The Arab Monetary Fund have produced a comprehensive set of guidelines for Open Banking deployment and have included Open Finance as a natural component in that evolution.
As Open Banking evolves in the global marketplaces the Middle East as I have earlier noted is a leader and general its starting point on the journey has the opportunity to leapfrog European, Australian and North American efforts, lever and build on that knowledge and set new standards that early adopters would do well to consider in their evolution.
For snippets from the Executive summary see Appendix.1
Themes to be aware of in leapfrogging early adopters
- Role of a Central Authority; this is different in Canada and America than in Europe. The strength of that Central Authority and their jurisdictional approach varies.
- Technical Focus; this report acknowledges that focus yet I see that as a hurdle best explored at the outset rather than live with the inevitable conflict later in the deployment cycle. I refer to earlier work where I see a missing customer focus. This customer focus could be leadership or educational in nature.
- The danger in strategic assumptions for future theme development; in Europe FSD2 has been folded into Open Banking. This results in millions of Open Banking Adoptees. But the real question ought to be capturing the impact of pure Open Banking on consumer behaviour.
Conclusion
Points 2 and 3 above are inter-related. The AMF Guidelines have an opportunity to address the strategic incongruity between Open Banking and other parallel financial system improvements. For example PSD:
It all began in 2007, with the Payment Service Providers Directive (PSD), which sought to contribute to the development of a single payment market in the European Union to promote innovation, competition and efficiency in the EU.
Incorporation of Open Banking with other directives can result in this example of the AMF assuming central regulation as an assumption rather than a political decision and understanding the implications.
Appendix – Open Finance Guidelies
Arab Monetary Fund
Ms. Nouran Youssef
Fintech Galaxy 2022. MENA Report: From Open Banking to Open Finance.
Ms. Mirna Sleiman
Ms. Adriana Arnaut
Mr. Wassim Ghabali
Central Bank of Jordan
Central Bank of Bahrain
Central Bank of Oman
Kuwait Central Bank
Central Bank of Egypt
Central Bank of the UAE
Saudi Central Bank (SAMA)
Palestine Monetary Authority Banque Du Liban
Banque Al-Maghrib
Guidelines for Effective Open Banking/Finance Adoption
Open Banking (OB) is evolving into a more comprehensive model known as Open Finance (OF) from smoothing access to payment accounts and related services to a larger variety of financial services, including investments, pensions, insurance, and consumer credit. With this larger perspective, individuals and businesses will have a deeper perception of their financial footprint, which will allow them to make more informed decisions.
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Authorities can leverage the potential of OB and APIs to deploy several use cases, including account aggregation, credit scoring services, digital identity verification, remote customer onboarding, digital lending, personal financial management, account-to-account payments for large purchases, as well as Buy Now Pay Later (BNPL) arrangements.
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Leading jurisdictions share key elements in their OB framework, such as a sole standard proposed by a centralized governance scheme, technical standards integrated into the regulatory framework, and data reciprocity.
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An effective OB/OF regulatory framework should take into consideration diverse aspects to provide a sound foundation for the OB ecosystem. These include, but not limited to, a definition of OB, the scope of data to be shared, types of participants in the OB ecosystem, data access and sharing requirements, consent mechanism and informed consent, identifying the regulated Third Party Providers (TPPs), access to TPPs, licensing of diverse services providers, operational and technical requirements, strong consumer authentication (SCA), consumer safeguards, governance scheme for the implementation of the OB/OF framework and Application Programming Interfaces (APIs), standardization of APIs, standardization of contractual terms on partnerships with non-regulated entities, as well as data security.
- Appendix – Open Finance Guidelines ↩
Bankwatch 