers to put their banking data to use by making it easily and securely electronically accessible to alternative providers.

Saudi Central Bank (SAMA) issued a roadmap for open banking’s rollout at the start of 2021 and published an open banking framework a couple of months ago. The authority had aimed to go live with open banking in the first half of 2022 but its timetable, which it described at the time as ‘challenging’, has slipped. It said when launching the framework that it was now ‘tracking the development of banks and fintechs to ensure their readiness to launch open banking services within the first quarter of 2023’.

The ‘Lab’ constitutes a ‘technical testing environment’ to enable established banks and fintech companies the opportunity to ‘develop, test and certify’ open banking services to ensure compatibility with the framework.

It has three core elements: a sandbox (test space) where the Lab provides a simulation of a real bank’s open banking APIs, enabling open banking participants to build and test applications safely and securely; ‘ready use cases’, with the Lab designed to support a ‘wide range’ of retail and corporate use cases, and mock data available for the participants to test their solutions; and testing and certification, with participants able to access ‘conformance suites’ to test and certify their APIs to ensure they are framework-compliant.

Open banking part of broader plan

SAMA’s launch of the framework was an important part of a broader programme to introduce open banking, including legislation, in the country, whose growing population is currently estimated at about 36 million people.

Authorities’ open banking plans are ultimately part of ‘Saudi Vision 2030’, a strategy to diversify the oil-rich economy published almost seven years ago, and – more specifically – Saudi’s Financial Sector Development Programme (FSDP), which followed in 2017. Priorities include developing a digital economy and helping new entrants build successful financial services businesses.

Other fintech-related developments have included the central bank’s launch of a regulatory sandbox in 2018 (to date this has accepted three cohorts of projects, according to SAMA’s website); the creation of Fintech Saudi, which was launched by SAMA in partnership with the Capital Market Authority in 2018 to act as a catalyst for fintech growth; and; and the issuance of payment services provider (PSP) regulation in 2020.

When launching the open banking framework, SAMA pointed out that it had already permitted ‘a number’ of fintech companies to provide open banking services under the umbrella of its pre-existing regulatory sandbox. ‘This step came in parallel with the open banking programme, with a view for testing some new business models and identifying the regulatory and technical challenges, which were considered when developing the open banking framework,’ it explained.

In terms of implementation of open banking the authority is first focusing on what are known as ‘Account Information Services’, with ‘Payment Initiation Services’ following.

Fintech drive

The FSDP has spawned a ‘FinTech Strategy Implementation Plan’, which aims to elevate Saudi Arabia to a position ‘among the leading countries’ in fintech and make capital city Riyadh – where SAMA is located – a ‘global fintech hub’.

The strategy is looking to almost treble the number of fintech companies operating in Saudi from 82 to 230 by 2025. In addition, it aims to increase the share of non-cash (digital) transactions to 70 per cent by 2025.

Launch of SAMA’s open banking roadmap a couple of years ago came 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.

Beyond open banking, governments worldwide are also exploring the possibilities of open finance: the extension of open banking data-sharing principles to enable third-party providers to have access, with permission, to customers’ data across a far broader set of financial fields, such as insurance and investments.  The AMF published a paper titled ‘Open finance: A framework for the Arab region is more than a question of scope’ just over a year ago.

SAMA was known as the Saudi Arabian Monetary Authority (hence the acronym SAMA) until a name-change in 2020.




Global Government Fintech’s open banking / open finance topic section

Open to possibilities: governments bank on opening up financial services data – our report on a Global Government Fintech ‘Open Banking and Open Finance: What Role – And Benefits – For Governments?’ webinar, which was held on 15 March 2022

Saudi Arabia to launch open banking in 2022 – our news story (18 January 2021) on SAMA’s previous open banking timeline