Recently, the Central Bank of the UAE (CBUAE) issued the Open Finance Regulation, through which the CBUAE will establish a comprehensive framework to regulate the licensing, supervision and operation of open finance. Open Finance.
The new regulation will be implemented in a phased manner. The UAE's financial industry has welcomed the move, although it is still in its early stages. Hailed as a major development for the UAE's financial industry, the regulation will affect all CBUAE license holders.
What is Open Finance?
“Open Finance is a secure way for financial institutions to open up their systems to accredited third-party providers,” says Zina Ashour, founder of Women in Crypto Arabia. “It allows these parties to access financial data held by financial institutions.”
She explains that Open Finance can lead to the creation of innovative financial service solutions tailored to the needs of individual customers: Thanks to Open Finance, for example, you will be able to use one app to manage all your bank accounts, investments and spending, regardless of the institution involved.
“Open Finance takes the concept of Open Banking a step further,” says Khaled Ahli, ME Executive Director at CREALOGIX, “by expanding secure data sharing between financial institutions and third-party providers to cover a wider range of financial products, including investments, insurance, pensions and mortgages.”
read: What does open banking mean for MENA?
Abdulla Almoayed, CEO of Tarabut Gateway, takes this connectivity a bit further. He says Open Finance enables a world where all your accounts are seamlessly integrated into one interface, “…and money is automatically transferred from your savings account to your investment account without you having to lift a finger.”
New Opportunities
Ashure believes the Open Finance regulation is likely to have a major impact on the UAE's fintech sector.
He said the regulation would open up new opportunities for innovative services, mandate high security standards and foster competition, “which could lead to more digital business and service models that are consent-based, data-rich, collaborative, secure and customer-centric.”
Afri is also excited about the transformative potential of open finance in the UAE. He believes it will help create a more level playing field for fintech companies to collaborate and innovate alongside established players. “This will foster a dynamic ecosystem that benefits everyone, from banks to consumers.”
Ashour is particularly pleased with the regulation's focus on security and customer consent: “The fact that customers have control over their data and who can access it is a major step forward in financial services. It puts power back in the hands of the consumer, which is a positive development.”
From another perspective, Almoayed appreciates the regulatory clarity and certainty of the new regulations, as he believes the comprehensive nature of the regulations will provide much-needed regulatory clarity for fintechs operating in the open finance space.
“This reduction in ambiguity allows us to invest in the UAE with absolute confidence,” Al Moayed said.
read: Fintech Accelerator Program: Paving the way for innovation and growth
Saeed Murad, senior partner at Global Ventures, sees the regulation from a technology perspective: He is enthusiastic about centralized API hubs and trust frameworks. Al Etihad Payments and Core 42These help provide a standardized and secure interface for all parties, he says.
“This centralized system, coupled with a regulatory sandbox for continued experimentation, will ensure a safe, innovative and promising financial ecosystem within the UAE,” Murad said.
Enabling collaboration
Murad believes what's remarkable about the UAE's open finance regulation is its comprehensive approach. He says that unlike other similar initiatives, the UAE's version covers both open banking and open insurance.
Murad further said the new regulations require financial institutions such as banks, insurance companies and payment service providers to grant access to financial data to accredited third-party providers, adding that the regulations also require all CBUAE licensees to comply with data sharing and service launch requirements.
Almoayed believes regulation will enable financial institutions to innovate through cross-industry collaboration, leveraging partner capabilities to develop new products and services and expand reach to previously inaccessible customer segments.
“For financial institutions, Open Finance is a goldmine of opportunity,” says Ahli. “Imagine a giant sandbox where banks can experiment and develop new services, ultimately reaching new customer segments and streamlining their operations.”
He says this collaborative environment fosters competitiveness and allows financial institutions to better meet evolving customer needs.
The benefits extend to both sides of financial services.
“The real winners in the open finance game are customers,” says Ahli. “They get greater transparency into their financial data and seamless management across platforms, which empowers them to make informed financial decisions and gives them access to a wider range of products and services.”
read: Fintech trends for 2024: Regional 'open banking' market booming
Almoayed said open finance will make financial services more comprehensive and customizable to customers' specific needs: “Not only that, but customers will enjoy all these additional personalized benefits without compromising on security and transparency thanks to the robust processing of their data.”
Leading by example
Almoayed believes the UAE's Open Finance regulation will be transformative for the region. He hopes it will pave the way for other countries in the region to follow suit. He said the regulation will have a major positive impact on fintech and increase competition for licenses.
“This regulatory framework will foster innovation, healthy competition, and the development of the country's financial environment,” Almoayed said. “We hope this will inspire other countries in the region to start implementing the same comprehensive regulations.”
Ahri argues that Open Finance lays the foundation for an entirely new way of living and interacting in the digital age. He believes it shows how industries can come together to create seamless digital experiences for everything we do. “It's a future where managing your money feels as easy as booking a ride or ordering groceries.”
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