Will Open Banking force banks in UAE to innovate for survival?

With changing regulatory mandates within the financial sector, the growth of open banking has been gaining significant momentum across the globe. The UAE is no exception. This has been triggered by the demand for greater financial transparency and is pressuring financial institutions globally to innovate. As customer demands evolve, it also serves as an opportunity to create new and tailored services for its customers.

Open banking is described to be a connected ecosystem of financial services that allows banks to enhance their digital offerings securely. Banks in Asia-Pacific and Europe have already started reaping the opportunities that have since emerged but UAE is still establishing a ground for it. This limits their competitiveness within a global market that cultivating a sharing economy.

Why are banks pushing forth for an open banking system? Below shows the benefits to be reaped:

More data sharing

The introduction of Application Programming Interfaces (API) gives both customers and businesses the freedom to access all banking data in real-time. It provides them with more accurate and up to date information on their finances. Additionally, customers would be able to draw a clear comparison and reap greater savings. They would also be able to gain access to more personalised resources to make sturdier and better banking decisions.

While privacy remains a concern, advancement in security technologies such as encryption and biometric authentication are now allowing banks to attain optimum reliability especially in the Middle East.


Establishment of new bespoke payments’ services

Open banking is also driven by the aim for banks to become more customer-centric. This involves engaging customers at a personal level and providing a bespoke experience matched to each individual. Organisations that are able to collect and analyse customer data create the best customer experience and indirectly drive higher profits.

With continual advancements of e-wallets, mobile payments, Near Field Communication (NFC) and real time transfers, it has led to an increase in presence of open banking in the region. This is with the support of a high mobile penetration rate in the region which was recorded at 228.3% in 2017, with 19.8 million subscriptions.


Collaboration between banks and fintech

Banks are orchestrating a collaborative framework with fintech start-ups to enhance a client’s value proposition. Apart from this, the UAE is also fast emerging as the regional hub for start-ups within the financial sector, while Dubai and Abu Dhabi are the most favoured destinations for Fintech firms owing to the availability of an advanced technological infrastructure.

Fintech Hive

Fintech Hive, a collaboration between banks in UAE and fintech start-ups, is the first financial technology accelerator in the region established by the Dubai International Financial Centre (DIFC). This 2018, First Abu Dhabi Bank, Arab Bank, and Noor Bank will join as new supporting entities from the financial sector, along with returning partners such as Abu Dhabi Islamic Bank, Citigroup, Emirates Islamic, Emirates NBD, HSBC, Mashreq, Standard Chartered, UAE Exchange and Visa. The participating financial institutions will ideate, collaborate and partner with start-ups in a wide-ranging 12-week mentorship and networking programme. This is in an effort to move the UAE towards an innovative and knowledge-based economy. It also prepares them for the future by supporting local and regional talent by giving them the tools and platforms they need to flourish.


What are the concerns of Open Banking?

Increased risks of cyberattacks

Banks that are keen on being fintech-friendly naturally seek to embrace open banking at a faster pace. However, this rush to jump onto the bandwagon can also make them vulnerable to several issues.

Cyber threats are more sophisticated than ever and are engineered to steal data as well as cause service disruptions to organisations. Exposing thousands of API by opening banks up without rigorous quality checks can impose huge risks. Testing and verification of Open APIs would also take a much higher quantum of effort compared to the development of these APIs.

Data scientists, developers and testers in the field would need to ensure that they are aware of the levels of data encryption to access methodologies that are used to control data sharing amongst API customers.


How will the landscape for talent evolve?

As open banking begins to gain traction as a transformative technology in the UAE’s banking sector, the competition to find the best developers, data scientists, testers and cybersecurity specialists would only grow stiffer. In 2018, banks are predicted to go further in terms of innovation, than what regulation dictates. This is in hopes to foster more cooperation and collaboration, within a more agile financial sector. While open banking may not be the silver bullet to reinvent the banking industry, it represents a catalyst for change. To embrace open banking, incumbents will need to challenge internal culture and existing business models to prepare for the future.

If you are looking to gain a better understanding of the limited talent in this market or to get a head-start for your organisation with one of the best talent available, do contact us at [email protected]. You may also follow us on our LinkedIn page for more industry updates.


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