INDUSTRY WATCH
VARYING LEVELS OF OPEN BANKING ADOPTION AND REGULATION ACROSS GCC PRESENT DISTINCT OPPORTUNITIES FOR BANKS .
It is clear to regional financial institutions that the open banking revolution is here . In the GCC , Bahrain was the first to mandate open banking , and the UAE and Saudi Arabia are now making moves to follow their neighbour ’ s example . The pandemic has acted as an accelerant , and banks across the Gulf and beyond are now looking to their digital function to explore how to become , in many respects , platform companies . But to ensure maximum benefit for themselves , consumers , and third-party providers , TPPs like fintech firms , banks will need to shrewdly evaluate the new open ecosystem and leverage their existing technology capabilities , rather than resort only to the use of new standardised APIs .
Of course , it would be unwise for banks to simply replicate what their counterparts in other countries within the GCC are doing . Nuances exist and this is evidenced by countries like the UAE having embraced Open Banking and Fintech collaboration much ahead of any regulation , while countries like Bahrain and Saudi Arabia are leading with regulation . Yet others like Qatar , Oman and Kuwait are yet to take notable action in either space .
To ensure they remain relevant , today ’ s banks must recognise the realities of tomorrow . Open banking is here to stay and , with it , API-based data services . Keeping country-specific nuances and maturity levels in mind , here are three ways in which banks across the region can leverage APIs to bring value to themselves and the industry at large .
New entrants
This is especially relevant to banks in countries like Oman , Qatar , and Kuwait , where Open API adoption has thus far remained in its nascent stages . Open banking is all about data sharing . A credit scoring system , for example , benefits greatly from data from other banks . This benefit would not only accrue to the banks themselves but to TPPs such as fintech companies . Any business that is building an app that offers paths to personal loans , property leasing , or other models where credit plays a role will find the scoring data extremely useful .
This is a welcome break from the arduous workflows of old , which involved hours and days of collation , correlation , and calculation , even when using a third-party creditworthiness assessment service . Any transfer of data would normally require additional regulatory adherences and the end-product would also come with a significant cost .
But open-data APIs alleviate this burden considerably . So , offering them to fintech companies would go a long way to building lasting strategic relationships with them . Banks have an opportunity here for differentiation , but also for new revenue streams . While the basic API will be free , fair usage could require certain limitations to be imposed , thereby incentivising TPPs to opt for a premium version , which can be monetised .
Moderate maturity
Further ahead along the Open Banking maturity curve , we find countries such as Bahrain and Saudi Arabia where regulation is either already in place , or firmly on the cards . In these countries , banks , again , as a differentiating and monetising strategy , have the option to go beyond their regulatory obligations and offer enriched datasets augmented by their internal data or data obtained through an external partnership .
For example , the bank could use external AI-powered business intelligence and data to enhance its own credit-check system and then share the resultant
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