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The Saudi Central Bank (SAMA) has officially released the second version of its Open Banking Framework, marking a significant step forward in the kingdom’s fintech landscape.
The updated framework centres on payment initiation services (PIS), which SAMA believes could transform the way financial transactions are conducted in the country.
A PIS is an element of open banking that initiates payments directly from a user’s bank account with their consent. Advocates say these types of payment offer lower fees and can be more direct, given that they can bypass card networks.
The new framework is part of SAMA's broader efforts to enhance the kingdom's fintech ecosystem, in line with Saudi Vision 2030, which aims to modernise the country’s economy.
SAMA says that by improving customer experience and increasing transaction efficiency, the framework seeks to provide innovative financial products and solutions, ultimately expanding the opportunities available to both individual and institutional customers.
What is the Open Banking Framework?
The first version of the Open Banking Framework, which focused on account information services (AIS) was unveiled by SAMA in November 2022.
The regulatory framework includes legislation, regulatory guides, and technical standards aligned with international best practices, enabling banks and fintech companies operating in Saudi Arabia to provide open banking services.
The framework sets business rules to ensure compliance, and defines Saudi-specific standards, including customer experience guidelines, API specifications, and implementation requirements.
The new focus on PIS will allow users to initiate payments directly from their bank accounts, streamlining the process and offering greater control over financial transactions.
This should help customers better manage their bank accounts by providing multiple and innovative options for conducting transactions.
The framework also outlines the responsibilities and obligations of all parties involved, ensuring that the service is provided securely and efficiently.
This initiative is a cornerstone of the National FinTech Strategy, which was approved by the Saudi Council of Ministers in 2022 as part of the Financial Sector Development Program.
The strategy aims to position Saudi Arabia as a global hub for fintech innovation, leveraging technology to drive economic empowerment across the kingdom.
SAMA expects the introduction of PIS under the new Open Banking Framework to significantly enhance the efficiency, security and reliability of payment services.
The central bank also believes PIS will facilitate the creation of payment operations via third-party applications, further advancing Saudi Arabia's fintech goals.
