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Industry participants welcome Saudi Arabia’s open banking framework, which is expected to launch in the first quarter of 2023.
On November 2, the Saudi Central Bank (SAMA) issued the open banking framework, a comprehensive set of legislation, regulatory guidelines and technical standards based on international best practices to enable banks and fintechs to provide open banking services in the country.
The first set of standards focuses on account information services, while the second set looks at payment initiation services, mirroring a similar framework to the EU and UK.
SAMA emphasised it is monitoring the development of banks and fintechs to ensure they are ready to launch open banking services in the first quarter of next year.
“[O]pen banking creates a positive impact in the industry by strengthening the partnership between banks and fintechs,” SAMA said in the press release, adding that it also “improves the financial infrastructure and guarantees better use of financial data for customers”.
Industry players welcome the framework
"It's great to see the publication of the Open Banking framework,” Chris Michael, co-founder and CEO of Ozone API, told VIXIO.
“We believe this will set a new global benchmark and really reflect the ambitious vision that the central bank has set out to achieve,” Michael added.
The framework has been designed to enable “some really critical use cases”, according to Michael, which will act as the foundation for innovation and drive strong levels of adoption and usage in the Kingdom.
The new open banking standard, which is a key part of the framework, “goes beyond existing global standards in a few areas”, the Ozone API executive said.
Specifically, it has been designed to be “more efficient for both banks and third parties to implement and introduce some game-changing new functionality, such as the ability to initiate service requests”.
"The SAMA open banking framework is a great step forward to propel collaboration," said Carmen Vicelich, founder and global CEO of Valocity. "Valocity is impressed with the pioneering ethos of many in the region and this framework enables more collaborative partnerships to grow at pace," she added.
Banfico, another open banking service provider, called the framework an important milestone which is “a culmination of the hard work of all stakeholders including banks, fintech, Saudi Payments and SAMA”.
“A truly collaborative effort over a challenging timeline.”
Saudi Vision 2030
The work on the open banking framework was first announced in early 2021 and forms part of Saudi Arabia’s Fintech Strategy, one of the pillars of the Financial Sector Development Program (FSDP) under Saudi Vision 2030.
As part of the initiative, which seeks to make Saudi Arabia a global fintech hub, SAMA has created a regulatory sandbox, issued regulations for payment service providers (PSPs) and created licences for non-bank financial institutions.
The development of Saudi Arabia's open banking framework comes on the back of significant investment to modernise the country's payment system.
In February, SAMA launched an instant payments system, which was built using Mastercard's IPS technology.
SAMA said that the new instant payments "represents a significant milestone in strengthening the Kingdom's position as one of the leading countries in the Banking and Financial Technology services, and a pioneering hub for FinTech innovation".
The infrastructure is likely to be a significant building block to support proposed payment initiation services in Saudi Arabia.
