SAMA, Saudi Arabia’s Central Bank has today announced its intent to launch an open banking regulatory framework in the kingdom.
In a policy paper issued by SAMA, it describes open banking “as a pivotal role in the further development of the Kingdom’s financial sector…[and] in this journey towards innovation and financial inclusion”.
Open banking encourages greater financial transparency through the use of open application programming interfaces (API), providing third-party developers access to consumer financial data from banks. Having access to such data allows third-party developers to create more financial products and services for consumers.
Besides innovation and financial inclusion, open banking is set to increase competition and reduce barriers to entry for financial technology (fintech) startups and encourages greater efficiency in the banking system.
“With the support of market participants, SAMA plans to go live with open banking during the first half of 2022,” according to the policy paper.
SAMA is currently assessing the potential impact of open banking and is working with financial market participants to collaborate on building a framework to “address the ecosystem stakeholders’ needs”.
Banks in the region have been particularly hesitant with sharing their customer data with third party players. It is therefore unclear how SAMA will proceed if the banks in Saudi Arabia do not support the initiative.