Open finance and open banking – two buzzwords we often hear in the financial industry. But what do they really mean, and how can financial institutions in MENA seize this opportunity to stay ahead of the game?
In a nutshell, open finance is all about making financial services more accessible and efficient for everyone. It lets you securely share your financial data with third parties, enabling you to get better deals and make smarter decisions.
This means companies can create tailor-made financial products and services just for you, all by tapping into your banking data (with your permission, of course).
Let's paint a picture of how open finance could be a game-changer for banks and their customers in MENA:
Imagine you're a small business owner needing a loan to grow. But you don't have a long credible credit history to prove your financial strength.
With open finance, the bank could assess your creditworthiness using other data sources like online sales, social media presence, or even utility and telecom payments. This way, the bank can offer a loan that reflects your actual financial situation, increasing your chances of approval, even if you don't have a traditional credit profile.
Not quite, open finance stretches beyond the boundaries of open banking by including a wider array of financial services, such as insurance and investments. It sets the stage for more inclusive financial services and sparks innovation and collaboration between banks and fintechs.
Originally, users could share their information with limited sources of data (usually banks only), but now it includes utility and telecom providers, government authorities, insurance, and much more.
Though open finance still faces some regulatory hurdles in MENA, there's a silver lining. The Central Bank of UAE recently unveiled plans to foster connectivity and collaboration among financial institutions.
This presents a golden opportunity for players in the region to get ahead of the curve and start exploring new possibilities. Open finance can revolutionize customer experiences, streamline onboarding processes, and unlock untapped markets.
Here are some examples that would even become smarter once open finance takes root in MENA:
1) Banks and fintechs working together: Take Emirates NBD's E20, for instance, which joined forces with Monimove, a UAE-based fintech, to create a digital trade finance platform that streamlines and secures the entire process.
2) Tailor-made customer experiences: We stepped in to assist the National Bank of Fujairah (NBF) in transforming unstructured transactions into visually appealing, organized data. This enrichment includes easily identifiable merchant names, eye-catching logos, and clear categories that bring simplicity and clarity to customers' financial lives.
3) Smarter credit scoring and risk assessment: Banks can use open finance to access data from multiple sources, creating more accurate risk profiles and offering improved credit products.
4) Speedy KYC and onboarding: By collaborating with fintechs specializing in digital KYC solutions, banks can simplify the onboarding process, cut costs, and elevate the customer experience.
5) Soaring to new heights with financial inclusion: Open finance can help banks and fintechs reach underserved populations, such as the unbanked or underbanked, by partnering with fintechs focused on alternative lending or digital wallets.
The rise of open finance in MENA is just beginning. It's an exhilarating time for the region, and it's definitely an opportunity worth exploring.