Imagine a world in which, with a few clicks on your mobile device, you can find better financial offers, benchmark your household bills, cancel unwanted subscriptions, control and enable bank debits or transfers and manage payments across accounts.
Having easier access to your own data allows you to make better and more informed choices about the financial products that are right for you.
It also drives competition within the financial services sector, promoting innovation and allowing new and better products and services to be developed.
Open banking is a standard and a process that allows banks and FinTechs to develop new products and services, using open Application Programming Interfaces (APIs) – which in basic terms just allows applications to communicate with one another.
The need to attract and retain customers will drive the acceptance of open banking in the region.
The Central Bank of Bahrain’s mandate for open banking compliance has been met by local banks and now Bahrain is officially open banking ready.
This is a clear indication of progress towards new financial offerings that will bring value to GCC consumers.
How does the world view open banking today?
Well, until it was implemented and put into action in the UK and Australia, open banking was regarded as a regular compliance exercise imposed by the regulators.
This attitude has now evolved, as the financial industry is undergoing a profound transformational phase – banks have very firmly moved from viewing open banking as a compliance exercise to appreciating it as an opportunity to compete and innovate.
The GCC region is strategically focused on the banking and financial sector. Decisive moves by regulators highlight that a sharing economy and competitive landscape is going to be the field of play for banks and FinTechs.
What about SMEs? The GCC region has a great spread of SME and innovative businesses that will undoubtedly benefit from the advent of open banking.
SME lending is one of the biggest use cases where access to finance and information is effectively missing; open banking raises competitive solutions that could create a seamless experience for SMEs to discover the best lending options available and to opt for them through innovative digital solutions.
What about consumers, do they care about open banking? The simple answer is no.
Consumers do not view open banking as a service, but that’s because it’s not a service.
Open banking is a framework of APIs which can transform the life of a banking or a FinTech customer by providing them with solutions and services.
This is done by understanding their financial situation and handholding them through a journey towards achieving their objectives.
This is where the opportunity lies, where a bank or FinTech can utilise the open API framework to retain and service these customers.
This implies that, eventually, open banking will experience a journey similar to the rise of Internet banking, becoming an integral part of people’s financial life.
Between now and next year open banking will become a reality in the GCC region.
This will leave its mark by enabling an impeccable user experience for financial and non-financial offerings, such as account information, delivery of payments and availability of mortgages, all seamlessly done on any mobile device.
Sumeet Kulshreshth is head of open banking at Aion Digital, a Bahrain-based Fintech firm that “builds” digital banks.