Recently, the Central Bank of UAE (CBUAE) issued the Open Finance Regulation. Through the regulation the CBUAE will establish a comprehensive framework that’ll regulate licensing, supervision and operation of Open Finance.
The new regulation will come into effect in phases. Even during its early stages, the financial sector in the UAE is pleased by the move. Hailing it as a major development in the UAE financial sector, the regulations will influence all categories of CBUAE licensees.
What is Open Finance?
“Open Finance is a secure way for financial institutions to open their systems to accredited third-party providers,” says Zina Ashour, founder, Women in Crypto Arabia. “It allows these parties access to financial data held by the financial institution.”
She explains Open Finance can lead to the creation of innovative financial services solutions, tailored to individual customer’s needs. Thanks to Open Finance, you could, for instance, use a single app to manage all your bank accounts, investments and spending, regardless of the institutions involved.
“Open Finance takes the open banking concept a step further,” says Khaled Ahli, ME executive director at CREALOGIX. “It extends secure data sharing between financial institutions and third-party providers, encompassing a wider range of financial products like investments, insurance, pensions and mortgages.”
Read: What does Open Banking mean for the MENA?
Abdulla Almoayed, CEO of Tarabut Gateway, takes this connectivity a little further. He says Open Finance can create a world where all our accounts are seamlessly aggregated into one interface. “…and your money is automatically transferred from your savings account to your investment account without lifting a finger.”
New opportunities
Ashour believes the Open Finance Regulation is likely to have a significant impact on the fintech domain in the UAE.
She says the regulation opens up new opportunities for innovative services, mandates high security standards, and boosts competition. “This could lead to more consent-driven, data-rich, collaborative, secure and customer-centric digital businesses and service models.”
Ahli is also excited about the transformative potential of Open Finance in the UAE. He believes it’ll help create a more level playing field for fintechs to collaborate and innovate alongside established players. “This fosters a dynamic ecosystem that benefits everyone – from banks to consumers.”
Ashour is particularly pleased by the regulations’ emphasis on security and customer consent. “The fact that customers have control over their data and who can access it is a significant step forward in financial services. It puts the power back in the hands of the consumer, which is a positive development.”
Looking at it from a different perspective, Almoayed is grateful for the regulatory clarity and certainty in the new regulations. He believes the comprehensive nature of the regulation provides much-needed regulatory clarity for fintech’s operating in the Open Finance space.
“This reduction in ambiguity will allow us to invest in the UAE with supreme confidence,” says Almoayed.
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Said Murad, senior partner at Global Ventures, looks at the regulation from a technical point of view. He’s gung-ho about the centralized API hub and trust framework by Al Etihad Payments and Core42. He says these help provide a standardized and secure interface for all stakeholders.
“This centralized system, along with a regulatory sandbox for ongoing experimentation, ensures a secure, innovative and promising financial ecosystem within the UAE,” says Murad.
Enabling collaborations
Murad believes a notable aspect of UAE’s Open Finance Regulation is its comprehensive approach. He says unlike similar initiatives elsewhere, UAE’s version covers both Open Banking and Open Insurance.
Furthermore, Murad says the new regulations mandate that financial institutions, including banks, insurance companies and payment service providers, allow accredited third-party providers access to financial data. He adds that the regulation requires all CBUAE licensees to comply with data sharing and service initiation requirements.
Almoayed believes the regulations allow financial institutions to innovate through collaborations across industries. Leveraging functionalities of their partners, they can develop new products and services, expanding the reach to customer segments previously unavailable.
“For financial institutions, Open Finance unlocks a treasure trove of opportunities,” says Ahli. “Imagine a giant sandbox where banks can experiment and develop new offerings, ultimately reaching new customer segments and streamlining operations.”
He says this collaborative environment fosters a competitive edge, allowing institutions to better meet evolving customer needs.
The benefits extend to both sides of the financial services fence.
“Customers are the real winners in the Open Finance game,” says Ahli. “They gain greater transparency over their financial data, and can seamlessly manage it across platforms. This empowers them to make informed financial decisions and unlocks access to a wider range of products and services.”
Read: Fintech Trends in 2024: Region’s ‘Open Banking’ market to surge
Almoayed says with Open Finance, financial services become more inclusive, and can be tailored to the specific needs of customers. “Not only this, customers are able to reap the rewards of all these additional personalized benefits without compromising on security and transparency due to the robust handling of data.”
Leading by example
Almoayed firmly believes UAE’s Open Finance regulation is transformative for the region. He hopes it’ll help pave the way for the rest of the region to follow suit. He says the regulation will have a significant positive impact on fintechs and will trigger a competitive race for licenses.
“This regulatory framework fosters innovation, healthy competition, and the country’s advancement of its financial landscape,” says Almoayed. “I hope this can be the catalyst for the rest of the region to start deploying the same comprehensive regulation.”
Ahli asserts Open Finance lays the groundwork for a whole new way of living and interacting in the digital age. He believes it shows how industries can integrate to create a seamless digital experience for everything we do. “It’s a future where managing finances feels as effortless as booking a ride or ordering groceries.”
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