You don’t need a crystal ball to predict that the world is moving towards Open Banking. Open Banking is redefining financial services as regulators and governments seek to increase competition and choice. Changing customer expectations have accelerated the adoption of this global movement and have pushed countries across the globe to embrace this disruption. While Europe might reasonably claim to be the ‘cradle of Open Banking’ by kickstarting the movement back in 2016, it is not a dream anymore in the MENA region, but a reality.
The path towards Open Banking varies across geographies and markets, but the goals are shared. Open Banking drives improved collaboration between financial service providers to create tailored products and services for customers. Each jurisdiction is applying a different approach to achieve the same universal goal; better choice for one and all.
Within the MENA region, Bahrain has spearheaded the development of Open Banking by issuing the first set of regulations in 2019. Since then, as part of Tarabut Gateway, MENA’s first licensed Open Banking platform, we have been able to integrate to all retail banks in the country. An achievement that has been accomplished in record time; hence setting the MENA region apart from the rest of the world.
So, what are the key lessons learned from Bahrain’s Open Banking framework?
Customer Experience is King
In a region where internet users are 11.8% higher than the rest of the world, customers expect more. They expect unmatched user experiences and improved financial services.
One of the key challenges any third party provider would face is the difference in authentication journeys between banks. While Bank A might ask the user to simply authenticate through facial recognition, Bank B might ask the user to enter their username, password, customer information file (“CIF”) number, and a One Time Password (“OTP”). Not only making it confusing for customers to use Open Banking services but could be daunting as well.
The need for standardization across all bank journeys proved to be a key determent in increasing customers’ confidence levels in this new technology.
Open Banking Beyond Compliance
Notably, banks have traditionally viewed the custody and protection of their clients’ data as a responsibility, more of a stewardship role than an asset to be commercialized. However, if done well, facilitating data sharing can deliver increased security through enhanced know-your-customer capabilities and identity validation. Thus, opening the door to a world of new opportunities for banks and financial institutions. For the banks that are prepared to go beyond compliance, these changes present rich opportunities to shape innovative offerings and drive new revenues. To enable API-driven services, banks will make significant changes to their technology infrastructures. By strategically monetizing APIs, banks can offer better products to customers and disarm the threat of other nimble competitors.
The Game Has Just Begun
From SME Lending, product comparisons, to streamlined payments… the use-cases of Open Banking are endless. The truth is that Open Banking offers considerable short- and long-term opportunities for financial institutions. The benefits shouldn’t merely be seen as something that will be enjoyed in the distant future – they’re ripe for picking now. It’s a journey that is likely to start with more elementary Open Banking use cases and advance to more sophisticated use cases over time. With 5 banks in Bahrain now offering the first regional Open Banking use case; i.e. Account Aggregation, we’re witnessing great interest in other regional banks to follow suit and go much beyond. The question is no longer whether or not we will need to deal with the implications of open banking. We will. The question is whether we are ready to make the most of it.