One of the most exciting and transformative characteristics of digital transformation is the way in which Open Banking is revolutionising the security and ease, of cross-border trade. Compared to the global landscape, the MENA region has unique advantages that leave it well-placed to accelerate innovation and participation in Open Banking applications and processes; creating enormous potential for policymakers, investors, and businesses, to transform cross-border trade, boost GDP growth, and strengthen regional value chains.
Already a home to multiple financial centres with rapidly maturing capital markets – GCC countries possess strong demographic potential, a business-friendly entrepreneurial culture, and a rapidly maturing regulatory landscape. Over the past year, legal frameworks for Open Banking have been launched and updated in Bahrain, Saudi Arabia, and the UAE – with others in the region following suit. The most recent is Saudi Arabia, which issued a comprehensive framework in November 2022 based on international best practices.
These policies set out comprehensive frameworks for Open Banking, incorporating legislation, regulatory guidelines, and technical standards. This makes it much easier for Third-Party Providers (or TPPs) to become catalyst for innovate new services that have the potential to make banking more accessible (and therefore more inclusive), more competitive, and more affordable for new and growing businesses.
Data sharing
One of the fundamental needs for a prosperous Open Banking ecosystem, is safe and secure access to customer data. This is an area where blockchain technologies can play an important role. Mashreq launched the MENA region’s first blockchain data-sharing platform to instantly support businesses and corporates opening digital bank accounts – and was also the first to launch an API developer portal. That portal is integral to building out the Banks’ SME ecosystem and powering the development of innovative digital journeys for its customers.
Trade impact
For developers in the Open Banking ecosystem, the customer journey is at the heart of innovation. For traders, Open Banking can make it possible to trade across borders faster and cheaper by bypassing a range of third-party intermediaries such as correspondent banks or payment gateways. This can reduce transaction fees, avoid delays and make the entire process of buying and selling goods easier.
The customer journey for cross-border trading can be made even smoother by banks’ digital platforms, which are becoming more streamlined, responsive and intuitive. APIs make it possible for banks to collaborate with TPPs, fintechs, and regulators, to build new automation and AI-enabled banking processes into their platforms. Examples include automated paperless onboarding, digitised credit checks, fast mobile payments, or financial management tools.
Collaboration
Collaboration between banks, fintechs, and the business community is critical in leveraging Open Banking for business growth and cross-border transactions. As part of its collaborative approach to leveraging open banking, Mashreq has this year integrated its NEOBiz Connect API into the company formation firm Virtuzone, allowing businesses to open NEOBiz accounts as an extension of the Virtuzone company formation process. This makes ‘one-click’ SME account opening possible for the first time in the region – just one example of many Neo projects that make it possible for Mashreq to support the growing SME ecosystem and to make doing business in the UAE easier.
Collaboration is also useful in leveraging the benefits of Open Banking to combat financial crime, such as money laundering and fraud in the MENA region. Statistics from the UAE government show that the UAE seized and confiscated assets worth more than $1.28 billion (AED 4.73 billion) between July 2021 and July 2022. In 2022, the Director General of the UAE’s Executive Office of Anti-Money Laundering and Countering the Financing of Terrorism explained that the government now has a department working on domestic compliance and coordination, with a special focus on international cooperation, partnerships, and communications.
Open Banking has a powerful role to play in supporting the work being carried out by policymakers, particularly because it enhances transparency through the alignment of standards and controls and providing a consistent approach to sharing of data between trusted third-party partners, within the financial ecosystem. Open Banking offers the potential to make it easier and faster to carry out identification and verification checks and makes it easier to track, monitor and report suspicious transactions and financial behaviours. Open Banking collaboration between banks and regulators also helps to facilitate the sharing of intelligence with national, regional, and international enforcement agencies such as the Financial Action Task Force (FATF).
Banking as a Service (Baas)
The fight against financial crime is especially important within the context of the evolving Banking-as-a-Service (BaaS) business model. BaaS enables banks to embed financial services in third party platforms – allowing non-financial organisations to offer financial services without having a banking license. BaaS allows non-financial organisations to leverage bank infrastructure, regulatory compliance, and seamless digital capabilities. Consequently, BaaS represents a significant blurring of traditional industry ecosystem; opening up to a vast new world of opportunity and innovation, through new business models and value creation.
For banks, the future of Open Banking provides a gateway to delivering hyper-personalised customer services that meet the real-time, unique needs of every business. To get there, banks need to invest in transformative technologies that those of us in the Open Banking environment already rely upon – analytics, AI, machine learning solutions, biosecurity tools, and cybersecurity, capable of protecting data in today’s extraordinarily complex and interconnected digital economy. Through the prism of Open Banking, these tools and capabilities will unleash enormous opportunities for businesses looking to accelerate and simplify their international trade – making cross-border transactions within the MENA region faster, easier, and more accessible than ever before.
