The Kingdom of Saudi Arabia has been undergoing many transformational changes since the announcement of Vision 2030. The Saudi Central Bank, previously known as the Saudi Arabian Monetary Agency or SAMA, has issued an Open Banking policy for all financial institutions. They have introduced open banking to promote trust, innovation, and competition, hoping to improve the banking and financial sectors’ efficiency. Over the next year and a half, the Saudi Central Bank will co-build the open-banking ecosystem with the kingdom’s financial intuitions. Those that choose not to move to open-banking may face heavy penalties. Many nations with the MENA region are turning towards open-banking to entice investment and give customers better control over their data. But what is open-banking, and why is it so important?
Customers’ and developers’ expectations are increasingly driving the financial sector to employ innovative approaches to serve the evolving needs of a diversified mix of users. Data underpins the successful execution of these new approaches. Before Open Banking was introduced, sharing customer’s data was too restricted. Established banks dominated the market so much that smaller and newer players practically couldn’t access or compete. This trend slowed down innovation and efficiency in the financial sector, limiting how customers could control or manage their data and avail financial services. This restrictive law and lack of innovation in banking brought the need for open-banking. And, that is where application programming interface (APIs) come into play, allowing app developers to collaborate with financial institutions and create apps that can serve the needs of a specific segment of users — a win-win for every player in the financial ecosystem.
Essentially, Open-Banking is the practice of financial institutions sharing their customer’s data securely, only through the customer’s consent, with third-party developers, Fintechs, and other financial service providers through APIs. APIs provide financial institutions with secure and seamless delivery of data (account details, transaction history etc.) to third-parties, such as fintechs and other players in the market, to gain access to financial services not directly offered by the institution.
As open banking takes off, and financial institutions expose their digital assets to the outer world via APIs, data security becomes a critical component of the open banking strategy. From PSD2 (Payment Services Directive) in Europe to CDR (Consumer Data Right) in Australia, to Open Banking in the UK and now in Saudi Arabia, regulators worldwide are mandating financial institutions open secure access to financial data and payment capabilities. These regulations specify stringent requirements for strong authentication and secure communications that financial institutions must comply with.
The majority of API platforms, such as Apigee, come with enterprise-grade security that offers open banking solutions to simplify and accelerate APIs delivery. Key Features to look for include:
These are some of the features to look out for when searching for an API Management platform, making open banking easy and secure for financial institutions across Saudi Arabia. Looking to comply with open-banking policy? Learn more.
Accelerate Financial Innovation: Financial institutions can expose their data to third-party developers and fintech companies to provide more innovative and diverse products & services to theirs customers — further strengthening the customer experience.
Generate New Revenue Streams: As more and more players securely access consent-based financial data, the opportunities for banks to introduce new revenue streams increases and improves their bottom line. Using an API management platform, the banks can securely create, manage, monitor, and monetize their APIs.
Better Services, Better Brand Loyalty: Open-banking benefits the customers the most. They avail financial services and products that are more convenient, personalized and fast.
Abacus’s in-depth industry knowledge and experience combined with Google Cloud’s powerful Apigee platform, allows enterprises to securely and efficiently implement the open banking API platform. Abacus has successfully helped several private sector organizations and financial institutions leverage Google Cloud’s API platform to modernize the banking sector. Learn more about our success stories here.