Launching the Open Banking Revolution in the Middle East via Fintastic Bahrain

Digital EconomyFinanceFinTechTechnology

A core component of the success of Bahrain as the Middle East’s leading FinTech hub, has been the pro-innovation stance adopted by the Central Bank of Bahrain (CBB). From the first regulatory sandbox, to the first set of comprehensive cryptocurrency regulations, the CBB has been at the forefront of developing a flexible and forward-looking regulation system that supports FinTech innovation. The advent of Open Banking, mandated last year, and set to come into force in June this year, is the latest step in Bahrain’s leadership role in the FinTech sector.

Bahrain is the first country in the Middle East to adopt Open Banking, replicating the efforts of global finance hubs such as the UK, which is itself in the early throes of its own Open Banking revolution. Bahrain’s new system will debut with the adoption by the National Bank of Bahrain (NBB) of the FinTech Tarabut Gateway’s Open Banking infrastructure. Tarabut Gateway is a trailblazer in its own right, having been the first company to graduate from the CBB’s Regulatory Sandbox last year.

Open Banking is a direct response to consumer demand for greater access to their own financial information and the ability to seamlessly interact with that data. As increasing numbers of digital-savvy consumers are connected to 4G, and shortly 5G networks, the clamour for quick, easy and on-the-move access to financial services will only grow.

So, what exactly is Open Banking?

Open Banking will make access to financial information easier, faster and tailored to the needs of customers. It facilitates this by allowing third-party providers to develop APIs (Application Programming Interfaces) that can access a customer’s bank and other financial accounts and present it in a way that is tailored to a customer’s needs.

For example, multiple bank accounts from multiple providers can be housed in one app, subjected to machine learning analysis, and made securely available to consumers on their mobile phones. With one of the highest mobile phone penetration rates in the world, Bahrain is the perfect location to test such solutions.

Who benefits from Open Banking?

The answer to that? Everyone. And that is exactly what the CBB has laid the groundwork for.

Customers benefit because Open Banking eliminates the need to conduct separate searches of different bank accounts through multiple portals and instead all relevant financial information is aggregated on a single application platform. Such a system will also unlock a wide array of cutting-edge products and services developed by nimble SMEs such as automatic micro-saving and robo-investment advice.

Banks, on the other hand, benefit because they will have to raise their game to compete with third-party providers (TPPs). By digitising their own services, traditional institutions will finally have the calling card to re-engage with consumers who had lost trust in banks following the global financial crisis.

But Open Banking also underlies the growth of a new player in financial services: TPPs. These are the fast-moving entrepreneurial app developers who will offer their services to both institutions and individuals with the aim of simplifying the satisfaction of everyone’s financial demands. The successful development of such a startup community will go a long way to defining the overall success of Open Banking in its own right. The startup-centric ecosystem found in Bahrain, that encompasses accelerators, incubators, training programmes and funding schemes, will therefore be at the heart of the Open Banking revolution.

In other words, Open Banking is the logical beneficiary of the entrepreneurial and FinTech ecosystem that the CBB has been instrumental in creating. It profits from the highly respected financial services industry that is ingrained in Bahrain’s business environment while spurring entrepreneurial activity locally, benefiting not only Bahrain’s financial services sector but that of the entire region. A win-win scenario that cannot be overlooked.

Dalal Buhejji

Senior Manager - Financial Services, Bahrain EDB

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