The Saudi Central Bank (SAMA) has launched an “open banking laboratory”, in line with the Open Banking Framework released in November 2022.
SAMA’s open banking lab aims to foster innovation and accelerate the development of open banking across Saudi Arabia. The laboratory will offer a “technical test environment” to enable the development and testing of open banking services. The tests will also look at ensuring compatibility with SAMA’s open banking framework.
What does the central bank’s open banking framework cover?
The open banking framework is divided into sections that ultimately aim to set legislation, regulatory guidelines and technical standards for the open banking industry in the region. The key parts are as follows:
- Dictionary: Definitions of all key terms used in the framework are included.
- Use cases: The framework also contains an overview of Open Banking Evaluation and Prioritizing Frameworkalong with a list of the use cases aimed to be enabled by each new release.
- Business Rules: This section aims to provide clear directives on the requirements banks and fintechs must follow if they offer open banking services.
- KSA standards: The standards set up are created using existing ones Customer experience guidelines, API Specifications, Implementation requirements and Operational guidelines.
The Saudi Central Bank’s new open banking lab offers a sandbox environment that simulates real banks’ open banking APIs. The sandbox supports innovation, but also encourages financial organizations to assess the framework at all times.
Saudi Arabia’s fintech strategy
The kingdom continues to put a lot of resources into its Saudi Vision 2030. Overall, the strategic framework aims to reduce the country’s dependence on oil, and diversify its economy, while developing its public sectors.
Part of the framework is namely Financial Sector Development Programme (FSDP). A main pillar of the program is Saudi Arabia’s fintech strategy to make the country a global fintech hub. It believes that improving fintech in the region can lead to empowering not only individuals but also the society of Saudi Arabia economically. Ultimately, this goal seems to improve the economy overall with such a development.
Open banking enables consumers of financial institutions to securely share their financial data with a third-party provider. This enables companies to offer new financial services and products to consumers. SAMA also explained that they believe open banking is to strengthen the partnership between banks and fintechs. It also said that open banking can improve the financial infrastructure to ensure better use of consumers’ financial data.
