The Central Bank of Bahrain (CBB) issued for consultation the draft rules on “open banking”, which is a relatively new concept based on the idea of interconnecting licensed retail banks and other financial institutions to FinTech firms which provide new innovative services to consumers.
Open banking services covered by the draft rules entail the provision of “account information services” which is a service akin to those provided by an aggregator for information pertaining to customers’ dealing with various banks, card companies and other payment service providers and “payment initiation services” which involves the payment transfer initiation from any licensee connected by the customer on a single app or application software, mobile device or other media, the CBB said.
“This initiative is part of a larger upgrade of the Bahraini financial sector which must remain competitive in the face of demand for connectivity within financial services and with the e-commerce industry. The growing number of new disruptive business models (FinTech), rapid strides in technology and global e-commerce connectivity are at the centre of the regulatory initiatives in many parts of the globe in opening up banking to third party for payment and related solutions,” the bank said.
The rules are targeted at ensuring that the CBB helps foster innovation, competition and enhanced efficiency within the financial system keeping in view changing consumer trends. More specifically, following are some of the anticipated effects on the banking system from a consumer perspective:
- New channels for internet payments without the use of credit cards/debit cards;
- Aggregation or ‘global’ view of account or financial position data from different providers (banks and other financial institutions);
- Proactive financial management and budgeting tools for users;
- Likely downward impact on fees and costs to customer.
The key benefits of open banking will only be derived if there is wide acceptance, and the interconnections made securely and cost effectively, it said.
As part of the consultation, the CBB is seeking views from the industry on the draft rules which would be finalized soon.
Rasheed Mohammed Al Maraj, Governor of the CBB, said: “We are pleased to announce the CBB’s roll out of the open banking initiative in line with its hard push to modernise the sector and help set best regulatory standards for new and innovative services in financial services. The regulatory framework is in line with international best standards thus creating a sound ecosystem to maintain Bahrain’s strong position as a leading financial hub in the region.”