By Abdulla Almoayed

The launch of Open Banking services in Bahrain last December offers a glimpse into how financial institutions have evolved within the region. With banks increasingly being able to ‘talk’ to each other through newly created collaborative processes, consumers are set to benefit from holistic account management while enjoying greater access to financial services.

When the National Bank of Bahrain [NBB] became the first financial institution in the Middle East and North Africa to launch Open Banking services in December, it underscored just how quickly the region is building an advantage within the digital economy, while consolidating Bahrain’s status as a leading regional hub for FinTech.

Within a short timeframe — faster than most other markets — a holistic platform was made available for customers to view and track their finances across all their accounts through their banks’ Aggregation service. This service is powered by platform provider Tarabut Gateway, the region’s first licensed Open Banking Platform, which has connected all compliant banks in Bahrain and beyond via a single application programming interface (API).

Benefits of Open Banking – Putting the Customer at Heart

The next step will be the sharing of account information and payment history with external banks and other licensed third parties, so customers can make instant transactions and informed decisions on products and services that best suit their needs.

Increasingly, consumers want fast, easy financial transactions and visibility across all accounts. FinTech is proving a powerful force in transforming the customer experience and is working to pose a direct challenge to often outdated business practices.

There is a strong appetite within the financial sector, which is undergoing a seismic transformation, to explore collaboration with FinTech firms in order to adopt new innovative solutions to drive their business forward.

Banking startups in Bahrain, like Tarabut Gateway, are getting to work with top banks on next generation tech. The end result is better suited products for the customers as companies grow more able to cater for specific requirements.

Consumers can expect better transparency and greater inclusivity as banks finally begin to reach them with innovative services, even as they engage more competitively with the range of banking and non-banking FinTechs that have leveraged the benefits of a decentralised digital economy.

Overall, Open Banking is expected to spur much-needed market evolution, and regional players including Saudi Arabia, Kuwait and the UAE are avidly watching Bahrain’s early moves.

Indeed, regulators all across the GCC are giving increasing importance to Open Banking due to the benefits it brings to consumers and the FinTech ecosystem as a whole.

The Central Bank of Bahrain and the Dubai Financial Services Authority have joined the likes of London and Hong Kong as key members of the Global Financial Innovation Network (GFIN), an international network of regulators and global organisations “committed to supporting financial innovation in the interests of consumers.”

Increasingly, regulators across the Gulf are recognizing that FinTech is not a threat to be overcome, but an opportunity to take advantage of. Nowhere is this more true than Saudi Arabia, which has arguably been warier than its neighbors of the impact that technological innovation and the growth of foreign competition would have on its banking sector.

But the Saudi Arabian Monetary Authority (SAMA) recently launched a regulatory sandbox to allow local and international FinTechs to test new digital solutions. In short, FinTech is critical to remaining competitive in the digital era, and Open Banking is an enabler of FinTech.

Data safety concerns

But the fuel powering Open Banking is customer data, which makes Open Banking one of the big tests for data access in the Gulf. On the one hand, Open Banking could lead the way to data being shared in many more ways, opening up innovation in business and operation models, for example when two banks could partner to offer customers a package of services.

On the other hand, Open Banking raises issues around regulation and data privacy. How do banks share customer data, and how is that information is stored, accessed and deleted by third-party partners. The answers to those questions remain a work in progress, which helps explain why global markets have taken varying approaches to governance.

For its part, Bahrain has approached the problem in two ways. Consumer rights are safeguarded through regulatory guidelines that make customer rights and security the primary focus.

No customer data can be accessed by third parties without proper licensing and customer consent, which the customer has full control to revoke at any time and pull out their data.

For business, Tarabut Gateway’s unified platform offers secure and frictionless access to banks for third-party providers, surmounting many of the issues currently hampering adoption in other markets, such as the widespread development of proprietary APIs, which strike at the very purpose of Open Banking.

Bahrain’s forward thinking and early diversification efforts allowed banking innovation to flourish within the country.

Driven by Tarabut Gateway, which has gone live in some 50% of the Kingdom’s banks, Bahrain has set the standards for global banking in the region. Most exciting of all, the Kingdom’s neighbours — from Saudi Arabia to Kuwait — are following suit, finding pioneering new means of allowing digital financial innovation to flourish.