According to Bahaa Abdul Hussein, Open banking is a system that allows third-party finance service providers open access to various banking services by using APIs or Application Programming Interfaces. Open banking is a major innovation in the banking industry. It is expected that open banking would drive the future of finance in the days to come.
Open banking and open finance
A study of banks and monetary authorities was carried out in 2020. The result showed that boosting innovation and attracting fintech organizations was highlighted as one of the priority areas of open banking. There is no doubt that open banking is going to have a strong impact on financial innovation.
The use of secure and standard platforms of APIs will allow open banking to be done at the global level. With the advent of open banking, there have been new solutions being offered for both consumers and corporate clients. Whether it is personal finance management app or digital payment tools, there are various innovative practices being implemented.
In the Middle East, open banking is at an initial stage. But interestingly, most of the banks in the UAE (88% surveyed) had decided to offer open banking by 2021. They were of the view that a personal finance manager was essential to aggregate customer accounts. The DIFC innovation hub is already bringing together nearly 60% of the fintech businesses and top finance brands.
The open economy is the future
Open banking would give rise to open finance and the open economy beckons. This is going to benefit the entire financial structure and will have a significant impact in the years to come.
The key for this to happen is collaboration between all entities that form part of the ecosystem. Industry working groups is going to be the principal success factor if this has to happen. Enabling frameworks are required from industry bodies and regulators to make this happen in a smooth manner observed Bahaa Abdul Hussein.
DFSA or the Dubai Financial Services Authority is now giving specific licenses so open banking is effectively implemented in the UAE. PISP (Payment Initiation Service Providers) and AISP (Account Information Service Providers) are being given licenses for this.
Dubai is collaborating with the UK already. This cross border collaboration will ensure international data transfer happens seamlessly and securely. The use of open banking frameworks and strong relationships with different jurisdictions will enable this.
Innovation could be driven in a bigger way by ensuring open finance is implemented beyond the finance industry in other organizations too.
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