Saudi Central Bank (SAMA) has issued its Open Banking Framework, as part of the government’s national fintech strategy.
The framework outlines a set of legislation, regulatory guidelines and technical standards based on international best practices to enable banks and fintech companies to provide open banking services in the Kingdom in hopes of greater financial innovation.
SAMA in a statement confirmed that the first phase of open banking services will focus on account information service (AIS) while the second version will focus on payment initiation service (PIS). The central bank is also monitoring the development of banks and fintech companies to ensure their readiness to launch open banking services within the first quarter (Q1) of 2023.
The new policy follows the licensing of at least six fintech companies by SAMA to offer open banking solutions under its regulatory sandbox this year. The six are: Wally Global Arabia, Sanam Aliliddikhar for Information Technology, Istishraf Al-Bayanat for Financial Technology, Spare Arabian Financial Company, Lean Technologies and Mod5r.
The practice of securely sharing financial data between banks and third-party service providers is a relatively new concept, particularly in the Middle East. Nations in the GCC, however, are charting a promising path toward implementing open banking.
Bahrain in 2019 put in place an open banking framework incorporating the EU’s PSD2 regulation and open banking rules from the UK and Australia. Central Bank of Kuwait in August gave the green light to test an open banking product within its regulatory sandbox while the UAE licensed its firm to provide AIS and PIS services earlier this year.
The Open Banking Framework is a result of Saudi’s Open Banking Program, an initiative under a national fintech strategy approved in late May. Spearheaded by the Financial Sector Development Program with the overarching goal of realizing Saudi Vision 2030, the fintech strategy aims to make Saudi Arabia a global fintech hub.