Saudi takes fintech to ‘new level’ with Open Banking Lab

Unsplash / Joshua Mayo

• Open banking enables consumers to securely share financial data 
• It’s gaining traction globally among financial services firms 
• Saudi’s launch set to improve its financial infrastructure and fuel growth

The launch of a new Open Banking Lab in Saudi Arabia is set to take the fintech sector to a “new level” in the kingdom, according to industry experts.

Saudi Central Bank, also known as Sama, is tracking the readiness of banks and fintechs with a view to launch open banking services by the end of March.

A relatively new concept, open banking lets consumers securely share their financial data with a third party provider in order to take advantage of new services and products.

The Open Banking Lab aims to enable innovation and accelerate the development of open banking services in Saudi Arabia.

It will provide a technical testing environment for banks and fintechs to develop and certify their services to ensure compatibility with the Open Banking Framework which was announced in November.

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“It is an exciting time to be a fintech startup in the region,” said Abdulla Almoayed, CEO of Tarabut Gateway, Mena’s largest regulated open banking platform.

“Innovation continues to be on the rise and as regulators take on the role of innovators, creating a supportive environment for fintechs to thrive. Sama’s Open Banking Lab is another impactful initiative and example of a move in the right direction.”

Almoayed added: “While Sama has an active regulatory sandbox for fintechs to test their products across various verticals, the launch takes technical testing to a new level.” 

The Open Banking Lab will help to accelerate the adoption of open banking in the kingdom, Almoayed said, adding that Tarabut Gateway is setting up a country-specific operation to cater to the Saudi market. “We are thrilled about the size of the market and all the possibilities it brings,” he said.

Tarabut Gateway was the first ‘graduate’ from Bahrain’s sandbox programme and is licensed by the Central Bank of Bahrain.

Last year it was granted a licence by Dubai Financial Services Authority to provide money services in and from Dubai International Financial Centre. This was the first time it authorised a firm to provide account information services (AIS) and payment initiation services (PIS) activities. 

Open banking regimes have been established in parts of the world including EU countries, the UK, Australia, Bahrain and Hong Kong.

The implementation of open banking services is one of the initiatives of the Saudi Fintech Strategy, a pillar of the Financial Sector Development Programme under Saudi Vision 2030. 

Barkha Doshi, who specialises in technology-driven innovation in financial services in the Middle East for Pinsent Masons, said that open banking is gaining increasing traction globally among policymakers, regulators and financial services firms. 

“Saudi Arabia has positioned itself as a front runner in the Middle East fintech market through its new open banking programme,” he said.

“It goes without saying that open banking, and open finance in general, will improve Saudi’s existing financial infrastructure and fuel fintech growth in the region.”

Companies such as Spare Arabian Financial Company, Istishraf Al Batanat for Financial Technology and Wally Global Arabia have already started making their presence felt in the Saudi open banking space, according to Sharib Suhail, media officer at Healy Consultants Group. 

“Fintech is playing a pivotal role in reshaping the financial society. Given how Saudi Arabia is strategically working towards a thriving economy, the region has made its intention clear of positioning itself as a global financial technology hub by launching the Open Banking Lab,” he added.

“The emergence of fintech presents growth opportunities for the government, investors and entrepreneurs in Saudi Arabia. The sector has started acting as a catalyst for increasing the contribution to the GDP and increasing job opportunities.”

Saudi Arabia is poised to launch three digital banks over the next 12 months, plus new regulations, as part of its aim to become a major player in the fintech industry.

The sector is “on the cusp of being propelled onto the global stage,” Nezar Alhaidar, director of Fintech Saudi, said last month, as it forges closer links with the UK, the second-largest fintech hub after the US.

In the same way that the UK and Singapore have positioned themselves in Europe and Asia respectively, Saudi Arabia is seeking to become the gateway for fintech activity in the Middle East.

The kingdom aims to host over 500 fintechs by 2030 and offer 18,000 related jobs, with the sector contributing $3.5 billion to the economy.

Chad Woodward, director of trade and investment at the British embassy in Riyadh, said the Vision 2030 targets meant there was “no better time to be in Saudi Arabia” in terms of trade and investment opportunities for fintech companies.

Alhaidar added: “History has shown that when the Saudi government sets a target and there is the right buy-in from stakeholders, there is momentum to achieve the target.

“It is not a case of if but when Saudi becomes a globally recognised fintech nation.”