Open Banking in the MENA region

We recently sat down with the Commercial Director at Creditinfo Group, Gary Brown, where he highlighted his thoughts on Open Banking in  the MENA (Middle East and North Africa) region. These were some of his insights:

What is Open Banking?

Open Banking is a service that provides third-party financial service providers open access to consumer banking transactional data from banks and financial institutions using application programming interfaces (APIs). Open Banking is growing with popularity globally and in the MENA and could soon become the latest source of FinTech to shape the banking industry.

Delivered through open banking, banks allow access and control of customers personal and financial data to third-party service providers. Of course, customers are required to grant consent to allow the bank access and permission to share. Lenders are then able to use customers data and transaction history to drive insights such as spending habits and regular payments. This will enable more competition and innovation to financial services which will lead to better products to help consumers manage their money.

What are the benefits to Open Banking?

Open Banking allows lenders to add an additional layer of data and complete a more accurate and comprehensive picture of a customer’s financial situation to offer more competitive and profitable loan products. It can also benefit the consumer and help them manage their own expenses and accounts. An open Banking application can display all the consumers banking accounts in one place and display their spending habits and behaviors.

Open Banking is a straight-forward solutions with low integration costs that can greatly benefit large and established banks, small banks and digital banks. It can reduce operational costs and provide a wider customer outreach through digital channels, hugely important in the MENA with such a high percentage of the population with access to a digital smartphone. This new technology can strengthen customer relationships and customer retention by helping consumers manage their expenses and connect with them through digitalization.

How will Open Banking improve the customer experience in the MENA?

With such high smartphone usage across MENA, Open Banking will provide consumers the ability to have full control over their finances under one view, as well provide them with a better range of products and services personalized to their financial situation. Consumers across the MENA are requesting more flexible and forward-looking systems that support fintech innovation. Open Banking allows consumers to be in control and empowers them and small businesses by creating a simple platform for accessing, controlling, and sharing their data so they can benefit from it. With connected accounts across the financial services landscape, consumers and small businesses can put their data to work, whether it’s for one specific purpose or across multiple apps and services.

Data exchange is crucial across any financial ecosystem and Open Banking plays a vital role by providing a new additional layer of data. Enabling a secure and safe flow of data across accounts and apps efficiently will fuel innovation for banks and provide many new benefits across the industry, such as improving financial literacy and extend financial inclusion to the underserved.

Can you explain the differences between Open Banking and Open Finance?

Open Banking and Open Finance are the latest buzz topics when it comes to fintechs and innovations in the Banking industry. Open Finance has been developed from Open Banking and will provide an extra layer of data available to consumers and organizations, Open Finance will include other financial data, such as mortgages, savings, pensions, insurance, utilities, etc. This will enable consumers to provide access to their entire financial footprint and provide them with an even better customer experience.

To better serve the unbanked or underserved, Open Finance will further level the playing field and make it easier for these consumers to have access to affordable and sustainable credit, providing everyone access to the services they require and deserve. With more access to finance, we can expect to see better economic growth across MENA.

Top trends that will shape banking in 2022 

We sat down with our Direct Markets Director at Creditinfo Group, Samuel White, to discuss some of the key trends that will shape banking in the MENA and Asia region. These were some of his thoughts:

New market players from non-traditional lenders such as telco or payment providers

We are seeing an increasingly number of non-banks entering the markets. There has been a clear sign that these companies have a wealth of internal data through their platforms and usually e-wallet transactions. It has been proven that this data is extremely valuable during the risk assessment process.

SME finance

SMEs are playing an instrumental role in local economies but still struggle to receive the access to banking products in a timely fashion. In the region every country is looking at how better to serve these customers and provide them with the solutions they require.

Digital Banks, Neo Banks, Born Digital Banks

Many of the traditional lenders are based on legacy technologies and we have seen an accelerated approach to digital transformation over the last 2 years. We have also seen some banks create new digital arms to their organization setup with new technology away from legacy portfolios. These Born Digital Banks are increasing in the region, and anybody left behind can expect to lose some market share in the future.

BNPL

Buy Now Pay Later (or as some are calling it Save now pay later) is not a new concept but there is no doubt it is growing with popularity. The demand for flexible payment offerings is at an all-time high. Typically, these smaller value loans are based on impulse buying so lenders must make sure they have the process in place to offer instant decisioning.

We also asked him how Creditinfo is playing a role in shaping these trends:

How is Creditinfo helping banks lead in the digital era? 

At Creditinfo we are focusing on helping banks streamline and improve the credit process across the full credit lifecycle, from origination through scoring, risk, decisioning and portfolio management. We are offering enhanced digital channels to meet the customer demands and reach the underserved or unbanked segments. We recognize it has become more accessible for individuals and SMEs to make use of digital financial services and by working with Banks we can develop software and applications to deliver services that are more transparent and automated.

What is Creditinfo’s business model and how do you see this model shaping the banking industry?

Creditinfo is a provider of credit information and risk management solutions worldwide, one of our primary goals is to help facilitate access to finance. We have built credit bureaus globally and across different markets, giving us key insights and knowledge into best practices. Creditinfo has a vision to create successful partnerships with lenders, governments, central banks to help increase financial inclusion and generate economic growth by allowing credit access for individuals and SMEs.

Creditinfo wants to continue building products and working with partners to add further solutions and data to enable lenders to further lend in a responsible fashion. Lenders are shifting their attitude towards FinTechs to keep pace with change and remain competitive. There is a huge variety of FinTech offerings available today using wide range of data that’s delivered through applications to provide lending decisions in only a few seconds.