Open all hours: inside the Gulf’s banking revolution

The UAE’s first open banking platform is helping fintech and banks bring personalised services to customers, and is accelerating the regional growth of this progressive sector

The Gulf has the potential to leapfrog other regions of the world, including Europe, with its adoption of open banking as bricks and mortar branches “slowly disappear”, according to the CEO of Tarabut Gateway, the first licensed platform in the UAE.

While the GCC region has been slower in adoption than some Western countries, particularly the United States and United Kingdom, a “dynamic fintech ecosystem” is developing rapidly, Abdulla Almoayed told AGBI.

” Bahrain was a leader in providing open banking regulation as early as 2018 to support fintech businesses,” he said. “Saudi Arabia and the UAE have also joined the club of progressive markets for open banking, committing to accelerate the sector with progressive regulation and sandboxes. Both the Dubai Financial Services Authority and Abu Dhabi Global Market introduced new regulatory frameworks for the fintech sector during the last two years.” 

Almoayed added that the Saudi Arabian Monetary Authority plans to go live with its open banking framework – part of Saudi Vision 2030 – later this year while the Central Bank of Oman also released its Open API Strategy recently.

Tarabut Gateway was the first ‘graduate’ from Bahrain’s sandbox programme and is licensed by the Central Bank of Bahrain. Last month, it was granted a licence by Dubai Financial Services Authority (DFSA) to provide money services in and from Dubai International Financial Centre (DIFC), the first time the DFSA has authorised a firm to provide account information services (AIS) and payment initiation services (PIS) activities. 

According to Almoayed, open banking is still a relatively new phenomenon globally but increased consumer demand for personalised products and services has motivated entrepreneurs and regulators to spearhead change.

Using Tarabut Gateway’s solutions, traditional financial institutions and fintech connect to offer payment services, digital wallets, or multiple account integration. 

The CEO is excited about the potential of fintech in the region and what it could mean for his company.

He said: “Fintech in MENA is expecting hyper-growth. For example, the regional ‘buy now, pay later’ (BNPL) market is set to grow from $3.6 billion in 2021 to $79.3 billion in 2028, and Saudi Arabia has announced its ambition to go cashless, aiming for 70 percent non-cash transactions by 2030. 

“We can support virtually every fintech or bank trying to improve the financial wellbeing of their customers. Example services include helping BNPL providers improve client onboarding and reduce their ‘bad debt’ costs. Or supporting e-commerce merchants by replacing cash receipts with simple and instantaneous payments, payouts or refunds. Opportunities and use cases are limited only by our imagination,” he said.

Almoayed added: “Our goal is to hold our position as an essential part of the fintech’s success story in the MENA region. Increasing robustness of the ecosystem will entice additional investment in the sector, keeping the flywheel of growth and innovation in motion.

“As the first open banking company to be licensed in MENA, we will continue to work closely with regional regulators to evolve standards contributing to simplicity and safety for end consumers… There is much to learn from other markets, and still a huge opportunity to improve on best practices.”

MENA’s fintech sector set to grow

Fintech sector growth has been stunning in recent years, and is still on an exponential path. There are approximately 500 fintechs in the region, and are still trending upward. 

Traditional banks are racing to keep up with sector developments by offering digital branches and improving their online offerings.

Bahrain has doubled its number of fintech startups since 2018, with the government closing in on $2.5 billion in direct investments until 2023. 

In the UAE, 88 percent of banks surveyed in 2021 had vowed to implement open banking frameworks by the end of the year while the number of fintech startups in Saudi Arabia increased 37 percent to 81 during 2021.

Almoayed told AGBI that an organic driver of fintech growth across MENA is the large number of under-served customers. MENA’s population is double that of Europe – but has less banks than Germany, he revealed.

He added: “Nimble fintech companies can fill the gap left by traditional banking and complement the existing system. It is imperative to cut regulatory red tape, especially where it hampers implementation of ‘enabling’ technologies such as banking APIs. Fortunately, regulators have in many cases embraced their role as enablers of open banking innovation.”

In the MENA region, the fintech sector is witnessing an unprecedented influx of investors; regional and international. Apart from open banking, major sector trends include ‘buy now, pay later’, digital wallets, cryptocurrencies, digital banking and personal financial management.

Almoayed said cross-sector collaborations into telecommunications, insurance, utilities, transportation and health will be the next step for open banking. 

The future of banking in the Gulf will be data-driven and personalised. Traditional banks are alert to this, and many are enhancing their digital offerings accordingly.

Abdulla Aloayed, CEO, Tarabut Gateway

While MENA’s fintech space has showed impressive dynamism, the market is still far from reaching the saturation levels seen in the US and Europe. 

According to Almoayed, opportunity abounds to carve out market-leading positions with new products and cater to under-served consumers. “Market entrants with strong competitive differentiators have great prospects,” he explained.

And you can see why… Internet connectivity across the MENA region has increased rapidly in recent years, covering potentially 93 percent of the population, or 580 million people, according to telecommunications association GSMA. Smartphone penetration is estimated to reach 80 percent in 2025, and over 90 percent in GCC countries.

Combined with considerable usage gaps, and youth comprising much of the population – a demographic that swiftly embraces technological innovation – the sector’s market opportunity easily surpasses more developed markets.

Digital transformation is at the top of the agenda for many companies in the financial services sector, motivating a rapidly growing number of bank-fintech partnerships.

Entirely new sectors such as open banking, crowd financing, crypto, decentralised finance have flourished.

Regulatory clarity encouraged global cryptocurrency players to finally create branches in MENA. Crypto exchange Kraken only recently announced the opening of its UAE office, offering the first direct UAE dirham to cryptocurrency trading worldwide.

So what might open banking customers expect to see by the end of this year?

Almoayed said two products will dominate in the coming years – Account Information Services (AIS) and Payment Initiation Services (PIS).

AIS is the ability to collect and aggregate account data, which enables financial apps to provide a single customer with an aggregated view of their accounts while PIS introduces new efficiencies for conducting payments across different bank accounts, and facilitates the aggregation of payments, delivered securely, and in real time, from account to account.

As for the future of bricks and mortar banking branches, the Tarabut Gateway founder is in little doubt.

“The future of banking in the Gulf will be data-driven and personalised. ‘Bricks and mortar’ branches will slowly disappear, and neo/digital banks will take their place due to enhanced customer-centricity. Traditional banks are alert to this, and many are enhancing their digital offerings accordingly.

“Customers expect service inspired by the Netflix/Amazon experience – an on-demand and one-click mentality.”

He added that improved financial literacy has caused customers to research and test more, before deciding which financial product or service to use. “Open banking makes traditional one-size-fits-all financial products look like coarse tools,” he said.

Fintech in numbers

• MENA ‘buy now, pay later’ market is set to grow from $3.6 billion in 2021 to $79.3 billion in 2028
• Saudi Arabia has announced its ambition to go cashless, aiming for 70 percent non-cash transactions by 2030
• There are about 500 fintechs operating in the MENA region 
• Bahrain has doubled its number of fintech startups since 2018, with the government closing in on $2.5 billion in direct investments until 2023
• In the UAE, 88 percent of banks surveyed in 2021 had vowed to implement open banking frameworks by the end of the year
• The number of fintech startups in Saudi Arabia increased 37 percent to 81 during 2021