country scenario

In Saudi Arabia, Open Banking is Taking Off

saudi arabia open banking

Saudi Arabia is ready to become a regional fintech hub. Just two months ago, the country  launched its first open banking solution. 

As stated by local media, the concept provides seamless digital banking solutions to all stakeholders, besides reducing operational costs of traditional banking.

With no doubts, in Saudi Arabia, open banking is taking off, driven by a conducive regulatory landscape, increased competition in the financial sector, and rising investors’ interest.

The Saudi Arabia open banking strategy

The first step is to modernize the payment sector of the country.  As part of Vision 2030s Financial Sector Development Program, the Saudi cabinet approved the first Kingdom’s financial technology strategy. 

Before that, in 2021, the Saudi Arabian Central Bank (SAMA) launched a framework for open banking that sets out the regulator’s ambitions and a timeline for development, implementation and go-live of open banking in the country.

In addition to the open banking framework, last year the SAMA also launched the first version of the Open Data Platform, a platform that offers economic, financial and monetary statistics and indicators for Saudi Arabia. 

The central bank’s move “is set to revolutionize how customers, merchants and financial institutions augment the value they reap from accessing financial data,” Tala Al Jabri, a Saudi national and venture capital investor based between Abu Dhabi and Riyadh, told CNBC.

Speaking about the program, Talat Zaki Hafiz, economist and financial analyst, said that the program has three main pillars. 

“One of these pillars is to improve the banking and the financial sector to support the private sector, the second pillar is to improve and enhance the capital markets, and the third pillar is to encourage individual investment and financial planning,” said Hafiz. He added that the approval of the strategy is set to push things forward for the fintech sector, as the Kingdom is planning to digitize at least 70% of financial transactions by 2030. However, by the end of the year, the first examples of consumer-facing open banking products and services will be live.

A young population is driving Saudi Arabia open Banking revolution 

According to global data from Accenture, banks that embrace open banking can benefit from an increase in revenues of up to 20%, but that figure could be even higher in Saudi Arabia, as product modernization and adoption can create a more inclusive financial system. However, as financial inclusion increases, traditional operators have to run with innovation. 

Hisham al-Falih, CEO of Riyadh and London-based fintech start-up Lean Technologies, sees this as essential for further modernization and digitization of Saudi banking and finance. SAMA has been “slowly enabling more and more technologies and innovations to the market. However, these fintechs can only go so far without being able to access customer data, so I’m really happy to see Saudi adopt open banking,” al-Falih said.

As pointed out by Abdulla Almoayed, founder and CEO of Tarabut Gateway, the Saudi Central Bank has already taken a positive approach with appropriate regulation to empower financial inclusion, that’s why banks across the Kingdom are already starting to embrace open banking. 

For example, Riyad Bank has established an open innovation platform, Arab National Bank and Saudi National Bank have live sandbox environments for testing, and Alinma is in the process of developing similar processes for collaboration. 

Saudi Arabia’s open banking plans are ready to revolutionize opportunities for fintech.

Fintech companies are also rapidly taking advantage of the opportunity, with examples such as Mala'a Technologies, a startup that has developed an app for personal wealth management and budgeting. 

In March 2022, Mala'a became the first fintech enterprise to obtain a permit from the Saudi Central Bank to roll out products using open banking APIs.

Moreover, the evolving open banking environment in Saudi Arabia is also fuelled by the Kingdom's young and highly connected and digitized population. More than half of the population is under 25, and demand for digital financial services is high. 

With one of the world's strongest rates of internet penetration, right behind China and India, the opportunity for accessible, inclusive, and empowering banking services has never been greater, underlined Almoayed.

Is Big Data the New Oil? 

The challenge for SEMA is balancing stability versus innovation. In fact, the Saudi banking sector is one that has heavily prioritized stability, even more than the Chinese banking system, a real drawback that makes Saudi Arabia not the best country in terms of innovation. 

However, in the last few years, Riyad has charged ahead with projects part of Vision 2030, his ambitious campaign to wean the oil-rich kingdom’s economy off hydrocarbons. 

In this instance, big data may become the new oil. It is well known how customer data access is crucial to fintech as well as crude oil is vital to the operation of a refinery.

“I hope this is going to be the genesis of a much more data-driven, much more digital society and economy,” Hisham al-Falih said. In few words, a real change in the Saudi banking system. 

The path is already settled down and Saudi Arabia must catch up with other competitors, such as Bahrein. However, the first results are coming. So, what’s next? Saudi Arabia is ready to be a game changer in the Gulf fintech arena.