It is a banking practice in which the banks allow access to third-party service providers’ their consumers’ personal and financial data by explicitly obtaining consumers’ consent for this open access to bank’s consumers’ data through Application Programming Interfaces (APIs). Open Banking is becoming the primary source of innovation, and it is reshaping the banking industry worldwide. Saudi Central Bank (SAMA) has announced the Open Banking initiative, which is planned to get into effect in 2022. SAMA is optimistic about Open Banking and considers it a pivotal role in further developing the Kingdom’s financial sector. Open Banking is amongst the significant components of the Saudi Vision 2030 and Financial Sector Development Program (FSDP). Currently, SAMA is going through the assessment stage of Open Banking and its impact on the Kingdom’s FinTech industry. The first half of the year 2021 will be the design phase, the second half of 2021 will be the implementation phase, and the first half of 2022 will be the go-live phase, according to SAMA. This initiative is carefully organized into three distinct phases; a design phase, an implementation phase, and the go-live phase;
Design phase: The Frist half of 2021 will be dedicated to designing the Open Banking system’s ecosystem, and a survey will be conducted by involving the public to assess its feasibility collect ideas from stakeholders. The Central Bank is assessing approaches and impacts before implementing this new banking system in Saudi Arabia.
Implementation Phase: The second half of 2021 will be the implementation phase; in this phase, the technology designs and ecosystem for Open Banking will be implemented by testing it on market participants to develop customer awareness about the latest technology.
Go-live phase: The first half of 2022 will be the go-live phase; in this phase, the Open Banking system will be formally launched in Saudi Arabia, and it will get operational with developments gradually.
Including its support for the financial sector’s development, the Open Banking ecosystem has countless benefits, such as:
Open Banking will provide a mixture of challenges and opportunities for incumbents and encourage competition. They will have to abandon the traditional banking model, in which the bank is the only producer and distributor of products and services. Alternatively, they will move to a model in which banks continue to develop their products and services but use FinTech and third parties like distributors, or the banks provide products and services created by FinTech and others. If you want to know more about the legalities of open banking you contact the banking lawyers in Dubai.