The digital pace that our world took decades ago has skyrocketed with the appearance of modern tech-savvy financial products and services, aiming to improve industry and people’s lives overall. Tech-savvy and hungry for innovation, the MENA region is gaining traction in working towards Open Banking and Open Finance. According to Fintech Galaxy research, the local Open Banking market, driven by the impact of the COVID-19 pandemic and the population being young and digitally advanced, is expected to grow by 25% annually during the next 5 years. The Open Finance market, as a tool for accelerating financial inclusion in the MENA region, is projected to nearly double by 2027. But let’s slow down and analyze every part separately.

 

We’ve been witnessing the genesis of Open Banking technology, and some of us even had a chance to benefit from a cluster of use cases emerging from this phenomenon. But do you know what the most exciting thing about Open Banking is? Open Banking is just the first step in a challenging and captivating journey called Open Finance.

 

As a starting point, let’s sum up what Open Banking is

 

Open Banking is the process of consumer financial data exchange (with the user’s consent) between banks/Financial Institutions (FIs) and Third-Party Providers (TPPs) via secure Application Programming Interfaces (APIs). The overriding objective of Open Banking includes enhancing financial services for consumers, boosting the industry's digital innovation, and accelerating the rise of new FinTech companies to create modern products and services to benefit all the ecosystem participants.

 

Financial Inclusion is high on the global Open Banking/Finance agenda, aiming to ensure that financial services are accessible to more of the world’s population at a reasonable cost. This means we need to look at both the underbanked and the unbanked.

 

Open Banking grants consent to regulated Account Information Service Providers (AISP) to access Account Information, including transaction history, thus offering businesses and customers a complete financial overview to manage their day-to-day financial activities with confidence in just one app. The information from all bank accounts can be viewed in one place, simplifying the process of tracking, analyzing, and managing finances. Open Banking-enabled PFM apps revolutionize the way end-customers and businesses manage their finances and offer a 360-degree view of their financial life.
 

Globally, the Open Banking market size is estimated at $18.02Bn in 2022 and forecasted to reach $54.69Bn in 2027 with a CAGR of 24%, according to Fintech Galaxy research report.

 

 

Source: Market Reports, World Bank, CBE, MRP, Magnitt, AMF, Statista; Ntsal Analyses

 

Meanwhile, the MENA region is developing fast, leveraging the best Open Banking practices from all over the world with most of the region’s population being young and showing one of the highest rates of smartphone usage worldwide. The regional Open Banking market size is estimated between $0.35-0.42Bn in 2022 and forecasted to grow with an average CAGR of 25% to reach $1.17Bn by 2027, according to Fintech Galaxy research.

 

Source: Market Reports, World Bank, CBE, MRP, Magnitt, AMF, Statista; Ntsal Analyses

 

Open Finance oversteps the boundaries of data available at the financial institution, comprising the customer’s complete financial footprint. While Open Banking is subject to the legal and regulatory framework and is based on sharing the basic bank account data, Open Finance is not subject to regulation yet and supplies more granular data across a wider spectrum of services. Just like Open Banking, Open Finance aims to provide customers with full control of their financial data - not only bank data but also data related to:

• investments

• pensions

• tax

• insurance

• mortgages

• saving accounts, and much more.

 

Open Finance data can be used to build better-tailored personalized services to bring value to customers – be it by providing unique data-driven insights, enhancing the user experience, or streamlining payments.

 

The global Open Finance market size is estimated at $56.74Bn in 2022 and forecasted to reach $572.98Bn in 2027 with a CAGR of 59%.

 

 

Source: Market Reports, World Bank, CBE, MRP, Magnitt, AMF, Statista; Ntsal Analyses

 

The appetite for Open Finance is growing in the Middle East, courtesy of the government supporting this initiative and to the digitally native consumers in the region. The regional Open Finance market size is estimated between $1.65-2.01Bn in 2022 and forecasted to grow with an average CAGR of 45% to reach $11.74Bn by 2027, according to Fintech Galaxy research.

 

 

Source: Market Reports, World Bank, CBE, MRP, Magnitt, AMF, Statista; Ntsal Analyses

 

 Open Finance – the mission

 

The concept of Open Finance has the pulsion to realize the full potential of Open Banking, making the account aggregation more insightful and fully-fledged by bringing not only customers' bank accounts but also investment and savings accounts into one user-friendly interface. Also, Open Finance can enable automatic transfers between savings and investment accounts.

 

Another important mission that Open Finance covers is financial inclusion. It can become a real game-changer for the underbanked, unbanked, and other financially excluded and vulnerable groups who don’t have access to proper financial services, thus creating affordable financial products that are sustainable for businesses and beneficial for the whole industry.  

 

Open Finance helps to bridge the financial inclusion gap by creating opportunities for both businesses and individuals. Financial inclusion is not only about making services affordable and convenient, but also about maintaining the highest level of security and sustainability. For example, Open Finance can easily solve issues linked to low-income populations' access to innovative products and services, helping them save, invest, gain access to lending products, and effectively manage personal finances, thus ensuring financial stability and granting financial services equation.

 

Final thoughts

It’s crystal clear that Open Banking and Open Finance pave the way for Open Data and Open Everything. Here, at Fintech Galaxy, we believe that the modern financial industry players must stay ahead of innovative trends and adopt a forward-looking approach, reimagining the future through Open Finance and innovation. We believe that people and businesses have the right to access and share their financial data and use alternative payment methods to receive the best and most cost-effective services tailored to them. We aim to build the world's most affordable, secure, reliable, and developer-friendly Open Finance platform. Our mission is to provide enhanced, seamless, and enjoyable financial experiences.

 

We believe that Open Finance can fundamentally transform business models and solve age-old problems. And we have all the Open Finance tools to help drive innovation and competition between services like never before, providing embedded, personalized solutions and supporting financial inclusion.