The Real Deal With CEO of Tarabut Gateway Abdulla Almoayed

StartupScene’s op-ed series ‘The Real Deal’ asks some of the region’s most dynamic entrepreneurs to share their stories, passions, struggles and personal thoughts on the workings of the ecosystem and their entrepreneurial journeys. This is a glimpse behind the headlines, the raises and the often misleadingly tantalising veneer of the fast-track.

This week our guest writer is Abdulla Almoayed, founder and CEO of Tarabut Gateway, the MENA region's first and largest regulated Open Banking platform that connects a regional network of banks and FinTechs. In his in-depth op-ed, Almoayed shares his views on the impact of open banking in the MENA region - from its ambitious beginnings to its bright future.

This is Abdulla Almoayed’s REAL DEAL…

As financial institutions and governments in the MENA region look to enhance innovation in the financial sector, open banking has rapidly caught on across regional jurisdictions. Governments in the region are acknowledging its transformative potential to empower customers like never before, and to create business opportunities in the process.

In simple terms, open banking is the regulated sharing of financial data between banks, fintechs, and authorised third-party providers supported through secure APIs. This technology has the potential to revolutionise the financial sector by providing customers with enhanced and personalised banking products and services using insights from the shared data.

Open banking was first introduced in Europe through its PSD2 legislation, while it gradually developed separately over the years in the United States and the United Kingdom. In both cases, its motivating impulse was a lack of competition in a banking sector dominated by a few large incumbents. Opening the treasure trove of data, previously controlled by a handful of financial institutions, represented a huge market opportunity for new challengers and existing players alike.

The same impulse started the open banking wave in the MENA region. However, the region chose a unique path with its own governments and regulators leading the way. Boosting competition in the financial services sector was recognised as an integral part of the effort to diversify oil and gas-based economies. Drawing from the lessons learned in more mature markets like Europe, regulators in the region became innovators, with open banking frameworks and implementation plans proliferating.

How does open banking’s impact on MENA’s financial landscape look so far? The Kingdom of Saudi Arabia, Bahrain, and the United Arab Emirates are leading the race for adoption, while other MENA countries are preparing frameworks. Kuwait has its Open Banking Working Group, Oman has its roadmap on sector development and Egypt’s Central Bank has acknowledged the potential benefits of open banking by improving the national payments system, in order to provide the groundwork for open banking reform.

The KSA’s regulator – the Saudi Central Bank – released its open banking framework in November 2022. Moving quickly with the plan’s implementation, it created the ‘Open Banking Lab’ at the beginning of this year, offering banks and fintechs a technical testing environment to market-proof open banking products. All these initiatives are part of Saudi Arabia's grand ‘Vision 2030’ strategy, which includes fostering competition in the financial services sector.

The efforts are paying off and have attracted many early stage fintechs to the Kingdom. 2022 saw a staggering 167% increase in fintech investment year-on-year, collecting $239 million and emerging as the best funded industry. Fintechs are attracting the most investor interest, a trend also notable in the UAE’s startup ecosystem last year. Just in H1 of 2022, UAE fintech startups raised $234 million spread over 28 deals, representing a 3x year-on-year increase, according to data by Magnitt.

The Emirates followed up on this stellar growth with its Central Bank launching a Financial Infrastructure Transformation programme recently. Its nine key initiatives to establish foundational services for a cohesive and integrated financial ecosystem include a card payment platform, an instant payments system, digital currency and open finance – which takes the concept of open banking one step further by expanding its additional financial services like lending and insurance. Open finance applications are tested in the Dubai International Financial Centre’s ‘Open Finance Lab’.

Meanwhile, in 2019, Bahrain became the first jurisdiction to introduce comprehensive regulation around open banking, transforming itself into the driving force of regional fintech innovation. The country’s secret is well-formulated regulation synthesising aspects of Europe’s PSD2, the OBIE of the UK and Australia’s Open Banking rules.

To what degree will open banking shape the future of MENA’s financial sector?

Incumbent banks leverage the technology to update their products and services, creating new revenue streams and better customer experiences. Fintechs gain access to a valuable pool of customer data. The number of business models this enables is hard even to estimate. Leveraging APIs to build new products and services comes with the ability to scale quickly, due to the ease with which software can be built.

Consumers on the other hand will gain greater control over their financial data and be able to choose from an improved menu of financial products. Ultimately, open banking promotes competition, innovation, and drives financial inclusion – a textbook case of positive-sum economic growth.

Western observers might expect the idea of regulatory-driven innovation to find resistance from banks. However, the opposite is true in MENA. Banks in the region are embracing the opportunity open banking provides to enhance their offering in terms of revenue, customer acquisition and retention. Displaying a strong appetite for open banking, they are already pushing for additional monetisation opportunities rather than limiting open banking to a compliance requirement.

Further benefits will come when open banking is combined with new technologies like Artificial Intelligence (‘AI’). One important use case lies in processing and categorising large pools of data in a more efficient, faster, and streamlined manner using AI-powered applications to improve the speed and quality of product customisation.

Another cross-over area promising growth is ‘embedded finance’ – where automated processes allow for real-time data to be provided to users. AI can make informed recommendations on financial products on the basis of analysing this data. Everything will become faster.

There is no doubt open banking is already shaping MENA’s fintech sector like few other technological advances. Certainly, the region must overcome one major obstacle to the connecting force of open banking – its strong fragmentation. Europe, having a unified legislative branch, has achieved a high degree of standardisation in regulatory frameworks, data protection, and cybersecurity practices.

But the synergy and dynamism exhibited by MENA’s regulators and financial sector when it comes to introducing open banking is unequalled globally. As long as jurisdictions remember the win-win of this cooperative effort, the sector has a bright future ahead.