UAE is readying to adopt open banking

Reported by: |Updated: November 12, 2020

While a majority of banks in the UAE is keen to introduce open banking, Emirates NDB has already taken a plunge:

A recent survey by Finstra has revealed that 88% of financial services institutions in the UAE plan to introduce open banking in the next one year, clearly indicating these institutions have weighed the pros and cons of the system and have understood that it will change the way banks will handle information about the customers and customers will ultimately be in control of the information. They also acknowledge that the innovations in the financial services domain are being created on open platforms. using open APIs and open-source software.

Of the institutions surveyed, 57% believed open banking will have the most impact on corporate banking while 51% said it will be retail banking and payments. Banks among the institutions surveyed felt that open banking will bring in better customer service and experience capabilities would motivate banks to collaborate more with other financial institutions and developers.

QUEST FOR INFORMATION

The UAE is poised to become a major technology hub even as the country is undertaking a major effort in diversifying the economy through technology and innovation. The country has already identified technology-based companies as key drivers of growth, supported by advanced technological infrastructure and governmental support. The focus on technology is invariably making the customers of financial services institutions hungry for information – instant information to be precise – and they want to have better control over their money. They are also aware of the experimentations conducted in Australia and Europe where open banking has given better facilities for them.

EMIRATE NBD’S SANDBOX

One of UAE’s leading banks, the Emirates NBD, had partnered with Virtusa to develop a cloud-based, gamified open banking sandbox in November 2018 that enables developers and fintech to ideate, build and publish API applications and create minimum viable products (MVPs). The sandbox is a self-contained environment, providing fintech and developers a simulated banking space to experiment and create real-world apps and services. The platform consists of over 200 APIs and 900 endpoints covering retail, corporate, and small or mid-size business lines. Developers also have access to over 5 million simulated transaction data related to 1 million customer accounts, based on the BIAN (Banking Industry Architecture Network) model. This data has been restructured to replicate Emirates NBD’s retail and corporate banking data and is fully compliant with open banking regulations and ISO20022 standards for electronic data interchange between financial institutions.

It is expected that the sandbox will bring the latest and most competitive experiences to the market first. Emirates NBD is now able to experiment and test the MVPs to offer new and diverse digital-native services, which adds significant value to the ecosystem. The bank is now able to experiment with a predefined list of fintech and has reduced the onboarding time of fintech by 75%. This means creative ideas are turned into real working prototypes faster, tested earlier, and brought to market rapidly at a reduced development cost. The platform also gives developers access to diverse transaction data to test various value propositions.
The platform that is created uses the Red Hat open banking solution, which combines the Red Hat OpenShift Container Platform with data integration, API creation, and management capabilities. Red Hat provides unified data integration, handles real-time data feeds, and makes the bank’s APIs available across internal systems, partners, and other third parties while helping mitigate security risks and protect sensitive data.

The bank’s shift to open banking has enabled it to externalize APIs that can then be used to offer new services like account updates via Amazon Alexa and WhatsApp banking. Built on open source and with access to cloud-native services, the platform also helps foster collaboration across the banking group’s internal teams.

In the UAE in particular and in the Middle East in general, the open banking concept is driven by the aim of becoming more customer-centric. This means engaging the customers at a personal level and offering unique experiences for each individual customer. The result is that banks and financial services institutions are able to collect more data and analyze this data and create unique experiences for the customers to win the race. A very high mobile penetration also helps open banking to flourish.

FINTECH HIVE

The UAE has a unique collaboration between banks and fintech startups, called Fintech Hive, which is a financial technology accelerator in the region established by the Dubai International Financial Centre (DIFC). Most of the banks, including foreign banks, are participants in this effort that is mandated to ideate, collaborate, and partner with startups in wide-ranging mentorship and networking programs. As of the end of 2019, it has over 100 financial companies as members. At present 3 accelerator programs are conducted by the center.
UAE banks, which have understood the value and benefits of open banking and are in the process of working on the concept are also varied in vulnerabilities. For example, cyber threats. Exposing thousands of APIs by opening banks up without rigorous quality checks can lead to risks. Testing and verification of open APIs would also take a much higher quantum of effort compared to the development of these APIs.

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