<p>Open banking has gathered a lot of hype in Saudi Arabia and is seen as a major disruptor of the whole financial industry's landscape. </p><p>It is transforming Saudi Arabia's financial services sector by encouraging competition and introducing new services, allowing fintech's direct access to the pool of bank customers' data. That, in its own right, is a disruptive process. </p><p>Open banking will impose consequences on the current financial system in the KSA and, more specifically, on member deposit-bearing banks, which, as in other regions, monopolized the money management and payment services for years.</p><p>The conventional paradigm on which a bank is a one-stop shop for all your financial services is no longer sustainable, and the services that plug into it : e.g., card services, custody, clearing, insurance, wealth management, and financial investment, are to be rethought. </p><p>They are currently considering moving from the traditional sectional/departmental optimization to a small private ecosystem that mimics a fintech platform and would encompass subcategories of financial services (Micro-FinTech). </p><p>This will create a sort of mutated bank that has been historically an incumbent bank encompassing archaic services.</p><p>Take, for example, microfinancing, a growing part of personal finance. It is a challenge for a financial institution to collect and aggregate data on a customer's income levels from multiple sources. </p><p>With OB, tech providers will have access to real-time data and insights into a customer's financial situation, ensuring the offering and approvals almost instantaneously. </p><p>Paytech companies will use a different paradigm than collecting a fee : it's an ongoing customer relationship that will drive income generation.</p><p>More importantly, on the payment spectrum, it will cost-effectively optimize all reconciliations, direct debits, repayments, and payouts, with a minimal fee.</p><p>We can list a lot of examples of this current mutation, but the most striking one remains the creation of a proprietary sandbox by banks, which speaks about the direction that most of them are trying to resolve to remain the market players they currently are.</p><p> </p><p><span style="font-size: 10pt;"><em>This article was contributed by our expert <a href="https://www.linkedin.com/in/camille-beyrouthy-45375b/">Camille Beyrouthy</a> </em></span></p><p> </p><h3><span style="font-size: 18pt;">Frequently Asked Questions Answered by Camille Beyrouthy</span></h3><h2><span style="font-size: 12pt;">1. How many companies in Saudi are permitted to operate in the open banking field?</span></h2><p>The Saudi central bank (SAMA), under the initiative of “fintech Saudi” has a big collection of FinTech’s that has access to their sandbox. Can make available more details on this companies, if need be, roughly around 80 companies.</p><h2><span style="font-size: 12pt;">2. What are examples of open banking?</span></h2><p>Payment, buy now pay later (BNPL), microfinance, digital wallets, etc.</p><h2><span style="font-size: 12pt;">3. How do you implement open banking?</span></h2><p>SAMA has created a sandbox and a regulatory framework that explains how to operate and a global governing set of rules and regulations.</p><h2><span style="font-size: 12pt;">4. What problems does open banking solve?</span></h2><p>It provides the capacity for third-party companies to access details about citizens and provide almost all banking services to the clients.</p><p> </p>
KR Expert - Camille Beyrouthy
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