Saudi Arabia’s Open Banking Initiative Transforms Financial Sector

Saudi Arabia’s adoption of open banking is revolutionising the region’s financial ecosystem, according to leading fintech executives. 

In a recent interview with Arab News, Abdulla Al-Moayed, CEO of Tarabut, praised the Saudi Central Bank (SAMA) for its inclusive regulatory framework. Launched in May 2022, SAMA’s open banking initiative has significantly influenced financial technology in the Kingdom and beyond.

Open banking allows customers to securely share their financial data with third parties, fostering a more interconnected financial landscape. “Open banking changes the very nature of relationships across the financial ecosystem for Saudi Arabia and for the region as a whole. This is only a good thing,” Al-Moayed stated.

Echoing this sentiment, Nader Abdelrazik, CEO of US-based fintech MoneyHash, noted that open banking will enhance collaboration between banks and fintechs, unlocking numerous business opportunities. “Banking and finance innovation is highly dependent on access and adoption of open data frameworks,” Abdelrazik said, emphasising that these frameworks will attract more banks and fintechs to the market, thereby increasing the economy’s digital sophistication and competitiveness. “The real winner here is the consumer,” he added.

SAMA’s Open Banking Policy report highlights its focus on fostering digital technologies and establishing a regulatory framework to support new financial services. “SAMA sees open banking as pivotal in the further development of the Kingdom’s financial sector,” the report states.

Al-Moayed explained that SAMA’s efforts to standardise application programming interfaces (APIs) are crucial in enhancing the country’s monetary platforms, promoting financial inclusion through secure, seamless, and affordable access to services. “Standardised APIs enable interoperability between providers, leading to a more cohesive financial ecosystem,” he said.

Tarabut, a leading provider of APIs, exemplifies the potential of this initiative. “Our mission is to enable connections necessary to expand financial inclusion by building infrastructure for secure, seamless, and inexpensive financial services,” Al-Moayed stated. He emphasised the importance of trust, security, and safety in handling financial and personal data.

Addressing security concerns, Al-Moayed highlighted Tarabut’s commitment to continuous security measures, including multi-factor authentication, state-of-the-art encryption, and strict data access controls. “Regular compliance checks and audits ensure adherence to the highest security standards and regulatory requirements,” he added.

Collaboration with SAMA during the regulatory sandbox period showcased the potential of open banking to enhance financial accessibility. “Saudi Arabia aims to promote a symbiotic relationship between banks and fintechs, enabling data sharing and innovative technology solutions,” Al-Moayed said.

This collaboration allows banks to offer valuable financial data with customer consent, working with fintechs to create personalised and innovative financial products. This approach opens new revenue streams and enhances market reach and product offerings, particularly for the young, digitally-native population of the Kingdom.

“SAMA’s robust legal framework ensures consumer data protection, requiring explicit consent before sharing financial information with third-party providers,” Al-Moayed explained. This framework empowers consumers, giving them control over their personal data and building trust in the open banking ecosystem.

As Saudi Arabia transitions to open banking, traditional banks are redefining their roles. “We have been hugely impressed by the vision and appetite for transformation from banks across the Kingdom,” Al-Moayed expressed. He noted that banks are moving beyond being mere custodians of funds to becoming integral participants in their customers’ financial lives, forming partnerships with fintechs to leverage innovative technology.

Abdelrazik concluded that while traditional banking will remain active in the short term, banks adopting robust digital strategies and forming strategic alliances with fintechs will be more competitive and agile in this dynamic market.