{"id":54073,"date":"2025-12-13T19:26:22","date_gmt":"2025-12-13T16:26:22","guid":{"rendered":"https:\/\/entarabi.com\/?p=54073"},"modified":"2025-12-13T19:26:22","modified_gmt":"2025-12-13T16:26:22","slug":"open-banking-data-will-be-the-new-oil-that-will-power-saudi-arabia","status":"publish","type":"post","link":"https:\/\/entarabi.com\/en\/2025\/12\/open-banking-data-will-be-the-new-oil-that-will-power-saudi-arabia\/","title":{"rendered":"Open Banking Data Will Be The New Oil That Will Power Saudi Arabia"},"content":{"rendered":"

The conversation surrounding Open Banking often centres on consumer empowerment and retail product innovation.<\/span> While these are vital components, the true measure of its impact\u2014especially in an economy focused on rapid, structural diversification\u2014is its ability to unlock the engine of growth: the Small and Medium-sized Enterprises (SMEs).\u00a0<\/span><\/p>\n

In Saudi Arabia, the Saudi Central Bank (SAMA) has strategically positioned its Open Banking Framework not merely as a regulatory requirement, but as a foundational pillar for achieving Vision 2030\u2019s ambitious goals, setting a powerful precedent for global best practice.<\/span><\/p>\n

A Visionary Foundation for Value Creation<\/b><\/p>\n

Unlike many European implementations that were initiated as a regulatory response to market failures or consumer protection needs (e.g., PSD2), SAMA\u2019s approach seems to be one of proactive value creation. The Open Banking Framework, anchored within the Financial Sector Development Program (FSDP), is explicitly designed to fast-track economic diversification and democratise progress.<\/span><\/p>\n

The Kingdom\u2019s leadership has astutely recognised that true financial transformation requires a robust, secure regulatory architecture that promotes competition while safeguarding consumer trust. This strategic foresight is evident in SAMA’s commitment towards ensuring any player granted access to the “golden keys” of financial data – the Third-Party Providers (TPPs) – possesses the necessary robustness and maturity to maintain data privacy and deliver genuine impact. This rigour in licensing is a direct reflection of how implementation is being aligned to the true priorities of the economy: security, stability, and scale.<\/span><\/p>\n

The Phased Approach: Learning from Global Lessons<\/b><\/p>\n

SAMA has demonstrated pragmatism by choosing not to reinvent the wheel. Instead, it has adopted a mandatory, phased, and standards-driven rollout\u2014a measured, “crawl-walk-run” approach that has proven effective in markets globally.<\/span><\/p>\n

SAMA\u2019s Open Banking framework began taking life over the course of 2023 with the Account Information Service (AIS), enabling read-only view of customer data, and made sure-footed progress in 2024 with the issuance of the Second Release of the Framework focusing on Payment Initiation Services or PIS (<\/span>SAMA Press Release<\/span><\/a>). This centralized, standards-driven model ensures interoperability from day one, reducing the fragmentation and technical friction that plagued market-led implementations elsewhere. The logical next step will likely involve broadening the scope of the data, the types of financial products included and integration with other government-driven data initiatives such as e-Invoicing & eKYC. Looking further into the distance, one can expect interoperability of standards across the GCC countries enabling MSMEs to expand more seamlessly across regional borders. Such transitions will take us beyond “Open Banking” to the globally emerging concept of “Open Finance\u201d. Such decisive and structured regulatory foundations will likely result in a competitive, technology-driven financial sector, and will create a fertile landscape for investment and innovation.\u00a0<\/span><\/p>\n

The Highest Impact Use Case for Open Banking \/ Open Finance: Democratising MSME Credit<\/b><\/p>\n

Saudi Arabia has a widely published goal of increasing contribution of SMEs to GDP from 20% to 35% by 2030, as confirmed in Monsha\u2019at SME Monitor Quarterly Report Q4 2024 (<\/span>link<\/span><\/a>). Further, as stated in the Financial Sector Development Program Annual Report 2024 (<\/span>link<\/span><\/a>) there is a goal of increasing bank financing to SMEs by 20% in 2030.\u00a0\u00a0<\/span><\/p>\n

The biggest impediment in achieving these goals is access to timely, reliable, comprehensive data about MSMEs. Open Banking, which is fundamentally a data play, solves for this enabling better credit decisioning and risk management.<\/span><\/p>\n

With the advent of Open Banking, lenders will be able to access verified, real-time transaction data with customer consent. This enables automated, real-time credit scoring for MSMEs, moving beyond static collateral and traditional, historic balance sheets to assess actual business health. This allows for timely and responsible lending, coupled with financing embedded into non-financial flows, such as directly within a business\u2019 accounting or e-commerce platforms.<\/span><\/p>\n

This model is proven and KSA seems to be executing it with precision. The UK began its Open Banking journey in January 2018. The Open Banking Limited Impact Report 7 published in May 2025 (<\/span>link<\/span><\/a>) highlighted that adoption reached new heights with 1 in 5 UK consumers and small businesses now actively using Open Banking, resulting in 31 million Open Banking payments being made in March 2025 alone. With 145 live third-party providers and 70% annual growth in payments, Open Banking enables a thriving sector of technology companies and an ecosystem worth around \u00a34bn to the UK economy. The data is clearly showing that Open Banking-powered services are delivering real impact at scale, helping businesses and consumers better manage their money, boost productivity, and improve access to credit.<\/span><\/p>\n

The British Business Bank Small Business Finance Markets Report 2024 (<\/span>Link 1<\/span><\/a>, <\/span>Link 2<\/span><\/a>) provides additional insights that highlight the growth in choice for MSMEs . In 2014, the top 4 banks supplied 63%<\/span> of lending, while in 2024 SME lending (excluding Overdrafts) provided by Challengers and Specialist Banks rose to 60%<\/span> of annual gross bank lending to SMEs.\u00a0<\/span><\/p>\n

One concern highlighted regularly with respect to Open Banking is whether businesses will share their data. These statistics demonstrate a clear willingness from businesses to do just this in exchange for the tangible benefit of greater access to timely funding at competitive rates.<\/span><\/p>\n

The Ecosystem of Solutions: De-Risking the Journey<\/b><\/p>\n

Critically, the Saudi government and its institutions seem to have recognised that Open Banking is not a single silver bullet. It needs to be one, powerful piece of an integrated ecosystem of solutions being deployed to solve the multifaceted challenge of MSME lending.<\/span><\/p>\n

The forward-thinking approach of the leadership in the Kingdom is most evident in the complimentary trifecta of initiatives noted below, which together seem to be expressions of a well-coordinated strategy:<\/span><\/p>\n

    \n
  1. The Ecosystem Architect and Regulator – <\/b>Monsha’at<\/b><\/a>: The General Authority for Small and Medium Enterprises (Monsha’at) is the chief government body responsible for organizing, supporting, developing, and sponsoring the entire SME sector in Saudi Arabia. Its mission is to make the MSME sector an essential engine for economic growth and an enabler of Vision 2030. Centralising responsibility in this manner has allowed for strong ownership of the challenge and coordinated deployment of impactful solutions.\u00a0<\/span><\/li>\n
  2. The Risk Mitigation Tool – <\/b>Kafalah<\/b><\/a>: The Small and Medium Enterprises Loan Guarantee Program (Kafalah) is a non-profit government development program. Its primary objective is to provide guarantees to financial institutions to mitigate the risk of lending to MSMEs. This encourages these financiers to broaden their lending appetite, especially for smaller businesses lacking sufficient collateral. Kafalah is supervised by Monsha’at and is one of Monsha’at’s key financing solutions, alongside initiatives like the Funding Gate. The impact is tangible and real with the program having reached over SAR 100 billion in financing Loan guarantees in partnership with various financial institutions as of September 2024 (<\/span>link<\/span><\/a>).<\/span><\/li>\n
  3. The Direct Financial Instrument – <\/b>SME Bank<\/b><\/a>: Established in 2022, it is an active participant and lender in the ecosystem with the mandate to expand the total loan portfolio for the MSME sector, bridge the financing gap, and enhance the contribution of financial institutions. The SME Bank often leverages the Kafalah guarantee program when structuring its own financing solutions or in collaboration with other banks, making Kafalah a key tool to deliver its mission of raising the productivity of SMEs and their contribution to GDP to 35% by 2030, a goal set by Monsha’at and Vision 2030.<\/span><\/li>\n<\/ol>\n

    This coordinated approach when combined with the power of Open Banking data creates a fertile environment for MSME lending to grow impactfully and sustainably in the Kingdom.\u00a0<\/span><\/p>\n

    Saudi Arabia hasn\u2019t just stopped here. These robust financial tools have been established in concert with crucial judicial and commercial reforms. The modernized Bankruptcy Law, for instance, introduces simplified procedures for small debtors and provides explicit pathways for businesses to reorganize or recover from genuine default without permanent stigma. This critical legal evolution fosters a culture of entrepreneurship by enabling measured risk-taking \u2013 an essential ingredient of innovation.<\/span><\/p>\n

    By purposefully converging regulatory innovation (Open Banking data), coordinated financial support (Monsha’at, Kafalah, SME Bank), and a modern legal structure, Saudi Arabia is engineering a unique, scalable environment for MSMEs. This holistic approach transforms Open Banking from a mere technology upgrade for KSA into a key pillar of a coordinated national strategy for economic empowerment. It invites entrepreneurs to build the next generation of growth engines that will diversify the Saudi economy beyond hydrocarbons and provide the robust foundation to sustain long-term growth. <\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

    The conversation surrounding Open Banking often centres on consumer empowerment and retail product innovation. While these are vital components, the true measure of its impact\u2014especially in an economy focused on rapid, structural diversification\u2014is its ability to unlock the engine of growth: the Small and Medium-sized Enterprises (SMEs).\u00a0 In Saudi Arabia, the Saudi Central Bank (SAMA) […]<\/p>\n","protected":false},"author":2,"featured_media":54074,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"post_subtitle":"","footnotes":""},"categories":[1789],"tags":[10625],"class_list":["post-54073","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-opinion","tag-open-banking"],"_links":{"self":[{"href":"https:\/\/entarabi.com\/en\/wp-json\/wp\/v2\/posts\/54073","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/entarabi.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/entarabi.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/entarabi.com\/en\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/entarabi.com\/en\/wp-json\/wp\/v2\/comments?post=54073"}],"version-history":[{"count":0,"href":"https:\/\/entarabi.com\/en\/wp-json\/wp\/v2\/posts\/54073\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/entarabi.com\/en\/wp-json\/wp\/v2\/media\/54074"}],"wp:attachment":[{"href":"https:\/\/entarabi.com\/en\/wp-json\/wp\/v2\/media?parent=54073"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/entarabi.com\/en\/wp-json\/wp\/v2\/categories?post=54073"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/entarabi.com\/en\/wp-json\/wp\/v2\/tags?post=54073"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}